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Restaurant owners refuse to pay higher wages because that would remove a huge profit source for them - variable pricing. As long as part of the wage is in tips

by Paul_S 5y ago

Restaurant owners refuse to pay higher wages because that would remove a huge profit source for them - variable pricing. As long as part of the wage is in tips the owner effectively is capable of charging customers different prices. Rich people pay more but poor poeple also visit. If you raise the price to pay a good wage without tips and abolish tipping you lose the poor customers.

atty 5y ago
You seem to be under the impression that rich people tip more. From what I have seen, and from many friends in the service industry, this is simply false. You’re far more likely to get no tip from someone driving a Mercedes than someone driving a junker, at least around where I am.
- dragonwriter 5y ago
  Rich people don't get rich by giving away money for nothing, so expecting rich people to be more inclined to do so is...odd.
arcturus17 5y ago
Eh, how is variable pricing a source of profit for the restaurateur? Their profit is calculated on a fixed price. Also from what I’ve observed in the US, everyone is morally obligated to pay a tip… Rich people may go above and beyond the average (citation needed) but having tips arguably does not raise demand from more modest people, since they are still expected to pay base price + tip. There is no real price segmentation at play as far as I can tell… Modest people also eat out in Europe or in Japan, where morally mandatory tipping does not exist, so there is that.
- red_trumpet 5y ago
  > Eh, how is variable pricing a source of profit for the restaurateur? Their profit is calculated on a fixed price. More people dining means more profit probably. > (citation needed) Yes, that may indeed be a problem.
  - arcturus17 5y ago
    > More people dining means more profit probably. I gave a precise argument to why I think tips do not increase demand for the service - most people in the US, regardless of wealth, pay at least the minimum tip. GP's argument that there is a substantial price segmentation would only hold if poorer people did not pay the tip.
wonderwonder 5y ago
This would apply to all industries and yet every one else seems to be able to figure it out. Also I have never been to a Restaurant where I got a different menu based on my W2. Edit: I missed the point, my fault.
- kristjansson 5y ago
  >Also I have never been to a Restaurant where I got a different menu based on my W2 That's OPs point? Tipping allows for a degree of price discrimination since people that can't afford the full cost (menu price + tip) are allowed to pay less. I'd quibble about the degree of that effect, but it makes sense directionally.

by Paul_S 5y ago

atty 5y ago

You seem to be under the impression that rich people tip more. From what I have seen, and from many friends in the service industry, this is simply false. You’re far more likely to get no tip from someone driving a Mercedes than someone driving a junker, at least around where I am.

dragonwriter 5y ago
Rich people don't get rich by giving away money for nothing, so expecting rich people to be more inclined to do so is...odd.

arcturus17 5y ago

Eh, how is variable pricing a source of profit for the restaurateur? Their profit is calculated on a fixed price. Also from what I’ve observed in the US, everyone is morally obligated to pay a tip… Rich people may go above and beyond the average (citation needed) but having tips arguably does not raise demand from more modest people, since they are still expected to pay base price + tip. There is no real price segmentation at play as far as I can tell… Modest people also eat out in Europe or in Japan, where morally mandatory tipping does not exist, so there is that.

red_trumpet 5y ago
> Eh, how is variable pricing a source of profit for the restaurateur? Their profit is calculated on a fixed price. More people dining means more profit probably. > (citation needed) Yes, that may indeed be a problem.
- arcturus17 5y ago
  > More people dining means more profit probably. I gave a precise argument to why I think tips do not increase demand for the service - most people in the US, regardless of wealth, pay at least the minimum tip. GP's argument that there is a substantial price segmentation would only hold if poorer people did not pay the tip.

wonderwonder 5y ago

This would apply to all industries and yet every one else seems to be able to figure it out. Also I have never been to a Restaurant where I got a different menu based on my W2. Edit: I missed the point, my fault.

kristjansson 5y ago
>Also I have never been to a Restaurant where I got a different menu based on my W2 That's OPs point? Tipping allows for a degree of price discrimination since people that can't afford the full cost (menu price + tip) are allowed to pay less. I'd quibble about the degree of that effect, but it makes sense directionally.