It's potentially discriminatory
Should restaurants ban tipping? It’s a natural question for anyone who cares about economics, employment, cultural mores—or for anyone who’s ever eaten in a restaurant.
The question got new life last week when New York restaurateur Danny Meyer announced that his Union Square Hospitality Group would abolish tipping at its dozen-plus restaurants. (Shake Shack, another Meyer creation, doesn’t offer table service and is thus not part of the tipping debate.)
So is this idea a good one?
Let’s first ask a simple question: what exactly is a tip? The answer isn’t as simple as you might think. Depending on your worldview, a tip is either a) a reward for particularly good service; b) a restaurant’s way of getting customers to pay the restaurant’s employees; or c) a virtually inescapable tax on dining.
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For what it’s worth, here’s how I’d define restaurant tipping: an accident of history, largely peculiar to America, which a) makes employers, employees, and customers awkwardly co-dependent; b) is potentially discriminatory on several dimensions; and therefore c) is a bad idea that should be done away with.
What do I mean by “awkwardly co-dependent?” As everyone knows, tips constitute the bulk of a waiter’s or waitress’s income. But they are also optional, at least in theory. Does it really seem like a good idea to make someone’s salary so susceptible to customers’ whims on a given day—or whether any customers happen to show up at all?
Then there’s the fact that one server might earn a lot less than another who does a worse job. How can this be? The Cornell researcher Michael Lynn, who has conducted many studies on tipping behavior, found a variety of customer biases in the data. As Lynn once told me in a Freakonomics Radio interview:
Blondes get better tips than brunettes. Slender women get better tips than heavier women. Large-breasted women get better tips than smaller-breasted women. Surprisingly, at least in the studies I’ve done, women in their thirties get better tips than either younger or older women.
On the whole, Lynn found, women and men earn roughly the same in tips. But white servers earn substantially more than blacks (even with black customers). On this point alone, it’s tempting to argue for the end of tipping. After all, as a society we profess to require equal pay for equal work. Isn’t it patently unfair for one employee to earn less than another because of the color of her skin (or even her hair)? While it is true that some restaurant owners pool their servers’ tips and divide them evenly, it is also true that some owners pool servers’ tips and skim some money off the top for themselves.
Diners, meanwhile, have their own issues. If you tip poorly, you’re punishing someone else’s employee (and perhaps being discriminatory, even if unconsciously). And if you tip well, you’re paying a lot more for your meal than the published price. That’s another big part of the tipping problem. Published prices are in general very useful: they help supply meet demand in a transparent way that discourages waste and corruption. That’s why everyone hates hidden fees (just ask the cell-phone carriers) and that’s one reason American health care is such a mess: almost nobody (including the provider) has any idea what a given treatment actually costs. A restaurant meal shouldn’t have the same problem.
So if tipping were abolished, what would replace it? That’s the easy part. As Meyer and other restaurateurs have already done, you simply set the menu prices high enough to cover all costs, including a set salary for the servers. (Meyer also argues, importantly, that this will help him increase the pay of kitchen workers, who typically don’t get a share of the tips.)
Does this mean that the published menu prices will rise at restaurants that abolish tipping? Absolutely. But it also means that those hidden, guilt-inducing, awkward dining taxes will vanish. And if you still feel compelled to slip a little something to the waiter who kept your water glass full—well, there’s nothing stopping you.
Stephen J. Dubner is co-author of the Freakonomics books and host of the Freakonomics Radio and Question of the Day podcasts.