Part 4/6:
To illustrate the dynamics of tip-based wages, consider a real-world example involving a pay stub. A server reported working 16 hours at the base rate of $2.13, which would total $34.08. However, this server reported tips amounting to $969 over that period, which is substantial. After accounting for taxes—approximately $11.75 deducted—the actual take-home amount would still yield a tiny paycheck.
Though this server reported a total of $969 in tips, taxes would still apply, meaning that even with the generous tips, the takeaway may often be disappointing. If they claimed the full amount of tips, the paycheck arrived depleted after deductions.