New Study Argues the End of Tipping Could Actually Hurt Servers
by Whitney Filloon
April 18, 2016
A UC Irvine professor doesn't believe abolishing tipping is a one-size-fits-all solution
One of the biggest issues faced by the restaurant industry today is tipping: Namely, should it stay or should it go? Those who want to see tipping go the way of the dinosaurs say tipping is an outdated practice, and getting rid of it will help servers earn a more steady income while also smoothing out the disparity in pay for servers and cooks.
But even as more restaurants are deciding to adopt a zero-gratuity model, surveys indicate American diners aren't ready to let go of tipping just yet, and neither are many restaurateurs. Now, a new study from an economics professor at the University of California, Irvine argues that abolishing tipping in favor of a blanket "living wage" of $15 an hour could actually be harmful for the very people it's supposed to benefit most: servers, as well as restaurant owners and diners.
As a press release explains, the study's author Richard B. McKenzie argues that servers actually earn far more than so-called "abolitionists" realize, and are not the "menial, low-income workers" they're painted to be.
McKenzie conducted an informal survey of waitstaff at casual table-service restaurants to find out how they'd feel about foregoing tipped wages in favor of a flat hourly rate; he says "the wage that the restaurant servers indicated would be acceptable was in the range of $30 an hour, not $15 which is the wage rate states are considering," implying that such workers would actually be taking a hefty pay cut if the tipping model was ousted in favor of $15 an hour. (McKenzie offers anecdotal evidence that some servers under-report their tips to the IRS, which could partially account for the disparity between the low wages tipping opponents cite and the higher pay that some servers actually take home.)
McKenzie also says every server agreed that "if tipping were replaced by a fixed hourly rate of pay, service would suffer significantly," particularly where difficult customers are concerned. (That's an issue that's been raised by many as one of the biggest potential pitfalls of a no-tipping model, but it's worth pointing out that there are plenty of other jobs where workers are expected to provide great customer service without the dangling carrot of tipping.)
McKenzie also takes a look at restaurants that have experimented with a no-tipping model and failed, such as San Francisco's Bar Agricole; the restaurant reinstated tipping last fall after losing 70 percent of its servers due to a significant drop in hourly wages.
"Overall, the various arguments labor advocates make for abolishing tipping are probably well-intended, with the welfare of servers at heart," McKenzie concludes. "The arguments certainly sound good, but they are divorced from the key economic realities of the server-labor and restaurant market economics they have highlighted."
McKenzie doesn't argue against businesses that seem to have found great success with the no-gratuity model, such as Danny Meyer's Union Square Hospitality Group restaurants, but he does believe that there isn't one solution that will work for all restaurants: "An industry that is as rapidly changing and competitive as the restaurant industry needs to retain as much of its flexibility in service and labor markets as it can ... While some restaurants might find that a 'hospitality included' pricing plan works best for them, it will not necessarily work for others."
As the battle for a higher minimum wage continues and politicians such as Hillary Clinton call for an end to tipped wages, the debate over tipping is sure to only get more heated.