4 ms·

This has been tried many times, you are ignoring the reasons it did not work. The employees hate it because they make less money, forcing the restaurant to go b

This has been tried many times, you are ignoring the reasons it did not work. The employees hate it because they make less money, forcing the restaurant to go back to tipping. It was effectively a pay cut for employees. It is not wage/revenue neutral because it changes customer behavior. Generally speaking, Americans are more generous when the money goes to directly to a service person than to a faceless business that sets itself up as a middleman in that relationship.

tolbish 5y ago
How much money did they make with raised wages and no tips? Was the wage still not comparable to other jobs?
- jandrewrogers 5y ago
  I have several good friends that work in this business in Seattle, where several restauranteurs tried the "no tipping" model. Anecdotally, in a popular quintessentially Seattle restaurant, a good front-of-house person may net around $40/hr after tips, some more and some less. I don't have a lot of sample data for the "no tipping" restaurants, but my general impression is that it was on the order of a 10% reduction in pay. One reason several of them have mentioned is that many customers are happy to regularly tip much more than 20%, and this is often correlated with the highest spending customers. Making it a non-discretionary 20% puts an artificially low cap on how much they earn from the customers that pay the most. At one time some customers would leave extra cash on the table after paying the "no tipping" bill, but no one carries cash anymore. Places that net $40/hr have enormous difficulty hiring right now. These are not poorly paying jobs but the broader lifestyle is pretty terrible even at good restaurants, made even more terrible because of the employee shortage. One overlooked issue is that many restaurant workers in the big cities are originally from "flyover country". When the restaurants closed during COVID, a large number went back home. I was talking to a waitress in the middle-of-nowhere Iowa a few months ago and she had just moved back after several years working in New York City restaurants.
  - tolbish 5y ago
    One would think a sign out front that said "Now hiring: Wait staff, starting pay @ $40/hr (or even $30/hr)" would have no trouble finding and retaining talent, even in big cities like Seattle. I don't think I've ever seen a sign advertising anything near that for restaurants.
    - jandrewrogers 5y ago
      These are skilled restaurant jobs, they don't advertise with signs. Same reason there isn't a "help wanted" sign for my job. It is a social market. There were shortages already before COVID in Seattle, but now the shortages are extreme. Restaurants are reducing opening hours and days. I have friends working these jobs. The consistent pattern is that they are only working the minimum number of shifts required to pay their bills, and they live pretty cheaply. You can't staff the restaurants when all of your employees only want to work 1-2 days a week. They could easily work more hours, and did before COVID, but are choosing not to now. And because restaurant work is extremely flexible and available on-demand, it makes their life flexible. Many people have adapted their lifestyles to having less money and not working, especially with the generous unemployment benefits. Restaurant workers I know fall into that camp. My SO was receiving $75k/year on unemployment during COVID and turned down jobs paying $125k+ because they discovered the unemployment benefit was sufficient for a lifestyle of doing nothing that they were happy with. Not likely to take a job anytime soon either. As a tangential observation, while I know many people in this position, none of them is doing much with their newfound free time. Just kind of coasting.
mdavis6890 5y ago
As a tipped employee, I can tell you this is not exactly the real reason. There are at least two more important: - Historically (less so now), tips are a tax dodge - they often aren't reported, or greatly under-reported. - Tips are less egalitarian than wages would be. Nominally, front of house and back of house have similar wages, but front of house gets far more tips. Even in the normal shared-tip-pool model this is true. Changing this would mean making explicit and obvious things that were previously implicit and looked past: Front-of-house would need/want/demand a far higher hourly wage than what the back-of-house workers would/cloud, and everybody would have to report ALL their income for taxes. There is also the problem that unprofessional service staff might not try as hard to please the customers, though maybe those get filtered out over time.
mariodiana 5y ago
I can't articulate the details, down to the last detail, but the worst thing to happen to tipping is the change the IRS made, some years back. If I understand correctly, the IRS always used to estimate tip for a server based on a table's bill. (The custom is 15-20 percent, and I think the IRS used to average lower than that.) But the IRS always used to collect its cut on tips from the server. The change is that the IRS now holds the restaurant owner accountable for the taxes due on the tip. The result is that instead of the money going to the server directly, it first has to pass through the hands of the business owner. I don't know if this still goes on, but some years back I recall hearing that some restaurant owners would then "distribute" those tips to other members of the staff — the busboys, kitchen help, etc. Traditionally, waiters always "tipped out" the busboys and bartenders they worked with, on any given shift, and better service (theoretically) promoted more generosity from the waiter. But now that the business owner has his hand in it, the business owner will operate according to his own interests. The waiter is cut out. The waiter has less control, and less direct incentive. The waiter has less of a payoff. Rumor has it (or, if you will, common sense has it) that some owners abuse their role as middleman.
- smachiz 5y ago
  This isn't an IRS change. It was a public behavior change. The owners always had to withhold taxes from their wait staff, just as your taxes are withheld by your employer. The difference is that since almost all tips are now on credit cards, the business owner doesn't need to assume the % sales to withhold, and withholds based on virtually all of their employees tips. The end result is that the wait staff can't commit tax fraud by not reporting tips. The business owner didn't have to report cash tips, only withhold based on a % of sales. They still withhold on % of sales if actual tips are less than the % of sales.
  - throwawayboise 5y ago
    That is a change. I used to deliver pizza, it was cash or check, I pocketed any tips before I got back to the store, the management never had a clue how much tips I got or did not get. Even with the checks, they just went into a box and were totaled at the end of the day. No way to trace them back to an order.
FireBeyond 5y ago
> This has been tried many times, you are ignoring the reasons it did not work. The employees hate it because they make less money, forcing the restaurant to go back to tipping. Yup. A couple of restaurants in the Seattle area tried this. "20% price increase, no more tipping". Over time, their employees left, saying they were being paid less. Remember this the next time you hear the "if you tip 15% or less I'm literally paying to serve you!" (which is also BS. The IRS, if you don't disclose tipped income, assesses a standard rate. If you're truly earning less than that in tips, you can document it and pay less. But almost no-one wants to do that because the IRS is behind the times, and almost all servers make more in tips than that standard rate).
moritonal 5y ago
Whilst that might be true for Americans, as a European I find your culture of tipping(as part of a waiter's salary) a negative for everyone but the faceless business. I still tip waiters who do a great job, but don't have to be guilted into thinking they will go hungry if I don't.
ruined 5y ago
That's not a problem with a tipless system, that's a management decision to lower wages. If management simply paid employees what they were netting before, or better, there would be no pay cut and no departures.
grecy 5y ago
> This has been tried many times, you are ignoring the reasons it did not work It works perfectly for many tens of millions of restaurant workers in two dozen developed countries around the world.
- jandrewrogers 5y ago
  Those workers never had a choice. If it "works perfectly" then why do workers that do have a choice consistently choose to work in establishments where tipping is the norm? That's not a very convincing argument. The bottom line is that it is the workers making the choice you disagree with, in pursuit of their own self-interest. It would be one thing if choosing one policy over the other was revenue-neutral to the restaurants and workers, but empirically that is not the case.
thirdsun 5y ago
> This has been tried many times, you are ignoring the reasons it did not work. The employees hate it because they make less money, forcing the restaurant to go back to tipping. Isn't the solution obvious? Adjust wages/prices to such a degree that it does fully compensate for the missing tips.

tolbish 5y ago

How much money did they make with raised wages and no tips? Was the wage still not comparable to other jobs?

jandrewrogers 5y ago
I have several good friends that work in this business in Seattle, where several restauranteurs tried the "no tipping" model. Anecdotally, in a popular quintessentially Seattle restaurant, a good front-of-house person may net around $40/hr after tips, some more and some less. I don't have a lot of sample data for the "no tipping" restaurants, but my general impression is that it was on the order of a 10% reduction in pay. One reason several of them have mentioned is that many customers are happy to regularly tip much more than 20%, and this is often correlated with the highest spending customers. Making it a non-discretionary 20% puts an artificially low cap on how much they earn from the customers that pay the most. At one time some customers would leave extra cash on the table after paying the "no tipping" bill, but no one carries cash anymore. Places that net $40/hr have enormous difficulty hiring right now. These are not poorly paying jobs but the broader lifestyle is pretty terrible even at good restaurants, made even more terrible because of the employee shortage. One overlooked issue is that many restaurant workers in the big cities are originally from "flyover country". When the restaurants closed during COVID, a large number went back home. I was talking to a waitress in the middle-of-nowhere Iowa a few months ago and she had just moved back after several years working in New York City restaurants.
- tolbish 5y ago
  One would think a sign out front that said "Now hiring: Wait staff, starting pay @ $40/hr (or even $30/hr)" would have no trouble finding and retaining talent, even in big cities like Seattle. I don't think I've ever seen a sign advertising anything near that for restaurants.
  - jandrewrogers 5y ago
    These are skilled restaurant jobs, they don't advertise with signs. Same reason there isn't a "help wanted" sign for my job. It is a social market. There were shortages already before COVID in Seattle, but now the shortages are extreme. Restaurants are reducing opening hours and days. I have friends working these jobs. The consistent pattern is that they are only working the minimum number of shifts required to pay their bills, and they live pretty cheaply. You can't staff the restaurants when all of your employees only want to work 1-2 days a week. They could easily work more hours, and did before COVID, but are choosing not to now. And because restaurant work is extremely flexible and available on-demand, it makes their life flexible. Many people have adapted their lifestyles to having less money and not working, especially with the generous unemployment benefits. Restaurant workers I know fall into that camp. My SO was receiving $75k/year on unemployment during COVID and turned down jobs paying $125k+ because they discovered the unemployment benefit was sufficient for a lifestyle of doing nothing that they were happy with. Not likely to take a job anytime soon either. As a tangential observation, while I know many people in this position, none of them is doing much with their newfound free time. Just kind of coasting.

mdavis6890 5y ago

As a tipped employee, I can tell you this is not exactly the real reason. There are at least two more important: - Historically (less so now), tips are a tax dodge - they often aren't reported, or greatly under-reported. - Tips are less egalitarian than wages would be. Nominally, front of house and back of house have similar wages, but front of house gets far more tips. Even in the normal shared-tip-pool model this is true. Changing this would mean making explicit and obvious things that were previously implicit and looked past: Front-of-house would need/want/demand a far higher hourly wage than what the back-of-house workers would/cloud, and everybody would have to report ALL their income for taxes. There is also the problem that unprofessional service staff might not try as hard to please the customers, though maybe those get filtered out over time.

mariodiana 5y ago

I can't articulate the details, down to the last detail, but the worst thing to happen to tipping is the change the IRS made, some years back. If I understand correctly, the IRS always used to estimate tip for a server based on a table's bill. (The custom is 15-20 percent, and I think the IRS used to average lower than that.) But the IRS always used to collect its cut on tips from the server. The change is that the IRS now holds the restaurant owner accountable for the taxes due on the tip. The result is that instead of the money going to the server directly, it first has to pass through the hands of the business owner. I don't know if this still goes on, but some years back I recall hearing that some restaurant owners would then "distribute" those tips to other members of the staff — the busboys, kitchen help, etc. Traditionally, waiters always "tipped out" the busboys and bartenders they worked with, on any given shift, and better service (theoretically) promoted more generosity from the waiter. But now that the business owner has his hand in it, the business owner will operate according to his own interests. The waiter is cut out. The waiter has less control, and less direct incentive. The waiter has less of a payoff. Rumor has it (or, if you will, common sense has it) that some owners abuse their role as middleman.

smachiz 5y ago
This isn't an IRS change. It was a public behavior change. The owners always had to withhold taxes from their wait staff, just as your taxes are withheld by your employer. The difference is that since almost all tips are now on credit cards, the business owner doesn't need to assume the % sales to withhold, and withholds based on virtually all of their employees tips. The end result is that the wait staff can't commit tax fraud by not reporting tips. The business owner didn't have to report cash tips, only withhold based on a % of sales. They still withhold on % of sales if actual tips are less than the % of sales.
- throwawayboise 5y ago
  That is a change. I used to deliver pizza, it was cash or check, I pocketed any tips before I got back to the store, the management never had a clue how much tips I got or did not get. Even with the checks, they just went into a box and were totaled at the end of the day. No way to trace them back to an order.

FireBeyond 5y ago

> This has been tried many times, you are ignoring the reasons it did not work. The employees hate it because they make less money, forcing the restaurant to go back to tipping. Yup. A couple of restaurants in the Seattle area tried this. "20% price increase, no more tipping". Over time, their employees left, saying they were being paid less. Remember this the next time you hear the "if you tip 15% or less I'm literally paying to serve you!" (which is also BS. The IRS, if you don't disclose tipped income, assesses a standard rate. If you're truly earning less than that in tips, you can document it and pay less. But almost no-one wants to do that because the IRS is behind the times, and almost all servers make more in tips than that standard rate).

moritonal 5y ago

Whilst that might be true for Americans, as a European I find your culture of tipping(as part of a waiter's salary) a negative for everyone but the faceless business. I still tip waiters who do a great job, but don't have to be guilted into thinking they will go hungry if I don't.

ruined 5y ago

That's not a problem with a tipless system, that's a management decision to lower wages. If management simply paid employees what they were netting before, or better, there would be no pay cut and no departures.

grecy 5y ago

> This has been tried many times, you are ignoring the reasons it did not work It works perfectly for many tens of millions of restaurant workers in two dozen developed countries around the world.

jandrewrogers 5y ago
Those workers never had a choice. If it "works perfectly" then why do workers that do have a choice consistently choose to work in establishments where tipping is the norm? That's not a very convincing argument. The bottom line is that it is the workers making the choice you disagree with, in pursuit of their own self-interest. It would be one thing if choosing one policy over the other was revenue-neutral to the restaurants and workers, but empirically that is not the case.

thirdsun 5y ago

> This has been tried many times, you are ignoring the reasons it did not work. The employees hate it because they make less money, forcing the restaurant to go back to tipping. Isn't the solution obvious? Adjust wages/prices to such a degree that it does fully compensate for the missing tips.