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“We see that a higher tip credit allows businesses to reduce prices — because they rely more on tips to finance labor,” says Dr. Snitkovsky. “Consequently, they can increase supply and serve more customers. This suggests an element of economic efficiency, but the efficiency in this case comes at the expense of the individual server’s earnings. So essentially, tip credit is a mechanism allowing employers to cut into tips that ostensibly belong to servers, using them to pay wages.”