It is not uncommon for the U.S. Bureau of Labor Statistics to provide data that is a little inaccurate, especially in the cosmetology field and other trades that rely heavily on tips. This is because hairstylists tend to underreport wages and neglect (or choose) to report all the tips that comprise their income. Ultimately, this results in much lower totals being documented. This is bad in a lot of ways for cosmetologists and the beauty business as a whole. First – it opens you up to getting audited by the IRS for misreporting income. Second – it makes it look like beauty professionals aren’t worth as much, which we all know isn’t true. So when you see $25-30,000 median salaries listed on the Bureau of Labor Statistics, think twice about whether that’s really accurate since so many people fail to report tips, freelance earnings and other sources of revenue in the cosmetology trade. The actually cosmetologist salary is probably actually higher.
Because of the lower salaries that are reported, it turns prospective beauticians away from the field. Many people who are passionate about beauty and cosmetology trades think there’s no money to be made in the field, so they pass over what otherwise would’ve been their dream job and going to cosmetology school. In fact, under reporting earnings leads to skewed results with demographics, the average wage statistics and even labor market activity. Not only does not reporting both the full amount that a cosmetologist earned and the amount with tips cause potential cosmetologists to stray away from their true passion, it also may lead to an increase in vulnerability when it comes to being audited. It is illegal to not report the full amount you earned throughout the year, including tips. The legality issue leads to auditors paying special attention to those who work in jobs where tips are generally customary.
When a person devalues the work that he or she does by under reporting wages, it leads to other consequences besides potential legal charges and a misconstrued perception of the industry. It may also harm a person’s ability to obtain loans and other forms of credit, since the amount that is documented is considered the amount that what actually made, regardless of unreported earnings. One stylist, Stefanie Gilardo, had to learn this lesson on her own. When she was 24 years old, she wanted to purchase her first home. She was excited and knew that she earned enough to make monthly mortgage payments. However, the now 29-year-old could not obtain the loan for buying that condo because her income appeared too low to be able to afford it. She learned that if income is not claimed, it is not verifiable and considered nonexistent.
Not reporting wages or tips also affects a person’s social security, due to the fact that the amount you pay in is based on your earnings. When wages and tips are reported accurately, it creates a sense of security at retirement, because the more money paid into social security, means the more money that will be paid out after retirement. But many cosmetologists are not thinking long-term and skipping this very important step.
Ultimately, the long and short of it is that all wages must be reported. The little girl styling her baby doll’s hair and dreaming of working as a stylist will grow up to explore her options. When she notices that the earnings are quite dismal, she just might decide against striving for a job that is her true passion in life.