The Working Catholic: Tips in Restaurants by Bill Droel

   The Wall St. Journal (3/1/15) reports that restaurant spending increased by 11.3% over the past year and that “food-service employment has surged.” The income of restaurant workers has not equaled the uptick in meals served; though employers are starting to pay more—3.1% more over the past year says the Department of Labor. Owners and managers want to adequately serve customer volume, and also want to lower their costly turnover rate (as high as 80% a year in some restaurants).

The restaurant business makes a distinction between front of the house workers (primarily the table servers and often bartenders) and back of the house workers (cooks, dishwashers, some hostesses and others). Technically, diners are not allowed to tip back of the house, though waiters and waitresses usually share a portion of the tip with others. Many diners think of the tip as a token of gratitude to their server. But that common notion is not correct. A 1966 amendment to the Fair Labor Standards Act introduced a subminimum tip wage for certain occupations. The tip wage is currently $2.13 in Federal law and has been stuck at that amount since 1991. Laws in some states supersede the Federal tip minimum, putting the tip wage at $4 to $4.95. Tips are therefore, at least in a certain sense, a subsidy to restaurant owners and tips certainly are essential to workers, the majority of whom are women. Of course, restaurant pay is better in some states, in some restaurants and on some shifts than others.  

Here, however, are some numbers in the ballpark: The Bureau of Labor Statistics puts the median for front of the house workers at $8.94, which includes the tip. Considering back and front workers in the same category, the Labor Department says the average is currently $12.28. By the way, servers pay tax on the presumed tip plus the wage from the restaurant. If a diner doesn’t tip or tips less than the IRS presumes, the server still pays the tax.

There are overlapping strategies for improving the pay of tipped workers.

§  A few restaurants (mostly in the four-star category) have eliminated tips and raised wages, including in the kitchen. In management’s opinion this improves service. The menu prices go up about 8% to 15%, an amount which in Europe and elsewhere is considered the service charge.

§  The 1966 tipped minimum category could be eliminated, thereby putting all workers into the prevailing minimum wage category. Sylvia Allegretto and David Cooper of Economic Policy Institute (www.epi.org) have research in support of this approach.

§  The dollar amount of the 1966 tipped minimum could be increased. Rep. George Miller of California (www.georgemiller.house.gov) and others back HR Bill 1010 that gives an 85cent increase per year until the wage of servers reaches 70% of the regular minimum. Others believe that changes at the state level are more likely. Tompkins County Workers’ Center (www.tcworkerscenter.org) and other groups successfully lobbied the New York State Department of Labor to increase the tipped minimum. It will go to $7.50 on December 31, 2015.

§  Diners could consistently tip well, let’s say 20%, and for bad service complain to the manager, realizing a smaller tip changes nothing. At a full-service restaurant 17% of diners still tip at 10% or less, reports Kevin Pang in Chicago Tribune (9/4/14). At a casual restaurant with waiters and waitresses 16% of diners tip about 10% and a full 32% don’t tip at all. And, hardly anyone tips at a fast-food restaurant.

As with everything nowadays, technology is taking this topic into perhaps unexpected outcomes. A person who tips justly, again let’s say 20%, but uses their phone app to pay or uses a touch-screen at the restaurant counter will see a prompt: Add a tip? Then the possible answers: 25% or 50% and even 75%. And the latest are Bitcoin tips; again 25% up to 75%. Plus, there are even electronic tip jars on some counters. Wave a debit card into the jar and give a preset tip. All of this, says New York Times (2/1/15), is “tip creep.”

The exact technology of tip creep eludes your Working Catholic blogger. Although he frequents neighborhood restaurants, he uses a poor man’s type of money: Cash. But The Working Catholic suspects that struggling restaurant workers will not be the ones primarily benefiting from these e-tips.

Droel edits INITIATIVES (PO Box 291102, Chicago, IL 60629), a free newsletter about faith and work printed on old-fashioned paper and mailed through the U.S. Post Office.