From the server's perspective: To keep the numbers round and easy to work with, let's say that minimum wage is $10.00 per hour and a restaurant pays its servers $2.00/hour. Let's further state that on a random day a server rings $1,000 in sales on a five hour shift. We'll assume a 20% total tip to the server ($200) minus the 3% of sales that is required to go to the bar and/or bus staff. That leaves the server with $170.00, or $34/hour. The restaurant can not legally report any less than 12% of a servers sales as tips; that is $120.00 (that's $24 per hour of work). Because by law in this example, a server must still make the minimum wage of $10/hour, and therefore the first $40 of that $120 claimed goes towards the gap from hourly wage ($2) up to minimum wage ($8 gap x 5 hours) which is incentive to both restaurant owner and server when taxes are due. Therefore the server gets taxed on $80 for that day's work, but actually made much more. It then follows that the higher the required minimum wage for service workers, the less those workers make.
With this paradigm, a person could work part time and put themselves through college, afford to live in a city while they work toward their big break in show business, or as in my case take care of an aging, unwell parent by day and make enough to live on by night. So, unless the public is willing for restaurants to hike up the price of food 4 - 6 times what it is now in order to keep their servers making upwards of $30 an hour, it seems unwise to abandon the current system.
Another consideration regarding the tipping culture is that it places servers in an entrepreneurial role. They work for themselves really. Also, earnings are directly correlated to effort, sales skills and soft skills making it more likely that the hardest workingpeople are the highest paid, which is as it should be.Take away tips and the motivation to work harder than others is removed because the reward of doing so no longer exists.
Now imagine that an unmarried server works for minimum wage without tips. The entire amount would be taxed and they would go home with about $7.50 per hour. This is not a living wage. Even if doubled to $20 per hour, it would not be enough to accomplish anything a person could with the current system.
From the restaurant's perspective: Most restaurants attempt to achieve the 30/30/30/10 percentage breakdown for their operations. That means 30% overhead, 30% cost of goods (food, alcohol, etc.), 30% labor and 10% net profit. Let's look at labor. In a restaurant, the bulk of labor costs in the current systems comes from management and the kitchen. Cooks at a modestly priced restaurant make about $12 - $15 per hour. Bartenders often have a higher basic wage, and of course benefit from tipping. Bussing staff usually make twice the hourly wage of servers plus whatever percentage of sales is set aside as their "tipout." (It is unfortunate that all bussers are tipped the same, rather than tipped at the servers' discretion. It causes the hard workers to slack and fails to incentivize the slackers to work harder. Many servers slip the better bussers extra cash when they help them out.) Restaurant hostesses make minimum wage or more.
As a restaurant owner, if forced to increase wages of Servers, Bartenders and Bussers, how much would the prices of their food need to increase? If we take it farther along the supply chain to include a minimum wage increase for a restaurant's vendors, it would cause prices to rise even more.
A customer visiting from a European country where tipping is not done, he explained that the business dinner he had that night cost him $80, including some alcoholic beverages, and the tip. I asked him how much it would cost back home and he said it would be closer to $200. He went on to say that the prohibitive cost of dining out in Europe means that people don't do it as often; usually going out to eat is reserved only for special occasions. He was surprised at how many restaurant choices were available in the U.S. within a small radius, no matter how populated the area. He said "I am happy to tip when visiting the United States because the competition for my business in the restaurant industry insures that I have better quality food for an even better value than is available to me in Europe."
As a restaurant owner, if forced to increase wages of Servers, Bartenders and Bussers, how much would the prices of their food need to increase? If we take it farther along the supply chain to include a minimum wage increase for a restaurant's vendors, it would cause prices to rise even more.
A customer visiting from a European country where tipping is not done, he explained that the business dinner he had that night cost him $80, including some alcoholic beverages, and the tip. I asked him how much it would cost back home and he said it would be closer to $200. He went on to say that the prohibitive cost of dining out in Europe means that people don't do it as often; usually going out to eat is reserved only for special occasions. He was surprised at how many restaurant choices were available in the U.S. within a small radius, no matter how populated the area. He said "I am happy to tip when visiting the United States because the competition for my business in the restaurant industry insures that I have better quality food for an even better value than is available to me in Europe."
