As a new wave of minimum wage laws blows through many major cities in the U.S., some restaurants in those cities are making a stride forward to end the tyrannical tipping culture in America.
The New York Times reported that a seafood restaurant in Seattle switched to an all-inclusive menu by raising prices 21 percent and ending tipping. The newspaper cited Bob C. Donegan, the owner of the restaurant, as saying that chefs working in the kitchen were paid about half as much as the wait staff working with customers.
Not surprisingly, this income inequality between chefs and wait staff becomes more obvious in high-end restaurants than low-end ones because tipping is not shared with kitchen staff while revenue generated from selling food has to cover other costs where wages of kitchen staff are only parts of it.
Tipping is deeply ingrained in the American dining culture, but it seems everyone complains about it. Restaurant owners worry that the gap between kitchen staff and wait staff could discourage chefs and the inconvenience for their bookkeeping. Wait staff might complain that customers do not usually tip as much as they expect. Diners grumble that they do not know how much is enough for tipping. With the minimum wage on the rise, it might be a good moment for the restaurant industry in major cities to take the lead and end this embarrassing culture.
From an economics standpoint, service that brings satisfaction to diners is not worth the tips if customers correctly follow the percentage rules of tipping. Consider a couple having a romantic dinner in a high-end restaurant. First they order an appetizer and entrees worth 80 dollars, and then they order a bottle or wine priced at 40 dollars. When they tip along with the given 20 percent rule, the total bill they pay is 120 dollars plus 24 dollars for tip. 16 dollars out of 24 dollar tips go to the wait staff for bringing dishes from kitchen to the table. The remaining 8 dollars is for the service of opening a bottle of wine.
Under the conventional rules, we see almost no competition in this “service” market. Thus, it is hard to measure the true value of services. It is said that diners could tip less if they are not happy with the service, but things like taking dishes out and opening a bottle do not really differentiate the quality of services. The tipping rules actually run into a contradiction: its original intent gives way to social convention.
Traditionally, minimum wage law does not apply to tipped employees. According to the Fair Labor Standard Act, an employer of a tipped employee is only required to pay $2.13 an hour in direct wages if that amount plus the tips received equals at least the federal minimum wage. The employee retains all tips and customarily (and regularly) receives more than $30 a night in tips. If an employee’s tips combined with the employer’s direct wages of at least $2.13 an hour do not equal the federal minimum hourly wage, the employer must make up the difference. Regardless of the controversy surrounding the minimum wage law, the enforcement of the law is particularly difficult. Customers usually pay tips in form of cash, thus it is less likely for employers to know how much tips an employee earns. The randomness of tipping generates difficulties in law enforcement and bookkeeping.
Tipping is almost a semi-self-employment, such that whatever restaurant you work for does not really matter. Since employers pay much less than market wage, they do not have enough incentive to train their wait staff. Given the fact that Americans not only value the taste of food but also services, this semi-self-employment hurts the restaurant, especially high-end restaurants to retain customers and reputations. By eliminating tipping and rising prices to a reasonable level, restaurant owners are able to better manage their daily operations, generate formal hiring procedures and training sessions for employees and provide services to customers the way they want. The only concern is that a price-rising menu will keep customers away, but as more restaurants join the course, diners will adapt to a new dining culture without tipping.
