Could tipping at restaurants become a thing of the past?
Some activists and commentators criticize the practice of tipping at restaurants, often alleging that tipped workers like servers and bartenders are underpaid. According to supporters of the so-called "no-tipping movement," restaurants should eliminate tipping and instead institute a service charge or raise prices in efforts to pay their workers higher wages.
Michael Lynn, the Burton M. Sack '61 Professor in Food and Beverage Management at the S.C. Johnson College of Business at Cornell University, challenges the claim that tipped employees are underpaid compared to other restaurant workers; his research finds that including tips, servers earn significantly more per hour than back of house employees such as line cooks. But he says that the discrepancy in pay between servers and back of house employees is a reason some restaurateurs want to end tipping, especially since the discrepancy gets worse when the minimum wage goes up.
“That pay discrepancy is because of tips. Arguably, it's not justifiable, at least in standard economic terms,” Lynn says. “There are some marketable attributes that [servers] have that the back of staff house don't have, but serving is a relatively low-skilled activity that you can learn pretty quickly. Cooking actually is a little bit more of a skilled activity. All in all, if you just look at it on the face of it, it doesn't look like the different job requirements justify servers making twice as much as the back of house.”
An increased minimum wage exacerbates this difference in pay because restaurants raise menu prices to cover higher wages. But when prices are higher, servers get even higher tips because their tips are a percentage of the bill. Lynn says that the restaurateur’s point of view on eliminating tipping is, “I can certainly increase my menu prices and the customer won't see an overall increase in cost because they don't have to tip anymore. This revenue that I'm getting from our higher menu prices or from the service charge, I can now distribute the way I want, and yes I'll make sure everybody gets at least the minimum wage but effectively that's decreasing the pay of the servers so that now, everybody's making $15.00 an hour instead of some making $10.00 and the others $25.00.”
Lynn says that “a tiny percentage” of restaurants have abandoned tipping across the U.S. but that the percentage is higher in certain locations. “In Miami Beach, Florida, for example, it's anywhere between 30 and 40 percent [that] have eliminated tipping,” he says. “I know that because I called all the restaurants in Miami Beach, Florida, and asked them. The reason that you have such a high percentage of no-tipping restaurants in Miami Beach is that you've got a lot of international guests who don't comply with tipping norms. If your servers aren't making good tips anyway, then you eliminate tipping and replace it with an automatic service charge.”
Susan Roe, an assistant professor of hospitality and tourism management at the College of Business at San Francisco State University, points to the Union Square Hospitality Group as an example of a group of restaurants that have abandoned tipping. “They call it ‘hospitality included,’ which means they shift the consumer from leaving a gratuity to paying a higher price, and that price gets allocated differently to employees than a gratuity would have,” she says.
In a paper published in Psychosociological Issues in Human Resource Management, Lynn surveys the evidence on the effects of tipping. He notes several arguments in favor of tipping; one is that it allows restaurants to set lower menu prices, which brings in more business. Lynn believes this is the most convincing reason to keep tipping.
Another argument in favor of tipping is that the tipping system helps restaurants recruit and retain good employees, either because of the higher pay that results from tips or because good workers receive better tips than those who provide poor service. Lynn finds that tipping does lead to better service, but he says that the effect isn’t large enough to justify the large pay difference between the front and back of house.
Lynn also finds that when people are surveyed on their pay preferences, working for tips plus the regular minimum wage is the most popular option. This implies that in states where servers earn the regular minimum wage, eliminating tipping would be unpopular with servers.
However, the same survey finds that working for tips plus a subminimum wage is one of the least popular options. Thus, for servers in states that permit restaurants to pay less than the minimum wage to tipped workers, ending tipping and raising servers’ wages would improve their job satisfaction.
Another argument for abandoning tipping is that servers may discriminate against groups of people whom they consider to be poor tippers. If restaurateurs are afraid that their servers will provide subpar service to certain customers under a tipping system, they may want to eliminate tipping so that servers treat all customers fairly.
After weighing the evidence, Lynn concludes that the best argument for abandoning tipping is that restaurants can pay front of house and back of house employees equally under a no-tipping system.
Roe adds that servers might benefit from a no-tipping system because their pay would be more predictable. “They could end up with more consistent compensation structure, meaning that they are not so dependent on[…] good tips, but rather they know what to expect in their paycheck every week, and there would be less ups and downs, peaks and valleys, dependent on what the consumer may or may not leave them for the gratuity,” she says.
Lynn’s research shows that younger people are less in favor of tipping than older people, but he says he can’t predict if that trend will continue. “There were attempts to eliminate tipping around 1915, 1920, and then people started accepting it,” he says. “Attitudes toward tipping come and go.”