Tip of the Iceberg: Tip Reporting at U.S. Restaurants, 2005-2018
November 2024
Working Paper Number:
CES-24-68
Abstract
Tipping is a significant form of compensation for many restaurant jobs, but it is poorly measured and therefore not well understood. We combine several large administrative and survey datasets and document patterns in tip reporting that are consistent with systematic under-reporting of tip income. Our analysis indicates that although the vast majority of tipped workers do report earning some tips, the dollar value of tips is under-reported and is sensitive to reporting incentives. In total, we estimate that about eight billion in tips paid at full-service, single-location, restaurants were not captured in tax data annually over the period 2005-2018. Due to changes in payment methods and reporting incentives, tip reporting has increased over time. Our findings have implications for downstream measures dependent on accurate measures of compensation including poverty measurement among tipped restaurant workers.
Document Tags and Keywords
Keywords
Keywords are automatically generated using KeyBERT, a powerful and innovative
keyword extraction tool that utilizes BERT embeddings to ensure high-quality and contextually relevant
keywords.
By analyzing the content of working papers, KeyBERT identifies terms and phrases that capture the essence of the
text, highlighting the most significant topics and trends. This approach not only enhances searchability but
provides connections that go beyond potentially domain-specific author-defined keywords.
:
payroll,
survey,
earnings,
revenue,
incentive,
salary,
restaurant,
poverty,
poorer,
taxpayer
Tags
Tags are automatically generated using a pretrained language model from spaCy, which excels at
several tasks, including entity tagging.
The model is able to label words and phrases by part-of-speech,
including "organizations." By filtering for frequent words and phrases labeled as "organizations", papers are
identified to contain references to specific institutions, datasets, and other organizations.
:
Internal Revenue Service,
Social Security Administration,
Center for Economic Studies,
Office of Management and Budget,
Current Population Survey,
Longitudinal Business Database,
Department of Agriculture,
Employer Identification Numbers,
Survey of Income and Program Participation,
Federal Register,
General Accounting Office,
Social Security,
Unemployment Insurance,
Economic Census,
Department of Labor,
Economic Research Service,
North American Industry Classification System,
American Community Survey,
Social Security Number,
Longitudinal Employer Household Dynamics,
Census Bureau Business Register,
Disability Insurance,
Federal Insurance Contribution Act,
Protected Identification Key,
Earned Income Tax Credit,
NBER Summer Institute,
W-2,
Census Bureau Disclosure Review Board,
Accommodation and Food Services,
Individual Taxpayer Identification Numbers,
SSA Numident,
Form W-2
Similar Working Papers
Similarity between working papers are determined by an unsupervised neural
network model
know as Doc2Vec.
Doc2Vec is a model that represents entire documents as fixed-length vectors, allowing for the
capture of semantic meaning in a way that relates to the context of words within the document. The model learns to
associate a unique vector with each document while simultaneously learning word vectors, enabling tasks such as
document classification, clustering, and similarity detection by preserving the order and structure of words. The
document vectors are compared using cosine similarity/distance to determine the most similar working papers.
Papers identified with 🔥 are in the top 20% of similarity.
The 10 most similar working papers to the working paper 'Tip of the Iceberg: Tip Reporting at U.S. Restaurants, 2005-2018' are listed below in order of similarity.
-
Working PaperTip of the Iceberg: How Much Do Tips Bunch at Reporting Thresholds?🔥
June 2026
Working Paper Number:
CES-26-40
We study the importance of bunching in the context of tip-income reporting by workers at full-service, single-unit restaurants in the United States. Using tax reports at both the individual and the employer levels, we show that reported tip income varies with minimum-wage laws that provide an incentive for tipped workers to report some, but not necessarily all, of their tips. As a result, reported tips bunch at the minimum required threshold. We quantify missing tips due to bunching at nearly $63 million per year in 2018 dollars, on average over the period 2005-2018. Bunching is stronger for jobs at small employers and in the earlier part of the time series and declined monotonically from 2010 to 2018. Using restaurant-level revenue data, we also estimate the total value of unreported tips assuming an average tip rate of 12%. We find that tips are missing throughout the distribution. All told, missing tips exceed $4 billion per year, implying that bunching explains only 1.5% of all missing tips.View Full Paper PDF
-
Working PaperMeasuring the Effects of the Tipped Minimum Wage Using W-2 Data
June 2016
Working Paper Number:
carra-2016-03
While an extensive literature exists on the effects of federal and state minimum wages, the minimum wage received by tipped workers has received less attention. Researchers have found it difficult to capture the hourly wages of tipped workers and thus assess the economic effects of the tipped minimum wage. In this paper, I present a new measure of hourly wages for tipped servers (wait staff and bartenders) using linked W-2 and survey data. I estimate the effect of tipped minimum wages on the wages and hourly tips of servers, as well as server employment and hours worked. I find that higher mandatory tipped minimum wages increase that portion of wages paid by employers, but decrease tip income by a similar percentage. I also find evidence that employment increases over lower values of the tipped minimum wage and then decreases at higher values. These results are consistent with a monopsony model of server employment. The wide variance of tipped minimum wages compared to non-tipped minimums provide insight into monopsony effects that may not be discernible over a smaller range of minimum wage values.View Full Paper PDF
-
Working PaperSelf-Employment Income Reporting on Surveys
April 2023
Working Paper Number:
CES-23-19
We examine the relation between administrative income data and survey reports for self-employed and wage-earning respondents from 2000 - 2015. The self-employed report 40 percent more wages and self-employment income in the survey than in tax administrative records; this estimate nets out differences between these two sources that are also shared by wage-earners. We provide evidence that differential reporting incentives are an important explanation of the larger self-employed gap by exploiting a well-known artifact ' self-employed respondents exhibit substantial bunching at the first EITC kink in their administrative records. We do not observe the same behavior in their survey responses even after accounting for survey measurement concerns.View Full Paper PDF
-
Working PaperComparing Measures of Earnings Instability Based on Survey and Adminstrative Reports
August 2010
Working Paper Number:
CES-10-15
In Celik, Juhn, McCue, and Thompson (2009), we found that estimated levels of earnings instability based on data from the Current Population Survey (CPS) and the Survey of Income and Program Participation (SIPP) were reasonably close to each other and to others' estimates from the Panel Study of Income Dynamics (PSID), but estimates from unemployment insurance (UI) earnings were much larger. Given that the UI data are from administrative records which are often posited to be more accurate than survey reports, this raises concerns that measures based on survey data understate true earnings instability. To address this, we use links between survey samples from the SIPP and UI earnings records in the LEHD database to identify sources of differences in work history and earnings information. Substantial work has been done comparing earnings levels from administrative records to those collected in the SIPP and CPS, but our understanding of earnings instability would benefit from further examination of differences across sources in the properties of changes in earnings. We first compare characteristics of the overall and matched samples to address issues of selection in the matching process. We then compare earnings levels and jobs in the SIPP and LEHD data to identify differences between them. Finally we begin to examine how such differences affect estimates of earnings instability. Our preliminary findings suggest that differences in earnings changes for those in the lower tail of the earnings distribution account for much of the difference in instability estimates.View Full Paper PDF
-
Working PaperBusiness Owners and the Self-Employed: 33 Million (and Counting!)
September 2025
Working Paper Number:
CES-25-60
Entrepreneurs are known to be key drivers of economic growth, and the rise of online platforms and the broader 'gig economy' has led self-employment to surge in recent decades. Yet the young and small businesses associated with this activity are often absent from economic data. In this paper, we explore a novel longitudinal dataset that covers the owners of tens of millions of the smallest businesses: those without employees. We produce three new sets of statistics on the rapidly growing set of nonemployer businesses. First, we measure transitions between self-employment and wage and salary jobs. Second, we describe nonemployer business entry and exit, as well as transitions between legal form (e.g., sole proprietorship to S corporation). Finally, we link owners to their nonemployer businesses and examine the dynamics of business ownership.View Full Paper PDF
-
Working PaperIncome Effects in Labor Supply: Evidence from Child-Related Tax Benefits
May 2016
Working Paper Number:
CES-16-24
A parent whose child is born in December can claim child-related tax benefits when she files her tax return a few months later. Parents of children born in January must wait more than a year before they can receive child-related tax benefits. As a result, families with December births have higher after-tax income in the first year of a child's life than otherwise similar families with January births. This paper estimates the corresponding income effect on maternal labor supply, testing whether mothers who give birth in December work and earn less in the months following birth. We use data from the American Community Survey, the Survey of Income and Program Participation, and the 2000 Decennial Census. We find that December mothers have a lower probability of working, particularly in the third month after a child's birth. Earnings data from the SIPP indicate that an additional dollar of child-related tax benefits reduces annual maternal earnings in the year following a child's birth by approximately one dollar.View Full Paper PDF
-
Working PaperNEW EVIDENCE ON SEX SEGREGATION AND SEX DIFFERENCES IN WAGES FROM MATCHED EMPLOYEE-EMPLOYER DATA*
December 1998
Working Paper Number:
CES-98-18
We assemble a new matched employer-employee data set covering essentially all industries and occupations across all regions of the U.S. We use this data set to re-examine the question of the relative contributions to the overall sex gap in wages of sex segregation vs. wage differences by sex within occupation, industry, establishment, and occupation-establishment cells. This new data set is especially useful because earlier research on this topic relied on data sets that covered only a narrow range of industries, occupations, or regions. Our results indicate that a sizable fraction of the sex gap in wages is accounted for by the segregation of women into lower-paying occupations, industries, establishments, and occupations within establishments. Nonetheless, a substantial part of the sex gap in wages remains attributable to the individual's sex. This latter finding contrasts sharply with the conclusions of previous research (especially Groshen, 1991), which indicated that sex segregation accounted for essentially all of the sex wage gap. Further research into the sources of within-establishment within-occupation sex wage differences is therefore much more important than previously thought.View Full Paper PDF
-
Working PaperNational Experimental Wellbeing Statistics - Version 1
February 2023
Working Paper Number:
CES-23-04
This is the U.S. Census Bureau's first release of the National Experimental Wellbeing Statistics (NEWS) project. The NEWS project aims to produce the best possible estimates of income and poverty given all available survey and administrative data. We link survey, decennial census, administrative, and third-party data to address measurement error in income and poverty statistics. We estimate improved (pre-tax money) income and poverty statistics for 2018 by addressing several possible sources of bias documented in prior research. We address biases from 1) unit nonresponse through improved weights, 2) missing income information in both survey and administrative data through improved imputation, and 3) misreporting by combining or replacing survey responses with administrative information. Reducing survey error substantially affects key measures of well-being: We estimate median household income is 6.3 percent higher than in survey estimates, and poverty is 1.1 percentage points lower. These changes are driven by subpopulations for which survey error is particularly relevant. For house holders aged 65 and over, median household income is 27.3 percent higher and poverty is 3.3 percentage points lower than in survey estimates. We do not find a significant impact on median household income for householders under 65 or on child poverty. Finally, we discuss plans for future releases: addressing other potential sources of bias, releasing additional years of statistics, extending the income concepts measured, and including smaller geographies such as state and county.View Full Paper PDF
-
Working PaperCustomer-Employee Substitution: Evidence from Gasoline Stations*
January 2015
Working Paper Number:
CES-15-45R
We document the adoption of self-service pumps in U.S. gasoline stations from 1977 to 1992. Using establishment-level data from the Census of Retail Trade over this period, we show that self-service stations employ approximately one quarter fewer attendants per pump, all else equal. The work done by these attendants has shifted to customers, biasing upwards conventional measures of productivity growth.View Full Paper PDF
-
Working PaperThe Antipoverty Impact of the EITC: New Estimates from Survey and Administrative Tax Records
April 2019
Working Paper Number:
CES-19-14R
We reassess the antipoverty effects of the EITC using unique data linking the CPS Annual Social and Economic Supplement to IRS data for the same individuals spanning years 2005-2016. We compare EITC benefits from standard simulators to administrative EITC payments and find that significantly more actual EITC payments flow to childless tax units than predicted, and to those whose family income places them above official poverty thresholds. However, actual EITC payments appear to be target efficient at the tax unit level. In 2016, about 3.1 million persons were lifted out of poverty by the EITC, substantially less than prior estimates.View Full Paper PDF
