Debate Forum 1/5/16

Should tipping be eliminated?

By Tim Walker

Tipping the server after dinner—do you do it, or not? If so, how much do you leave—18 percent? 20 percent? If you leave less, are you a cheapskate? And why is tipping expected at some establishments, but not at others?

Questions like these have puzzled diners for years, and inspired debate in unexpected corners. In a memorable scene from Quentin Tarentino’s 1992 film “Reservoir Dogs,” for example, the character Mr. Pink, ably played by Steve Buscemi, states “I don’t tip because society says I have to. All right, I mean I’ll tip if somebody really deserves a tip. If they really put forth the effort, I’ll give them something extra. But this tipping automatically, it’s for the birds. As far as I’m concerned, they’re just doing their job.”

The subject of tipping servers has again been in the public eye recently with the announcement of changes to come in the tipping policy of two major restaurant chains. In a sweeping adjustment to how most of its 1,800 employees receive their pay, the Union Square Hospitality Group will eliminate all tipping at Gramercy Tavern, Union Square Cafe and 11 other restaurants by the end of 2016, says the company’s CEO Danny Meyer, in late October.

Then, a few weeks later, Joe’s Crab Shack, a Houston-based seafood chain with more than 130 locations nationwide, announced it would also adopt a no-tipping system in one of the largest trials yet of the policy. The casual seafood chain will test the change at 18 locations, announced its parent company, Ignite Restaurants. The company also indicated menu prices would rise to absorb the added labor costs, but said the increase would be “typically less than the average 20 percent service tip.” The company did not say when the new policy would begin.

“We believe that consistently great service should always be included in the menu price, so we are taking the responsibility for paying the service staff,” CEO Ray Blanchette says in a statement. “I personally believe tipping is an antiquated model and you have seen most businesses in America migrate away from it over the last 50 to 100 years.”

“It’s troubled me for 21 years that the tipping system is antithetical to creating a real profession for people who takes their jobs seriously,” Union Square CEO Meyer concurred when interviewed in CNBC. “You don’t tip your doctor if they do a good job. You don’t tip the airline pilot if the plane lands. … It’s actually a demeaning practice.”

In restaurants, servers are generally paid wages well under the minimum, and they rely on tips to make up the difference. But the system can be volatile, enabling servers to take home good wages on a busy night or make very little when business is slow. For customers, tipping can represent an annoying math problem, even if they appreciate the ability to reward good service or protest poor performance. Restaurants also give up a significant tax credit by eliminating tips, and the potential effect on menu prices—should tips be eliminated—is uncertain.

Opponents to the idea say that servers would be forced to take a huge cut in pay if tips are eliminated. In the service industry of dining out, especially at high-end restaurants, what you make as a server is dependent on your skill level, they argue, and someone with more menu knowledge will walk away with more. The salary or minimum wage would have to reflect that.

Proponents of eliminating tips say that it is outdated, demeaning and inconsistent. Restaurant owners and managers who have adopted the policy, they say, have reported that it leads to improved morale and less pay discrepancy between front-of-house and back-of-house workers. Servers are often penalized financially for problems that are not their fault—for example, if an order is prepared incorrectly by the kitchen. Restaurants, they say, should pay their employees a fair wage and not depend on the public to subsidize their employees.

 Tim Walker is 50 and a writer, DJ, and local musician. He lives with his wife and their 2 children in Dayton, where he enjoys pizza, jazz and black t-shirts.

 

Skip the tip

By Paula Johnson

The tipping economy promulgates poverty, discrimination, sexual harassment and not only is it a drain on the American taxpayer through necessitating social support programs, but in lost income tax revenues on unclaimed income as well. David Kinch, chef and owner of the Michelin-starred Manresa in Los Gatos, CA calls tipping an “antiquated slave system, where people are treated like domestics.” It’s time to drop this practice for good and make serving a desirable profession offering a living wage.

And the first major American chain restaurant agrees. Joe’s Crab Shack has just ended the practice, joining a few others who, up to this point, are mostly high-end restaurants.

What’s in it for a restaurant to eliminate tipping?

The restaurant owners who have done so claim that eliminating tips actually creates a better dining experience because the kitchen staff making your food will actually get paid a better wage due to more equitable redistribution of a “service fee” charged in lieu of tipping. Servers and cooks typically made similar base wages—and minimum wage was the same for both jobs—but servers kept all the tips, which could often mean they were taking home three times what the cooks made, or more.

Eliminating tips fixes this disparity, and results in lower turnover and more team camaraderie and commitment from workers, and more stability and better customer service. Since less time and money is spent on training replacement workers, more profit is realized, thereby enabling owners to afford higher wages.

So what is it about tipping that’s so bad?

First, it’s a strange and self-defeating practice that has come to negate the reason it exists. What began as a reward for exceptional service is now compulsory. And, it’s arbitrary. Customers don’t tend to vary their tips according to service. Instead, people tip out of habit. If a 20 percent tip is a customer’s norm, then they are likely to tip 20 percent no matter how good or bad the service is. As a result, servers don’t really have an incentive to provide better service. (Additionally it’s estimated that only 23 percent of the dining public actually tips that much, and half the respondents to a survey by coupon site vouchercloud.net said they tip less than 5 years ago because their “financial situation has changed.”)

Since most places are still sticking with the tipping system, this means in some states, workers are paid the minimum wage for tipped earners, a whopping $2.13 an hour. In most states, restaurants are allowed to pay serving staff far less than the minimum wage. Each state, though, has leeway to set a higher wage for servers, and a few have done so. It’s is a great system for the restaurant industry, because it lets businesses pay less than the minimum wage in almost every state. But it contributes to poverty among servers who work in lower end establishments. In fact, servers are nearly three times as likely as other workers to experience poverty, according to a March 2014 report from the National Economic Council, the U.S. Department of Labor.

Tipped workers and their families rely on welfare programs to survive at significantly higher rates than non-tipped workers, according to a 2014 report from the Economic Policy Institute, a think tank focused on labor issues. “Tipped workers are heavily reliant on public subsidies to help make ends meet,” says Sylvia Allegretto, a research economist at University of California, Berkeley.

Until 1996, when the regular minimum wage increased, the tipped minimum wage would automatically increase along with it. Under pressure from the restaurant lobby, the tipped minimum wage was separated from the regular minimum wage. So the value of the tipped minimum wage has steadily fallen over the years. That explains a huge discrepancy for workers and a huge plus for business owners.

Tips are unpredictable. However, studies by Michael Lynn, the Cornell professor and tipping expert, have shown that female servers with larger breasts, smaller body sizes and blond hair tend to earn more tips than servers without such attributes. A separate study by Lynn found that white servers are tipped more than black servers for the same quality service and regardless of the race of the customer.

The tipping economy is particularly unfriendly to women. According to an October 2014 report from the Restaurant Opportunities Center, 80 percent of female servers say they’ve been sexually harassed at some point in their careers, and sexual harassment is more prevalent in states that only pay servers the federal sub-minimum wage of $2.13 an hour, as opposed to states that mandate a higher minimum wage.

“Since women restaurant workers living off tips are forced to rely on customers for their income rather than their employer, these workers must often tolerate inappropriate behavior from customers, co-workers and management,” the report says. “This dynamic contributes to the restaurant industry’s status as the single largest source of sexual harassment claims in the U.S.”

One argument you often hear in favor of keeping the tipped minimum wage so low is, if restaurants have to pay servers a higher hourly wage, they’ll be forced to increase menu prices and that will drive business away by giving people “sticker shock.” But in all likelihood, the price hike of your meal, or the mandatory service charge tacked on in lieu of a tip, would be roughly equal to what you would have paid in tips anyway.

Saru Jayaraman, co founder of Restaurant Opportunities Centers United, a group that has fought for the elimination of tipping, says, “Forward-looking employers who are taking the high road to profitability through policies that ensure a living wage for employees will show the nation that dignity and profitability are not mutually-exclusive ideas at America’s restaurants.”

Well said, Mr. Jayaraman. I tip my hat to you.

Dayton City Paper Dining Critic Paula Johnson would like every meal to start with a champagne cocktail and end with chocolate soufflé. As long as there’s a greasy burger and fries somewhere in the middle. Talk food with Paula at PaulaJohnson@DaytonCityPaper.com.


Tipping gives us economic power

By Rob Scott

Tipping can be a hot topic. Who do you tip? How much do you tip? Is it a percentage, and what percentage? Also, if the service is terrible, is it okay to not tip at all?

Tipping is a staple of the hospitality industry and other parts of the economy that generates an estimated $40 billion in annual for those receiving the tips. Many believe tipping has become tedious and an unnecessary obligation.

Many restaurants are beginning to consider doing away with tipping, especially with minimum wage rising. Restaurants are not the only service workers who benefit from tipping—there are hotel workers, hairstylists, nail technicians, valets and many more.

In an interview, Kevin Reddy, CEO of fast-casual chain Noodles & Co., said that his restaurants don’t allow tipping because “we don’t really feel that folks should have to pay something additional. We don’t want our guests to feel we’re trying to upsell them.”

Some local outlets have banned tipping in favor of other arrangements. At many grocery stores, store clerks are not allowed to take tips. When I worked at Meijer as a bagger and cart boy, we were not allowed to take tips from customers. This is the same rule at Kroger.

Even high-end establishments are following suit. Restaurateur Jay Porter ran the San Diego bistro, Linkery, for six years with no tipping allowed, substituting it with an 18 percent service charge on every check, with proceeds split among the entire restaurant staff. A new Washington, D.C. brewpub, The Public Option, will pay everybody at least $15 per hour while banning tips.

Sometimes tipping can be seen as a power play or a sign of financial health. Republican Presidential nominee and Real Estate mogul Donald Trump once left a waiter a $10,000 tip on an $82 bill because he felt the waiter had done such a good job at the Buffalo Club in Santa Monica, CA.

Ultimately, many believe tipping is irrational economically.

That may be somewhat true, from the narrow perspective of the diner; but tips also allow the customer to pay wait staff directly without the added cost of tip-less labor pushing up food and drink prices. From the perspective of the establishment and the workers themselves, that’s a good thing. There are three good reasons why we should never ban tipping.

First, tipping creates an incentive to be entrepreneurial. Anybody who’s ever worked as a waiter or bartender knows you can boost your income at least two ways: by earning bigger tips (whatever it takes to do that), and by turning over your customers faster through speedy service, which means you’ll get more customers and therefore more tips. There are flaws. Tip-starved waiters, for instance, might rush customers and degrade their dining experience. On busy days some waiters could take more tables than they’re able to handle, impacting service for everybody.

But offering hourly pay in lieu of tips takes the hustle out of the job, since you’ll get paid the same whether you serve one customer or 50, and whether your service is great or terrible. There’s nothing wrong with punching a clock, but it does replace the incentive to maximize your income with the mere duty to show up and make it through your shift. Any work that generates an entrepreneurial vibe is important in our economy, especially since it can instill a hunger for making money that many people will never learn in school or at home.

Keeping tipping allows for folks to make more money. Those who benefit from tips could easily earn five times the minimum wage on an hourly basis. This causes a $15 an hour job to seem less enticing versus being a waiter or waitress. Plus, people earning cash income have enviable flexibility in terms of the earnings they report to the IRS, although none of them, I’m sure, would do anything illegal.

Tipping gives consumers more control. Anti-tippers complain about the social pressure tipping causes, as if some poor waitress’s college education and entire future rides on whether a few customers here or there leave her 25 percent rather than 15 percent.

If a waiter’s pay isn’t related to the quality or speed of the service provided, what incentive is there to excel? Just wanting to keep your job? The professionalism that comes with wearing the apron? I’d rather trust the financial incentive, which is far more powerful.

The argument is this: where do we pass the buck? Most restaurants and service industries would need to increase wages for their employees if tipping was not allowed. This in turn would increase the costs of a meal or service the consumer is getting.

Either way, I would prefer to have some control in the matter and be able to economically reward someone who takes good care of me.

Rob Scott is a general practice attorney at Oldham & Deitering, LLC. Scott is a Kettering City Councilman, founder of the Dayton Tea Party, member of the Dayton Masonic Lodge and Kettering Rotary. He can be contacted at rob@oldhamdeitering.com or www.gemcitylaw.com.

 

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Tim Walker
Tim Walker is 51 and a writer, DJ, and local musician. He lives with his wife and their two children in Dayton, where he enjoys pizza, jazz, and black T-shirts. Reach DCP freelance writer Tim Walker at TimWalker@DaytonCityPaper.com

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