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Restaurant Tipping Is Stupid, But It's Probably Here to Stay for Now

Many economists say tipping doesn't make any sense, and lots of servers would rather have a steady income, but few restaurant owners want to ditch the practice.

by Peter Moskowitz
Oct 11 2015, 1:00pm

Image via Flickr User Lars Plougmann

Karla Harscheid, 48, has worked in New York restaurants as a server for over a decade. She's made just a couple dozen dollars in tips on some nights, and nearly a thousand on others. That's how the industry is. But in February, Harscheid applied to work at Dirt Candy, a newly-expanded vegetarian restaurant in Manhattan's Lower East Side. By then, Dirt Candy was already being hailed as a darling of the city's restaurant scene—its owner, Amanda Cohen, was being hailed as one of the most daring restauranteurs out there by everyone up to and including the New York Times.

When Harscheid applied, Cohen told her the restaurant would be pushing the envelope in one other way: There'd be no tipping at the new Dirt Candy. Instead, customers would pay a 20 percent service charge on every check, and everyone—both front- and back-of-the-house staffs—would be paid a salary that started at about $15 an hour. Most servers, according to Cohen, are now making about $200 a night.

"It's not the most amount of money I've ever made, it's not the least, but it's worth it," Harscheid said. "Maybe at some places you can make $500 a night, but you have to stay up the entire day, which ruins your entire next day. It's grueling. I'm at a point in my life where that's not worth it for me."

Servers at Dirt Candy and elsewhere agree they'd rather have a normal salary than deal with the stress accompanied by tipping culture, even if that sometimes means making a bit less money. What remains to be seen is whether restaurant owners will make the same move Cohen did. So far only a few restaurants in New York, almost all of them high-end, have adopted a no-tipping policy.

Servers, managers, and experts all seem to think the US is a long way off from universally adopting the payment system prevalent in almost every other country—one in which servers, cooks, and everyone else are paid a salary—but this could be the start of a trend.

"We get calls all the time from other restaurants asking how we do it," said Jackie Aponte, the general manager at Dirt Candy. "It seems to be catching on."

Image via Flickr User Dave Dugdale

Over the last few years, a backlash against so-called "tipping culture" has begun brewing. But the custom of tipping at restaurants has less to do with culture than with economics. Restaurants are required to pay tipped employees only $2.13 an hour under federal law. (In some states, that number is slightly higher; in New York, it's around $5 an hour but soon going up to $7.50.) This allow restaurants to essentially offload their front-of-house labor costs onto customers. Voluntarily reincorporating those costs—thus raising prices or reducing profit margins—isn't appealing to most places.

And restaurants have no legal incentive to do so. The powerful restaurant lobby, the National Restaurant Association (not to be confused with the other powerful NRA) has spent millions convincing Congress to keep restaurant wages down. The last time the tipped minimum wage was raised was 1991. Almost no other country on earth separates tipped from non-tipped employees in this way. The minimum wage in France, for example, is $8.24, and includes service workers. In Japan, the minimum wage is relatively low—$6.30 an hour—but still tipping there is considered unnecessary, or even rude.

According to some experts, the American system is not only bad for workers, but for the entire economy. Employment in the restaurant industry has grown by 80 percent since 1990, and because those workers are making less than the regular minimum wage, the country as a whole has lost spending power.

"Restaurants have never had to internalize their real labor costs," David Cooper, an economic analyst at the Economic Policy Institute, said. "The restaurant industry is still the Wild West in terms of labor standards."

Read on Munchies: You Don't Need Laws to Figure Out How to Tip Me

Beyond the reluctance of restaurants to factor in the real cost of running a restaurant, tipping doesn't really make any sense. While the NRA has argued that tipping incentivizes good service, restaurant customers are not necessarily logical in their tipping patterns. They tip more when paying with credit cards, less when they're part of large parties, and more when servers draw smiley faces on their checks. Whether the service was good only accounts for a 1 to 5 percent difference in tips, according to one study.

Aponte doesn't believe that tipping especially incentivizes workers to do a better job. "You can tell if you interview somebody if they're going to be good server," she said.

Garrette Henson, a 35-year-old server who works at Dumont Burger in Williamsburg agreed. "A good server is a good server," he said. "A shitty server is a shitty server. Tipping isn't going to change that."

So far, Dirt Candy is part of a small crowd of service-included restaurants in the US. Thomas Keller, the restauranteur and chef behind places like like Per Se and French Laundry, doesn't allow tipping at his establishments. (Per Se recently had to pay $500,000 to current and former waiters for violating New York State wage laws.) Top Chef judge and famous restauranteur Tom Colicchio recently eliminated tipping during lunch service recently at Craft. High-end Japanese restaurants Riki and Sushi Yasuda also don't allow tipping.

Dirt Candy was one of the first mid-range restaurants to abolish tipping, suggesting that the trend may trickle down.

A server named Jack at a well-known but not super-high-end restaurant in Manhattan said his managers had recently sat the staff down and asked them what they thought about ending tipping.

"I know there'd be a lot of growing pains, but I'd support it," Jack said. "One of the issues is that we pool tips. It doesn't matter how much I make in tips because ultimately it goes into a shared pot. Maybe I'd feel differently if the front-of-house didn't share gratuity."

But another restaurant worker named Ariel who has worked in restaurants in New York and elsewhere for almost a decade pointed out that tipping is really just the tip of the iceberg of restaurant labor pains.

"We aren't even paying cooks over $10 an hour," Ariel said. "It seems a little ridiculous just to focus on tipping when the entire restaurant industry is a shitshow."

ImageviaFlickr user Pip R. Lagenta

"We'll follow the US system," a manager at Salt and Charcoal, a Japanese barbecue restaurant in Brooklyn, said. "People looking for a job here know what they're getting into when they're hired. If they don't like the system they don't have to take the job."

Cohen said New York will provide an interesting test case over the next few years for whether government action will incentivize restaurants to get rid of tipping once and for all. Over the next few years, the state is forcing every business, including restaurants, to raise the amount they pay their workers.

"There's not going to be a choice for a lot of places," Cohen said. "With wages going up, it's just not going to make sense for restaurants to pay people that wage, which will make food prices higher, and ask customers for tips. The tip numbers are just not going to work."

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