Proponents of the abolition of tipping in practically all of the nation’s million restaurants couldn’t be more wrong in their assessment of the economics of tipping, and tipping abolition. Let me count the ways:
—Tipping abolitionists argue that tipping enables restaurants to “exploit” servers, trapping them in poverty. Servers deserve a fixed “living wage,” maybe $15 an hour.
No doubt low-income servers can be found in the country, but that is hardly the case for servers at moderate-priced — Applebee’s-level — restaurants. I asked 40 servers in such restaurants in Orange County, Calif., the hourly wage they would require to forgo tips. The responses ranged from $18 to $50 an hour, with 62 percent of the servers giving $30 to $50 an hour (much of which can go untaxed).
This means that two married servers between 25 and 40 years old earning only $30 an hour but working full-time would have an annual income of $124,800, putting them in the top 17 percent of all households and the top 12 percent of households in their age category. If the California minimum hourly wage were raised today to $15, two married 30-year-old servers would be elevated to the top 3 percent of all households at their age level. All servers were hostile to replacing tips with an hourly wage of $15 or even $18.
—Tipping abolitionists argue that tipping is a holdover from slavery, when slave-owners tipped slaves for their unusual efforts.
The argument stretches credulity. Servers I interviewed don’t see themselves enslaved to their restaurants. They can, and do, move to where the money is.
—Abolitionists argue that servers resent having to “tip out” a part of their meager earned tips to “bussers” and “runners.”
Servers with whom I talked repeated a good, old-fashion economics lesson: “Incentives matter.” They reported often “over-tipping out” bussers and runners who do exceptional jobs in enabling them, the servers, to accommodate more customers and to garner more tips.
—Abolitionists argue that tips have little to no effect on the quality of service, and vice versa.
The servers I interviewed were convinced that their work diligence affected their tip income, and substantially so. They reported that if they elevated their service level from “average” to “exceptional,” their percentage tips would rise by an average of 57 percent. They also unanimously reported that if tips were replaced by an hourly wage, service would seriously deteriorate, especially for inconsiderate customers.
—Abolitionists argue that tipping leads to pay discrimination among servers and between servers, runners and bussers, and kitchen workers.
No doubt it does, appropriately. Many runners and bussers take their jobs in the hopes that one day they will become servers or, better yet, bartenders. Most servers believed that they were above average in the service provided, and they did not want their incomes reduced to the service level provided by less experience and diligent servers.
—Tipping abolitionists maintain that tipping serves no useful business function and only promotes sexual harassment who must “grovel for customers’ change.”
Female servers did report they confronted inappropriate comments and behaviors in their jobs, but most assured me that they had become skilled in dealing with most inappropriate affronts and most had managers and bouncers guarding their backs.
Managers and servers also recognized that tipping made servers “sales people,” giving them an incentive to use their local knowledge of customers to make more sales and to provide better, more individualized service to customers, especially regulars who, understandably, tend to leave bigger tips than occasional customers.
A small number of restaurants have tried a no-tipping policy with higher menu prices, only to see server morale collapse and turnover rate skyrocket. Customers have also balked at the higher prices and loss of influence over their service. This isn’t to say that tipping should be used everywhere in the highly diverse restaurant industry. But my overall point is that a blanket government ban on tipping is surely a policy snare and delusion, no matter how well intended.
Richard McKenzie (email@example.com) is the Gerken Professor (emeritus) in the Merage School of Business at the University of California, Irvine. He is also a senior fellow at the National Center for Policy Analysis, where his detailed study on tipping can be found. He wrote this for InsideSources.com.