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this post was submitted on 12 Sep 2023
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This is the problem.
Framing this as the consumer doing something wrong and withholding wages from the servers is total bullshit.
The real fault is the industry underpaying their staff and leaving it up to the consumers to subsidize a significant portion of their income.
I'm not sure why people say it is on the industry. It's clearly driven by customer preferences. Try being a server some time and reject any tips that come your way. The customers will not be too thrilled.
In fact, the restaurant business would be much better served by charging a higher price, even if that also means paying the workers more, as they can skim more profit off the top. They have no legal entitlement to tip money. That is a huge opportunity loss.
Remember, restaurants – at least the kind where you pay after the event – aren't really in the business of food. They are in the experience business. They provide an experience that allows you to feel "like a king" for an hour or two, and throwing some coins at the "poor servants" to show how "rich and powerful" you are is part of that experience.
I don't think anyone's suggesting tips should be banned. It's just that tips shouldn't be expected from each customer. Someone working at any given fast food restaurant (not to mention other low level service jobs) is working just as hard as a server at a sit down restaurant for the same pay. Why should I be expected to tip one and not the other? Also, why is 15-20% considered a proper tip? 10% shouldn't be treated like it's an insult.
If you want get into the long history, alcohol service is unique in that it places liability on the server rather than the business. This means that they are legally their own independent agent and as such are free to charge their own rates. The tip separates what was sold by the restaurant and what was sold by the server. You will notice that any old laws on the books about tipping refer specifically to alcohol.
This is why it has been traditionally customary to tip in establishments that sell alcohol, but not places that just sell hamburgers. But these days I'm pretty sure everyone will ask you for a tip and a lot of those old laws have been stricken from the books. It is of little applicability these days. Now, it's mostly just because people enjoy tipping.
Because that is what the market will bear.
So what if it is an insult? I think most everyone feels a little insulted when someone says "no" to their offer. But are you going to accept every telemarking scam and vacuum salesman just because you are afraid you are going to hurt their feelings?
Lots of people get pleasure from tipping. And if a server can provide that service to them, great. If that is not you, just don't pay for the service. You can't win every customer, as they say.
The industry decides that profits come before everything else. Large restaurant corporations could easily charge the same amount, pay workers more (with the add on effect of customers saving money by not having to tip), and take a hit to profits. Unfortunately, our legal system doesn’t punish businesses for not paying workers a livable wage or for using tips to deceptively price goods to overcharge consumers. Instead, it’s illegal to not abide by fiduciary duty in the pursuit of infinite profits. Due to this, I can’t see the tipping culture going away anytime soon. It isn’t the consumers who are driving this, it’s the restaurant industry.
Exactly. So why do you think they are happy to let their margins go out the door?
A business is always incentivized to get paid as much as possible. Tips, however, are not paid to the business. They are paid directly to the workers. This means an, often substantial, loss in potential revenue for the business and thus is a huge loss in opportunity for the business.
Again, what business willingly turns revenue away? The answer is no business willingly turns revenue away. Where did you even get the idea otherwise?
Businesses prefer tipping because they don't need to provide benefits or scheduling for their employees. When they are slow, they aren't paying for all the staff hanging around. When it is busy, they still aren't paying their staff, but they have even more because people want to work for tips when it is busy. And when their employees act up, the customers are the ones who deal with it.
Tips let businesses staff for peanuts while punishing their employees with terrible schedules so they quit instead of being fired and getting unemployment.
Businesses love tipping culture.
I agree 100% especially given the behaviors that our current economic system incentivizes. I was simply responding to what you said about consumers preferences driving tipping culture instead of the industry.
Although consumers in North America feel comfortable and good about tipping, this tradition primarily stems from the push to increase profits by underpaying workers and offsetting their deserved pay with the “merit” based tipping system. It’s a clever trick that feeds into the idea that “the harder your work, the more you get paid”.
I don’t think this system will change unless profit is removed as the main factor in driving a business. Not to mention our legal system discourages and even prosecutes those who attempt to undermine the growth of a company against shareholder interests.
The only places this works is in privately owned businesses where the people who run it have the authority to prioritize paying employees over profits. However, this opens the door for businesses to reduce prices by cutting wages which undercuts the private business used in this example and could lead them to go out of business.
This example is basically to state that in order to eliminate the tipping culture and give workers the pay they deserve, the entire industry needs to change. One private company cannot be solely responsible for this change since another can come in and eliminate them. Now do I think this will happen? NO!
Yes, that's right. That's the topic at hand.
The only thing that will eliminate it is customers losing their desire to tip. They are under no obligation to. They do so because they want to! They could literally end it right now. But why should they? They clearly derive enjoyment from it, as found out in that tip rejection experiment.
Like you said, we 100% agree that the business would be better off charging more for the service (more revenue) instead of seeing the transaction split between the business and the workers (less revenue). There is no question that restaurant businesses, if it were up to them, would prefer to charge more for the plate over having tips. That gives them greater cashflow to work with and increased profitability on the margins.
But you can't get blood from a stone. If the customer wants to split the transaction between the business and the workers, there isn't much a business can do beyond saying "no soup for you" – but that's even less profitable than accepting a split transaction. Restaurants are forced to begrudgingly accept (if they want to be profitable).
I see what you mean. It is true that if the restaurant wage problem was solved tipping wouldn’t go away overnight, especially since many consumers in North America are used to the idea of tipping. However, I do believe it would slowly become less common as it is in other countries.
In places where tipping is less common, customers view the prices as fully baked in. What they pay includes the price of the food and providing enough so their workers can live. There’s no guilt over not tipping. Some people may if they like the service, but most won’t. Additionally, the consumer is able to make a more informed choice since they are able to see the actual cost of their meal. They also don’t have to choose having the soup vs. tipping someone enough to live.
I think my main point is that random patrons shouldn’t be able to determine whether someone can pay rent after working 12 hour shifts for a month. Letting the consumer split the cost of a transaction between the business and the worker is always a losing situation for the worker. The cost of the food is fixed, the business will always make X amount of dollars per transaction. Meanwhile, tipping is variable so the worker is never guaranteed a fair sum.
If workers were paid properly then tipping would be viewed as an actual reward for doing a good job instead of a restaurant worker subsidy program as it currently stands. As I see it, the whole industry needs to change with actual laws backing up it up or else a few bad actors can ruin everything in the name of wanting to be profitable.
Not hard to solve. Just stop tipping. Wages will adjust. Wages are only artificially low because the workers know they will make up the difference in tips. Take that away and they will demand more from the employer instead. Pretty simple.
Being the one who receives the money is always the winning situation. More revenue is better than less revenue. We already "100% agreed" upon this earlier.
Who is sticking around for a month if the tips aren't showing up? Even a mid-scale restaurant will see tips into the $20-30 per hour range, and the classiest restaurants can go even higher. One will be jumping to a new job the next day if one particular restaurant is failing to attract a clientele that tips sufficiently.
You make it sound like the workers are some kind of helpless blobs that have no idea what is going on around them.
And what's going to drive that? It takes the will of the people to change laws, but those very same people could just stop tipping. Trouble is that they want to tip.
I am on the Artemis app for Kbin which hasn’t been updated to allow quoting yet so excuse the strange formatting. Each of the following paragraphs will address each point in order.
1: Wages will certainly not adjust if tipping went away, there would just be less workers willing to take those roles. It’s not the workers keeping wages artificially low, it’s the restaurants owners who do. Having workers successfully demand higher wages on an industry wide scale just isn’t feasible without unionization. Sure there may be individual situations where workers actually get a raise but I don’t see this being the norm. Employers do not have to capitulate to raising wages, especially if workers have no other options available to them.
2: Workers can get tipped and be paid fairly. It’s not a zero-sum game. Paying workers a livable wage so they don’t rely on tips is what I consider to be the “winning situation”. Customers can tip if they want to which means more money for the worker and if they don’t receive tips then it’s not big deal since their wages are enough to cover their expenses. This is in contrast to what we have now where tips are used to supplement wages. So with increased wages and with people still deciding to tip on occasion, the average worker would actually make more money, not less. In terms of revenue for the restaurant owner or chain exec, I could care less.
3: You are ignoring a variety of important factors in the assertion. Not everybody lives in an area or can easily move to one where they can make that much in tips. Not everybody can easily switch jobs and take a gap in pay. Not everyone is in an area flush with jobs where they can get paid properly. Sometimes surprise expenses come up and mess up your budget when you are living paycheck to paycheck. Basically, not everyone has the means to actually do what you are suggesting. If people could easily find a new job to make up for any budget shortfalls then we wouldn’t see bankruptcy and homelessness run rampant.
4: People don’t care about the actual concept of tipping at all. Who needs to drive this is restaurant workers getting together and collectivizing to have bargaining power over restaurant owners. I doubt workers care about tipping over getting paid a livable wage with the added bonus of some people still tipping. If workers withhold their labor then restaurant owners will have to give in. This will lead to actual material change for these workers. I know it’s a long shot but it is a viable way to achieve these goals without involving consumers and their tipping habits. All of this is achievable (unless restaurant owners do what hospitals do when they try to unionize and bring in outside labor at a higher cost (which ironically would increase wages for those people, just not for those who got fired for trying to bargain) within our current legal framework.
Guess what happens when there are fewer workers willing to work in a role...?
And restaurants will have no trouble paying it because they will be able to raise their prices when there are no tips. It's like not like that $100 + $20 tip meal is going to move to being a $100 meal. It's going to become a $120 meal. There will still be the same amount of money sloshing around in the system. All you are really doing is changing how it is accounted for.
Of course, that does put more control in the hands of the restaurant. Now it is their revenue, not yours. A restaurant taking what was a $40 per hour, tip in, job and trying to squeeze it to $35 per hour and keeping $5 for themselves is a real possibly, just like I told in an early comment. It is always best to be the one in control. More revenue beats less revenue.
You're limited by what the customer is willing to spend, and they are only going to spend so much. That is zero-sum.
Restaurant margins are already basically zero, so there is no capacity to pay workers more without raising prices. That isn't going to happen without tips taking the squeeze. That $120 meal above is not going transform into a $144 receipt.
Higher wages and less tips, or a lower wage and more tips. Pick your poison. Of course, if you are the server, more tips is the way to go. It gives you the control, not the restaurant. And if you are unscrupulous, which I do not condone but seems to be the norm, it is easy to hide from the government. That's a huge additional pay bump.
That is true. I completely missed the most obvious part: You are going to ask other servers what the tips are like before you even consider taking the job. So if a restaurant struggles to attract the right clientele, you're not going to sign on in the first place.
Remember, at a good restaurant it is a $80-100k per year job (FTE). We're not talking about hopeless souls here. We're talking about top people who are highly intelligent and are especially skilled in dealing with people.
You want the largest benefactor of this system to be the one who brings the uprising? Methinks you've not thought this through.
Restaurants are most likely to lead the charge. They are highly incentivized to see that money become their revenue. And, indeed, many individual restaurants have tried (and failed, obviously) to do exactly that. A concerted effort by the entire restaurant industry, however, would no doubt be illegal.
1: "Guess what happens when there are fewer workers willing to work in a role...?" You're responding to a hypothetical I'm not making which doesn't address my argument. I'm advocating fair pay so workers aren't reliant on inconsistent tips, not banning tipping outright. In my proposal, fair wages means decreased tips wouldn't deter workers. Your hypothetical keeps pay low with no tips, unlike my proposal. When discussing the potential for restaurants to seize more control over revenue, it's important to highlight the power of unions and collective bargaining. Unions exist to represent the interests of their members, and in this case, the workers. They provide a structured, legal avenue through which workers can negotiate better pay, benefits, and working conditions. When a union negotiates with a restaurant or a chain, they're establishing legally binding agreements that outline worker compensation and rights. This ensures that even if prices increase, there is a legal obligation to ensure workers benefit. It's a mechanism that places a check on the natural inclination of businesses to maximize profits, ensuring workers aren't shortchanged in the process. Additionally, unions have strike funds and other resources to support workers who are fired or face retaliation for union organizing, as we are seeing with the recent strikes in Hollywood.
2: The notion that tips place power solely in the hands of the workers is a bit misleading. In fact, tips are at the mercy of customers, and, to some extent, the establishment. Factors like ambiance, quality of food, and even factors beyond a server's control can influence tips. The current reliance on tips effectively offloads the responsibility of ensuring a living wage from the employer to the customer. This shouldn't be the case. Workers should be guaranteed a livable wage, with tips serving as a bonus for exceptional service. As for the profit margins, it's an oversimplification to say that restaurants operate strictly on slim margins and can't afford wage hikes. If that were the case, how do we account for thriving chain restaurants and franchises? There are restaurants that are extremely profitable, and while there may be challenges in the industry, there is certainly room for wage adjustments.
3: Citing the earnings of top-tier restaurant servers as a standard is cherry-picking. The vast majority of servers don't earn anywhere near that amount. Additionally, the variability and unpredictability of tips don't disappear simply because some servers in upscale restaurants earn well. And if every server is supposed to find the highest-tipping establishments, then who fills the roles at the lower-tipping places? The logic doesn't pan out.
4: The claim that high-earning servers wouldn't want to unionize misses the bigger picture. The vast majority of restaurant workers are not top-tier servers at upscale establishments. They are workers struggling with low wages and unreliable tips. These workers have every reason to come together and unionize to demand better pay and working conditions from restaurant owners. Historically, the groups most affected by an unjust system are often the ones to lead the charge for change. The claim that restaurants would lead this charge contradicts established trends. Restaurants, as profit-driven entities, are unlikely to spearhead efforts that might cut into their profits unless compelled by external pressures – like a strong union.
Tipping isn't driven by customers, but an unfair system offloading fair pay onto them. Workers shouldn't have to rely on tips just to get by. The solution is empowering workers to demand fair wages so tipping returns to being a bonus, not a business model.
Was there a reason to introduce this bad faith direction?
None of what you said justifies paying these employees less because consumers are expected to give them money above and beyond the products/services that were purchased.