"Restaurant King" Meyer Is Right About War On Tips

Danny Meyer, New York's "Restaurant King" - was right to abolish tipping at his restaurants.

What is it about the American yen to give tips? Tips for haircuts, cab rides, for wait staff at restaurants?  Hell, even Starbucks has a "tip jar"! What? People can't just work for a straight wage now, everyone is expected to subsidize as more and more have their hands out?  We have hard working people, who may put in numerous long hours each week at everything from construction, to teaching, to landscaping and even sanitation service jobs - who then want to just eat out once - but are expected to subsidize the meager wages of the wait staff. Oh,  and do it to an expected level of 20 percent now regarded as standard in most restaurant transactions.

By way of example, I stopped at Village Inn yesterday at lunchtime after going to see the 50th anniversary re-release of '2001- A Space Odyssey' at the nearby IMAX Theater. (Janice declined having seen the film 4 times, this was my 13th time - first in IMAX.).  I ordered a 6 oz. sirloin steak plus a garden salad side.  Normally, in any such transaction the waitress starts off with a 20 percent potential tip but this is subject to incremental deductions, i.e. after each miscue.  

If the gratuity was already built into the tab this sort of discretionary "deductionism" wouldn't be necessary, but here in the US of A it is, on account of the weasel wage system.  Anyway, a number of errors were made with my order including: the waitress forgetting to bring out the garden salad to start, a fruit salad served with the steak instead of mashed potatoes,  no gravy on the latter when they did appear, diet coke served in a too small glass - with too much ice.  The total bill came to $15.67, and I used a 20 % off coupon to reduce the total to $12.53.   I then entered my card to pay and selected the option of "18%"  on that amount - translating to a $2.25 tip.    Of  course, the "good" tipper is supposed to leave his or her tip based on the original total not the lesser amount - after the coupon deduction. But given the waitress' errors I reckoned she earned no more than $2.25 or  14.4 % on the original bill total.

Again, in Europe this game wouldn't have to be played and the customer  wouldn't be put in position of a would-be "Scrooge"   for dinging the poor, underpaid server for not performing at 100%.

Industry experts estimate that about $45 billion in tips are given each year. In May 2012, the U.S. Bureau of Labor Statistics showed the median hourly wage for restaurant servers was $8.92, including tips. And a 2012 PayScale survey found that waiters made 58 percent of their income from tips.  To be frank, this is absurd.


Tipping may be an outmoded and unfair way of paying someone — and there is a small amount of industry buzz about whether restaurant workers should be salaried, or tips built into the check   Now, we learned (WSJ Exchange, Aug. 25-26, p. B1) NY restaurant king  Danny Meyer may have solved the issue by abolishing the outmoded practice which most Europeans have long since retired.

After all, when we dined for lunch at the Panorama Restaurant in Salzburg in May, 2013, e.g.




Signs on the premises abounded with words 'No tipping!'




Signs abounded saying 'No Tipping". The gratuity was built into the tab so one didn't have to think twice about it.  End result? Patrons weren't wrestling with how much the service was worth (it was docked at a steady 18%) and wait staff didn't have to wonder if they'd be "stiffed".

Flash forward now to Danny Meyer whose restaurants (according to the WSJ piece) "rolled out its 'hospitality included' strategy in the fall of 2015" - informing his assorted wait staffs that while a handful of NYC restaurants had phased out tipping no major operator had adopted a blanket policy. So he would be the first.

Things were shaky at first, how could they not be in a tip-programmed society?  But Meyer thought "customers were sophisticated enough to look beyond the higher prices he'd have to charge", i.e. to incorporate the gratuities - the same way we found at Salzberg's Panorama Restaurant.  To that end, Meyer's team would have to figure out how to keep tipped employees from losing income, while bidding his investors to "sit tight".   As he later admitted "I think the real answer is we knew we were flying by the seat of our pants and had absolutely not idea."

Ultimately, when the strategy emerged three years ago several things were noted:

-  A revenue -sharing plan for dining room workers didn't always make up for lost tips

- Many legacy staffers quit

- Turnover rates spiked

At the same time:

"Many diners seemed thrilled to stop calculating tips but others couldn't compute the math behind the rising prices."

Well, how about a remedial course in arithmetic?     After all,  the Austrians we met in Salzburg didn't seem to need such math.    Incredibly, and even more an indictment of the American provincials, "a few confused patrons continued leaving cash on the table".

Meanwhile, "losing a federal tax break for restaurants based on the tip income its employees report cost his company $1 million a year."


Ouch! But this is what one gets when the whole system is geared to tips. There is no place for the bold innovator, the changeling.

What to do? Well, Danny Meyer "launched a public campaign to urge other restaurants to join him." (His restaurants included Shake Shack and Gramercy Tavern)

But:

"While some owners thanked him for jumping on the grenade on tips, few followed suit. A citywide downturn in lunch business and competition from online delivery made them skittish about raising prices."

Thus Meyer arrived at the reluctant conclusion he had to go it alone.  It paid off. Two years after Meyer's no tipping plan was to be fully implemented, "13 restaurants adopted it with two left to go.  Meyer's cooks "received fat raises and overall retention and service metrics have improved."

Also, restaurants that adopted the program early have stabilized financially.  More reinforcement for the decision arrived after mandated minimum wage increases force tip-taking competitors to raise prices.

Why be against tips in the first place? Meyer points out in the WSJ Exchange piece that the problem with tips is the implication  "that someone would only be nice to you if they expect a generous tip".  Which sounds more like extortion. My view is you only get a generous, e.g. 20 percent tip, IF you deliver.   In an ideal world restaurant staff are compensated by merit. Success then is a satisfied customer who not only returns but spreads his satisfaction by word of mouth.

Of course, there are other problems with tipping apart from implied extortion.. Five years ago on a Freakonomics podcast host Stephen Dubner asked Cornell University professor Michael Lynn, who has written dozens of academic papers on tipping, what he would change about the practice.

'You know,' Lynn replied. 'I think I would outlaw it.'

According to Lynn, there was enough race and gender disparity in how much servers get tipped (blond women more, blacks less) so that "it's an ethically dubious way of rewarding workers."

Maybe the best way to get the system to initiate change - given too few Danny Meyers-  would be for Joe Q. Public to cease all tipping forthwith. Nothing, Not one red cent. Not one thin dime. Then what? There will be only two choices when the staff rise up in rebellion (unless they are zombies) : the restaurants will all have to close down - they will claim they "can't pay actual wages" etc. (which is horse pockey) OR, they will start paying salaries to staff as is done in Europe - where wait staff are professionals and are treated as such.

In the meantime, yeah, I will live with the U.S. tip culture, but still only award tips in relation to performance. 

The "New" Tipping Standard is 20%? Gimme A Break!

Scene at Panorama Restaurant at the Fortress HohenSalzburg in Austria. Gratuity is built into the tab, so there is no 'tipping'. Why can't the U.S. have such a rational system? Ans. It's dominated by Neoliberal 'free market' capitalists!

"Can you imagine 1920s’ steelworkers in Pittsburgh, their faces stained with soot and grime, paying each other’s wages while their mill bosses pleaded poverty? That’s essentially what’s happening now in a merry-go-round circle-jerk of dream economics."  - Article on tipping, on salon.com


The quote shown above will, of course, shock most 'Muricans accustomed as they are to tipping for whatever service is supplied, especially at restaurants. But the point is salient. We have hard working people, who may put in numerous long hours each week at everything from construction, to teaching, to landscaping and even waiting tables - who then want to eat out once - and are expected to subsidize the meager wages of the wait staff. If you think about it, it's as nonsensical as the notion of 1920s' steel workers paying each others' wages while their bosses laugh.

In a similar vein, wait staff are subject to an empire where people like Hermann Cain have dictated wages no higher than $2.13 /hour, expecting the dining public will make up the rest ....in tips. Never mind most of these owner honchos don't even have the self-respect or decency to at least offer their staff health benefits or even sick days ....thereby limiting the circulation of  the stomach flu when it makes its yearly rounds (say if one or more servers is ill with it).

Then, in the midst of this, an article in The Denver Post five days ago sought to educate we, the hoi polloi, who are now expected to cough up a wage subsidy via tips: of 20 percent!   According to the Post article:


" Industry experts say that about $40 billion in tips are given each year. In May 2012, the U.S. Bureau of Labor Statistics showed the median hourly wage for restaurant servers was $8.92, including tips. And a 2012 PayScale survey found that waiters made 58 percent of their income from tips.

Tipping may be an outmoded and unfair way of paying someone — and there is a small amount of industry buzz about whether restaurant workers should be salaried, or tips built into the check — but the bottom line is that this system won't change any time soon, not in this country.

For many service workers, tips are a lifeline. No tips, no rent, no groceries."


Which, of course, is despicable. And why should it not change?   When we traveled in Germany and Austria 4 months ago, we encountered perhaps one restaurant out of more than 30 which actually had tipping - and that was American-owned!  See e.g.  http://brane-space.blogspot.com/2013/06/not-being-expected-to-tip-at-restaurant.html

As I noted in the earlier blog post, the system in the U.S.  is really a very poor one, where wait staff basically sign on as indentured servants whose miserly (normal) scale pay, at $2.13 /hr. is usually quickly snatched up by the employer to pay whatever "expenses" he can think of, with the employee then scrambling to make enough in tips to pay the rent, or just groceries.  Worse, none of the wait staff in the U.S. get anywhere near the two full weeks vacation that wait staff get in Germany, Austria. Or the health benefits. Why not? Because in this cheapskate Neoliberal bastion few want to pay the taxes that would support decent living wages or benefits for everyone,  Instead we read sneering, condescending codswallop to the effect "no one ought to stay in those jobs anyway!". Yeah, right, and keep walking....don't look at the stats which show the U.S. has even lower levels of mobility than Slovakia or Barbados.

A salon.com piece on tipping  observed:

"People fall over themselves to brag of their tipping prowess and, despite the inherent and obvious injustice of a massive, scarcely-paid workforce scraping and begging for a wage, there has yet to be a true revolt of tipped employees. In a lottery-minded, American Idol culture, workers are loath to give up the chance for a Saudi Sheik to tip them a million dollars as reward for preparing a great smoothie."

The last line is especially apropos and accounts for the reason many in the service industry are loathe to change to a wage-based system. (By way of reference, at the restaurant we ate in Salzburg - featured in the graphic shown, 18% was automatically built into the total tab. This generates typical salaries of $35k- 40k a year with health benefits and paid vacations.)  I bring this up because waiting for a "lotto-sized" tip to push one into the middle class, is basically an immature and jaundiced perception .  Yet one guy who wrote in response to the Post's piece insisted he'd hate the salaried alternative because, get this, it meant "being trapped in socialism".  His reasoning: Well, as a salaried employee - even with benefits - he'd be paid exactly like everyone else, and there'd be no way to shine, get more tip money and rise above the rabble!

This kind of thinking is exactly what's wrong with too many in this country, who also believe taxes need to be always cut rather than increased. It also explains why one can never expect to see any "true revolt of tipped employees". Why should there be, if they all  - or most - believe they can get ahead of their brethren more via tips?  Never mind they still have to cough up for health care and get no paid vacation or sick days.

But they need to think about this scenario: what if the economy really dives into the toilet again? What if a new war, say on Iran or Syria, breaks out in the Middle East and oil prices spike to $300 a barrel, while the stock market collapses like a house of cards? What if the country's credit rating is degraded to BBB or less, on account of no agreement regarding the upcoming debt ceiling increase? Think people will pour into restaurants then, and even if they do - be able to afford even a 10% tip, far less the 20 % demanded by the Denver Post?

Yes, of course, all this could mean restaurants lay off more, but then many of the working public will also be laid off too. Those wait staff who remain - and bear in mind all restaurants won't close - will be paid living wages because they'd have to be amongst the best to be retained. With that in place they will be more likely to garner self-respect instead of grafting for tips.

Grafting? Think of the word "servicing" itself, as the salon.com article notes:

"Tipping makes us into slaves and masters simultaneously in a confused, kinetic, and highly kinky social model. The service industry model carries over into the bedroom with the modern emphasis on oral sex and “servicing” one’s partner. And it is cross-cultural; the service industry accounts for most jobs in the post-industrial West — up to 80 percent in the US, a country that has exported most of its industry to cheaper places ."


Back to the Denver Post.  We read:

" In some circles, notably Cornell University professor Michael Lyon, there has been talk about discontinuing the practice of restaurant tipping and adopting the European model, where waitstaff are considered professionals supported by salaries and benefits.

On a Freakonomics podcast in late spring, host Stephen Dubner asked Lyon, who has written dozens of academic papers on tipping, about what he would change about the practice.

'You know,' Lynn replied. 'I think I would outlaw it.'

According to Lynn, there is enough race and gender disparity in how much servers get tipped (blond women more, blacks less) that it's an ethically dubious way of rewarding workers."

Then why do it? According to the Post, well it's all too bad, but we are "stuck with it" and "it won't change anytime soon". Why not? Why such resignation?  Imagine if the early civil rights protestors in the 1960s had just given up after their first refusal of service at a bus stop café?  The South would still be hostage to the Jim Crow laws!

Maybe the best way to get the system to initiate change would be  externally, i.e. for Joe Q. Public to cease all tipping forthwith. Nothing, Not one red cent. Not one thin dime. Then what? There will be only two choices when the staff rise up in rebellion (unless they are zombies) : the restaurants will all have to close down - they will claim they "can't pay actual wages" etc. (which is horse pockey) OR, they will start paying salaries to staff as is done in Europe - where wait staff are professionals and are treated as such.

Will existing wait staff scream at this proposal? Undoubtedly! Because they lack the confidence to see it could work, and - or, they may be content to remain in the non-professional bracket, and endlessly grafting for tips to make do....or favoring the "lotto" mindset, hoping that one fine day a rich Saudi prince  gives them a $1m tip so they can start their own business....or retire early. 


 It's always nice to dream, no?