17 ms·

Banning tips in the hospitality sector would be a bit like banning stock options or similar equity incentives in the tech sector (and startups in particular).

Banning tips in the hospitality sector would be a bit like banning stock options or similar equity incentives in the tech sector (and startups in particular). Having to replace such performance/luck based incentives with fixed salaries would make a lot of business unviable, and restrict growth and innovation. Furthermore, the current workforce in places where such compensation is common will often have self selected for the kind of people who prefer this model (due to the potential upside, excitement, feeling of purpose, etc) over the safety of a fixed salary. So banning tipping in such markets tend to have a similar reaction as would forcing such incentive models on markets where people are used to a fixed salary.

djtango 2y ago
And yet when I went to Germany, China and Japan service staff did their jobs with a sense of pride and didn't chase for tips. In many places in Asia I've had tips outright refused. And yet the tiny check in lady in Tokyo airport came from behind her desk to lift my suitcase onto the scales.
- trashtester 2y ago
  Different places have different cultures. I see no problem with that.
arghwhat 2y ago
Stock options is also a very American tech thing, and mainly provided by US tech companies in the EU. Peformance bonuses paid by the employer when you reach targets set by them is somewhat common and could be used in hospitality too. However, the majority of jobs do not have such performance incentives other than keeping your job if you keep up your end of the bargain, and possibly getting promoted to a higher role if you show certain skills. The hospitality sector does not have to differ.
- ml_basics 2y ago
  And American tech companies have been substantially more successful that European tech companies so maybe it does actually make sense to have stock options as part of compensation rather than employer bonuses?
  - highwaylights 2y ago
    Sure, but where’s the problem? If those companies are succeeding because they offered those incentives then it forces others to do the same or fail.
    - trashtester 2y ago
      I'm not sure you noticed, but Europe simply doesn't have the kind of tech sector that the US and increasingly China and even India have. In fact, I'm not sure I know of a single global top 100 company (by market cap) that is a European tech company founded in the past 40 years. Compensation models is almost certainly part of the reason, in addition to taxation, regulations, culture, etc.
  - arghwhat 2y ago
    That feels a lot more like correlation than causation. What you could argue is that because these companies are so successful, they can now offer disproportionately large compensation packages including stock options which draw talent from the rest of the world to keep them large. This in turn fuels the startup economy as investors dream of having a big share of the next big thing. I don't think it makes sense as a justification for why these companies grew so big and attracted so much money, causing a gap in startup environments. It would at most explain why they stay so big.
    - trashtester 2y ago
      American economic success is not due to old companies staying big. It's due to the immense rate that some startups tend to grow. From the 100 most valuable companies on Earth, there are maybe 20-30 US (rough guess) tech companies that have been started in the the past 40 years, and several of them in the past 20. And approximately 0 European ones. And while this isn't PROOF of causation, it surely increases the posterior probability of causation, regarles of what your prior was before adding this evidence.
- ghaff 2y ago
  I'd argue a lot of the "incentive" pay offered by US public companies is more or less expected as well.
- trashtester 2y ago
  I live in Europe, so I know. But the respect for such differences should go both ways. A system based on tips makes it easier to start a new place, and then find a few young people to help staff it. Like many places in the US, or in popular vacation resorts even in Europe. On the other hand, systems based on fixed salaries favors more established businesses (like McDonalds) or, at the opposite end of the spectrum, family run businesses where family member salaries are set more to minimize overall tax burden more than to compensate performance. Just like French small/-ish restaurants may be an excellent solution in the French countryside, the US model can work well in Miami or some steakhouse on Route 66.
  - arghwhat 2y ago
    > A system based on tips makes it easier to start a new place, and then find a few young people to help staff it. So this is to allow new businesses to start easy by not having to pay their employees if there isn't business? Imagine if other industries picked up on that, stopped paying living wages and instead made it every employees job to attract business and satisfy customers themselves in order to be able to pay rent. Starting any business implies up front investments and a gamble on its future profitability. In any other industry, if you lacked the cash to pay salary you'd have to offer things like equity to share both risk and gain with the first few employees. Using tips mean you only share a high risk of them not being able to make a living off this new unproven business, without any benefit other than "if everything goes well and we're lucky, you'll be able to pay rent!". If we wanted performance-driven salary, then a living base wage and a pre-agreed performance bonus with no concept of tip would be more appropriate. Recently, there was a lot of focus on tips due to how Square/Cube/whatever has affected tipping, and it appears that the consensus in the US is not in favor of tipping.
    - trashtester 2y ago
      > if you lacked the cash to pay salary you'd have to offer things like equity Do you think the 18-year-old getting a job serving burgers and beers at the recently started sports bar cares about the equity? Most of them would much rather receive $200 in tips on a good night over POSSIBLY having some stake in that bar 10 years down the road. (The one exception I can see, is if the business is owned by her parents.) An equity as a model is suited to another type of demographic working in a different kind of business.
graemep 2y ago
> Banning tips in the hospitality sector would be a bit like banning stock options or similar equity incentives in the tech sector Not the tech sector or startups in particular, but I think that the incentive culture in general (e.g. stock options for management, bonuses in banking) has been very harmful and it would be great to get rid of it. It encourages short termism, and manipulating the numbers. Goodhart's/Campbell's law (not sure which is more accurate here). I could ban it, I would.
- trashtester 2y ago
  Compensation models have pros and cons. I would argue that in countries where is is common (legally, not as corruption) tend to do better than those who don't. But it also leads to moral hazards. > I could ban it, I would. But THIS I really have a problem with. Outright banning practices you don't like is something I would see as an authoritarian streak. Kind of like how authoritarian religious people want to ban gay sex or authoritarian capitalists want to ban labor unions.
highwaylights 2y ago
I think you’ve debated your own argument here. Maybe waiting staff should get stock options / performance incentives. Compelled tipping doesn’t encourage good performance when it’s taken for granted, it just becomes an extra tax.
- trashtester 2y ago
  While I agree that tipping isn't really tipping if it is compelled, it's not tax either. No more so than any other cost slapped onto a price that goes to the owners or employees of a company. Taxes are those costs that are slapped on the price to cover payments to the government.

djtango 2y ago

And yet when I went to Germany, China and Japan service staff did their jobs with a sense of pride and didn't chase for tips. In many places in Asia I've had tips outright refused. And yet the tiny check in lady in Tokyo airport came from behind her desk to lift my suitcase onto the scales.

trashtester 2y ago
Different places have different cultures. I see no problem with that.

arghwhat 2y ago

Stock options is also a very American tech thing, and mainly provided by US tech companies in the EU. Peformance bonuses paid by the employer when you reach targets set by them is somewhat common and could be used in hospitality too. However, the majority of jobs do not have such performance incentives other than keeping your job if you keep up your end of the bargain, and possibly getting promoted to a higher role if you show certain skills. The hospitality sector does not have to differ.

ml_basics 2y ago
And American tech companies have been substantially more successful that European tech companies so maybe it does actually make sense to have stock options as part of compensation rather than employer bonuses?
- highwaylights 2y ago
  Sure, but where’s the problem? If those companies are succeeding because they offered those incentives then it forces others to do the same or fail.
  - trashtester 2y ago
    I'm not sure you noticed, but Europe simply doesn't have the kind of tech sector that the US and increasingly China and even India have. In fact, I'm not sure I know of a single global top 100 company (by market cap) that is a European tech company founded in the past 40 years. Compensation models is almost certainly part of the reason, in addition to taxation, regulations, culture, etc.
- arghwhat 2y ago
  That feels a lot more like correlation than causation. What you could argue is that because these companies are so successful, they can now offer disproportionately large compensation packages including stock options which draw talent from the rest of the world to keep them large. This in turn fuels the startup economy as investors dream of having a big share of the next big thing. I don't think it makes sense as a justification for why these companies grew so big and attracted so much money, causing a gap in startup environments. It would at most explain why they stay so big.
  - trashtester 2y ago
    American economic success is not due to old companies staying big. It's due to the immense rate that some startups tend to grow. From the 100 most valuable companies on Earth, there are maybe 20-30 US (rough guess) tech companies that have been started in the the past 40 years, and several of them in the past 20. And approximately 0 European ones. And while this isn't PROOF of causation, it surely increases the posterior probability of causation, regarles of what your prior was before adding this evidence.
ghaff 2y ago
I'd argue a lot of the "incentive" pay offered by US public companies is more or less expected as well.
trashtester 2y ago
I live in Europe, so I know. But the respect for such differences should go both ways. A system based on tips makes it easier to start a new place, and then find a few young people to help staff it. Like many places in the US, or in popular vacation resorts even in Europe. On the other hand, systems based on fixed salaries favors more established businesses (like McDonalds) or, at the opposite end of the spectrum, family run businesses where family member salaries are set more to minimize overall tax burden more than to compensate performance. Just like French small/-ish restaurants may be an excellent solution in the French countryside, the US model can work well in Miami or some steakhouse on Route 66.
- arghwhat 2y ago
  > A system based on tips makes it easier to start a new place, and then find a few young people to help staff it. So this is to allow new businesses to start easy by not having to pay their employees if there isn't business? Imagine if other industries picked up on that, stopped paying living wages and instead made it every employees job to attract business and satisfy customers themselves in order to be able to pay rent. Starting any business implies up front investments and a gamble on its future profitability. In any other industry, if you lacked the cash to pay salary you'd have to offer things like equity to share both risk and gain with the first few employees. Using tips mean you only share a high risk of them not being able to make a living off this new unproven business, without any benefit other than "if everything goes well and we're lucky, you'll be able to pay rent!". If we wanted performance-driven salary, then a living base wage and a pre-agreed performance bonus with no concept of tip would be more appropriate. Recently, there was a lot of focus on tips due to how Square/Cube/whatever has affected tipping, and it appears that the consensus in the US is not in favor of tipping.
  - trashtester 2y ago
    > if you lacked the cash to pay salary you'd have to offer things like equity Do you think the 18-year-old getting a job serving burgers and beers at the recently started sports bar cares about the equity? Most of them would much rather receive $200 in tips on a good night over POSSIBLY having some stake in that bar 10 years down the road. (The one exception I can see, is if the business is owned by her parents.) An equity as a model is suited to another type of demographic working in a different kind of business.

graemep 2y ago

> Banning tips in the hospitality sector would be a bit like banning stock options or similar equity incentives in the tech sector Not the tech sector or startups in particular, but I think that the incentive culture in general (e.g. stock options for management, bonuses in banking) has been very harmful and it would be great to get rid of it. It encourages short termism, and manipulating the numbers. Goodhart's/Campbell's law (not sure which is more accurate here). I could ban it, I would.

trashtester 2y ago
Compensation models have pros and cons. I would argue that in countries where is is common (legally, not as corruption) tend to do better than those who don't. But it also leads to moral hazards. > I could ban it, I would. But THIS I really have a problem with. Outright banning practices you don't like is something I would see as an authoritarian streak. Kind of like how authoritarian religious people want to ban gay sex or authoritarian capitalists want to ban labor unions.

highwaylights 2y ago

I think you’ve debated your own argument here. Maybe waiting staff should get stock options / performance incentives. Compelled tipping doesn’t encourage good performance when it’s taken for granted, it just becomes an extra tax.

trashtester 2y ago
While I agree that tipping isn't really tipping if it is compelled, it's not tax either. No more so than any other cost slapped onto a price that goes to the owners or employees of a company. Taxes are those costs that are slapped on the price to cover payments to the government.