The Glorious Economics of Tipping!

     There has been a lot of rumbling over the past few years about tipping in U.S. and how it is not done in other countries. These views often come from SJWs believing that it is unconscionable for employers to pay their service staff less than minimum wage. Any server with basic math skills does not agree and it makes perfect sense why this is so.

     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."

2,419 Days of Bridie's - The Beginning of the Love Affair

 

Bridie McKenna's Irish Pub - Spring 2009

    Everything in life is temporary. Change is inevitable and relationships of all kinds come to their respective ends. From the day we opened to the public on Wednesday, January 16, 2008 to the day we closed the doors on Sunday, August 31, 2014 Bridie McKenna's Irish Pub was an important and integral part of my life.  Six years, seven months, and 15 days in business; the time I spent there varied through those years, but it was always part of me.
    In the beginning working at the pub literally saved my life.  I was hired there in November of 2007 in the midst of an 18 month period of monumental personal loss that came in a barrage beginning in July of 2006 and continuing through January of 2008: One loss after another from tough break-ups, surgery, the deaths of my uncle, father, cousin & friend, job loss, etc. Each attempt to pick myself up during that period was met with another knock-out blow.  I couldn't catch my breath and each blow added mountains of ever increasing sadness to point where the pain just did not seem worth the effort to continue.  I planned my exit and started the process on more than one occasion, only to change my mind at the thought of how someone would have to explain it to people I loved.
     When I first walked into the place, I was struck by its beauty.  It wasn't even done yet.  Upholstery on the booths was only halfway complete. The finish had not yet been applied to one of the bars. There were men on ladders hanging fixtures and touching up paint. Sawhorses were in every room. Walking in the front door and seeing the curved mahogany bar and appointments and all the names of important places in Dublin accenting the woodwork was breathtaking even under those circumstances and it never lost its allure. 

First Impression, The Victorian Bar

     Being hired that day started to give me something to live for again. There is an excitement around opening a new place. I was able to help with all kinds of tasks from bookkeeping to numbering the tables for the POS system.  I love the hospitality business and being part of the beginning was a real thrill, but that was not what got under my skin, what made me fall in love with the place and any role I undertook there.  No, I fell in love with the wonderful mix of people; coworkers, customers, vendors, entertainers, everyone!  
     I have determined that the restaurant business is in itself a subculture with lots of character, much of which is quirky, eccentric, twisted or downright unstable.  As a student of psychology the pub was the agar in a fascinating  petri dish of insecurities, anxieties, neuroses and pathologies where the players were both annoyed by and cared deeply for one another. We laughed and cried and played together. We counselled and supported each other. Some were nursed through and encouraged out of abusive relationships, others were nurtured through battles with substance abuse, rape, divorce, miscarriages, break-ups, new love, loss, marriage, births, etc., still others were cheered on as they completed high school or college and then sent on to conquer the world. Having the opportunity to help and support others in turn helped me. At a time when I felt so alone and was starving for connection, the ever changing cast of characters at Bridie's became a surrogate family, held me up and got me through the darkest time of my life and for that I will be forever grateful. 

The Four Original Owners

Front of House Staff, Halloween 2008

Front of House Staff, Halloween 2009

That was how I fell in love and that wonderful, crazy place got inside of me and I found myself more than willing to do anything to contribute to its success, appreciating every minute of it from excruciating to joyful and everything in between.