But this is a bit of a chicken and egg problem, isn't it? You could just as easily argue that the wages are so low because tipping is pretty much a given.
As your link says, they are not allowed to pay less than minimum wage. They are allowed to set hourly wages for tipped employees lower than minimum wage, but they have to ensure that the total compensation of the employee averages out to minimum wage.
Realistically, if the restaurant owner has to contribute anything beyond their hourly rate to the paycheck of the server, that server will be fired (or the business is so slow that it will go under soon).
Not necessarily. I briefly worked at a 24x7 roadside place where tipped employees would occasionally fall under minimum wage due to slow periods or customers who would either stiff the waitress or tip out $0.35 on an egg, toast, coffee which cost $2.65.
That place systematically robbed those staff by refusing to pay minimum wage and falsifying records and withholding taxes based in nonexistent tips. The Labor department fined then pretty heavily -- but that isn't an uncommon practice.
I'm not sure how this contradicts what I said. Your experience showed that the business was not contributing anymore to your paycheck than the normal wage. Had they not been breaking the law, they probably would have fired someone due to the "extra" expense.
Exactly - so any tip just reduces how much the owner has to pay to cover minimum wage, making it a subsidy to them, not to the server, who gets minimum wage either way.
It's not really a subsidy though, it's just a complication of the payment.
It could be a subsidy if it wasn't an established custom to tip, but people know quite well that they are paying the server a tip for the service.
I suppose the fact that it enables the restaurant to under-report wages and thus under-pay wage taxes is a bit of a subsidy (but then some of that savings probably shows up for the customer).
It is a subsidy, because the server gets the same, it's the restaurant that pockets the difference.
Say the server works 40h/week like a regular full-time worker, so the minimum take-home pay under federal law is $15000. If the server gets $0 in tips, the restaurant must pay the $15000. But if the server gets, say, $5000 in tips, the restaurant can pay only $10000.
The server gets the same money, only the restaurant gets to save some.
Seattle recently passed $15 minimum wage and now a lot of restaurants are charging a "service fee" and putting up signs that discourage you from tipping. A much better system imo.
What's the point of a service fee on top of the cost of your meal though? Why not incorporate it into your meal, since it's non-optional.
I noticed they did this in Singapore. You'd be charged a service fee on top of your bill, I can't remember if they popped tax on top of that too. If it's non-optional, it should be included in the cost.
>What's the point of a service fee on top of the cost of your meal though?
For the same reason airlines don't include mandatory charges in their fares - humans are not particularly good at rational pricing evaluation.
It's known as partition pricing and generally results in higher revenues - from "The Effects on Perceived Restaurant Expensiveness
of Tipping and Its Alternatives": [1]
"Furthermore, participants ordered more expensive meals when automatic gratuities were added to the bill than when the costs of service were built into menu prices"
Servers are actually never paid that wage. If a server's tips do not elevate them above the standard minimum wage, the restaurant is required to compensate them at the standard minimum wage. This was at least the law when I worked in the service industry.
The fact really is in the USA if we eliminated tipping, the cost of the food on the menu would just go up by $X number of dollars, and people don't want that, they want low prices for the items on the menu which is why the system also is the way it is.
I don't believe you. No one I know likes tipping. It's awkward no matter how you slice it. We would all much rather just pay what it costs and not have to tip.
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Looked it up. You were right. Well, at least in the pay structure. 85% of surveyed people prefer a tipping pay structure to including it in the price of food.
I think it has to do with the perceived idea that tipping leaves the diner in control and leaves the ability to punish a bad waiter. Maybe I'm wrong about that too.
No job wherein the customer directly employs you should give customers direct control of employees wages. Can you imagine the custom applied across the board.
I'm sorry doctor that appendectomy scar is a bit to big for my liking I'm only tipping you $180.
Honestly, this would greatly improve medical service in the US. Unfortunately, for sums this big there would be too many people willing to be dicks even when the service was good, so the system wouldn't work for that reason.
I don't think people (as least zero of the people I associate with) have any problem with tipping in the United States - it's just so understood it's what you do when in a restaurant, that the only question is usually one of "(A) I'm Lazy, don't want to calculate, 20% tip, (B) I'm being anal, figure out exact 18.5% tip, (C) Got poor service, 15% tip, (D) Waiter spit in my food and was really obnoxious/rude to me - 10% tip (but be prepared for further hostility when you do this)."
After doing this for enough years, it becomes a background task that you don't even really think of, no awkwardness.
I have never given a 0% tip in the United States. If the service is that bad, get the manager, have them fired - but as long as they are working, they should be paid. Not tipping is equivalent to asking someone to work without salary. Tipping 10% is pretty damn aggressive, and the few times that I've done it, it's certainly gotten a reaction.
What people have to understand, is that a "Tip" in the United States for a server == Salary, not some nice additional money. It's how they pay their rent/buy their groceries/feed their children.
Not hyperbolic at all. If you read through this thread, the "salary" they are paid assumes that they are making money through tips. It doesn't get adjusted if they are tipped less.
What? They are paid the standard minimum wage if they aren't tipped. It's actually the opposite of what you're saying. Their hourly pay from their employer DOES get adjusted when they are tipped below a rate which satisfies the federal minimum wage of $7.25 an hour.
That presumes first class (or at least credible) payroll management, which, while there are probably instances of in the Restaurant Industry, is less common than one might hope. In practice, waitresses are paid their minimum server wage and are then on their own to scrounge up tips to make up the difference. For each case where we can find where a restaurant actually made up the difference in missing tips, we will likely also find several examples of where it doesn't happen.
And, while that "$7.25/hour" is OK in some place like Terre Haute, Indiana, It's destitute poverty in a lot of cities, so the societally agreed convention is that in order to live/pay groceries/utilities/bus-fare/etc... tips are essential.
It's reasonable to assume that when a serving person in the United Stated doesn't receive a tip of 18-20%, then that money is resulting in a reduction of expected baseline salary.
I've only ever left 0% tip once. It was because I had to repeatedly get up from the table to find the server, first to order, then to get the check, possibly another time when I needed something and they never came back to check after the food was delivered.
There was a freakonomics episode on this. People believe they have control, but it turns out that , even if the amount people tip differs per person, people basically never change how much they tip.
The differential between server minimum wage and regular minimum wage used to be much lower, but the regular minimum wage keeps getting adjusted up due to inflation &c.
