[loeg]

You're describing so-called "server wages," which only apply to businesses with tipped employees (and do not apply in the seven "equal treatment" states, including California and Washington). I don't think it makes a huge difference in total unemployment numbers, because tipped workers represent something like 2-3% of all US workers.

(I agree that the concept of server wage is pretty awful and should be eliminated as a matter of policy.)

[baby]

Why do people tip in California if that's not a thing then?

[loeg]

You would have to ask them. But one plausible reason would be that they might think service is worth more than the state minimum wage.