3 ms·
On the contrary: most tipped employees I know make substantially more than the untipped ones. The why is simple: price discrimination extracts excess value. If
by OkayPhysicist 3y ago
On the contrary: most tipped employees I know make substantially more than the untipped ones. The why is simple: price discrimination extracts excess value. If everyone's paying the same price, you lose some potential profit from people who would have been willing to pay more, and you lose some potential profit from people who aren't willing to pay the set price, but would have been willing to pay some still-profitable lesser price. By charging people based on their willingness to pay, you extract much closer to the maximum value.
Tipping is a price discrimination scheme that directly benefits the workers. That's a lot of value that can be captured, and any other system that a restaurant could use to extract that value would end up benefiting the owners far more.
- m463 3y agoAlthough it can benefit workers, the employer can hire better, lower the wages of the tipped employees, and make rules for the tips. Yes, I guess the customers are less reluctant to spend the money though.
- OkayPhysicist 3y agoIMO, California's tipping law is the ideal: None of the "offset minimum wage with tips" tomfoolery, if tipping pools exist they must only be shared with employees and be a written policy explained at time of employment. In that context, I like tipping. I tip well, which gets me better service at places I go often.
- m463 3y agohmmm... I looked and you are right. california requires minimum wage and tips do not count against that. I can see why the doordash tipping fiasco was so dire.
- lotsofpulp 3y agoThanks for writing this out, finally someone has taken microecon 101.