The Resilience of Tipping

Tipping is “confusing, arbitrary, discriminatory, and basically anti-democratic.” So says Elizabeth Gunnison Dunn, in a post on Esquire’s food blog that’s been popping up in my facebook feed since it went up on Friday. The article is basically a dual interview with Ethan Stowell and Tom Douglas, two prominent opponents of Seattle’s newly-passed minimum wage increase. The gist is they have no choice but to move to a more European service model, where what’s now a voluntary gratuity is added to the bill and then distributed by the house. Their front of house staff, it’s implied, are going to have to take one for the team.

Dunn suggests, perhaps hyperbolically, that such a move might signal (or cause) a sea change in the way restaurants work in the US.

Dunn is against the institution of tipping, and has many good reasons. Having worked for tips most of my adult life, I’m sympathetic with her arguments. Maybe I’m being sentimental, but I am convinced that tipping will survive Seattle’s wage increase just fine. Because for all its downsides, there are good reasons tipping has evolved its niche in the American economic and cultural landscape, and I think they’ll continue to apply as Seattle’s economy evolves in the coming years.

Let’s start with why we tip. First and foremost, it’s an indirect subsidy of the house’s labor costs. It’s also a gray area, negotiable by the customer, a way of paying less if you are displeased with your experience. That’s what the house is selling, after all, and the person whose wages are most directly affected is the one charged with making your experience as pleasant and amenable to your desires as is reasonably deliverable. By putting their compensation in your hands you, the customer, are assured of an advocate whose interests at least partly align with yours, and have the option to withhold compensation if they fail to deliver your desired experience to your satisfaction. To quote a study published in the Journal of Economic Psychology (linked in the original article):

[V]oluntary tipping policies increase potential demand among U.S. consumers by reducing perceived expensiveness, increasing perceived tipping policy fairness, and increasing perceived service quality. Relative to automatic gratuities, voluntary tipping increases potential demand by increasing the perceived fairness of tipping policies. These findings… suggest that, despite the many drawbacks of this employee compensation method, U.S. businesses may allow customer tipping of employees as a way to manage consumers’ perceptions of the firm and, thereby, increase demand.

It’s possible folks like Tom Douglas and Ethan Stowell could get away with moving to a different compensation model. Both are accomplished chefs and restauranteurs with strong brand recognition and lots of love from the community. There’s a certain cache to working for them, which counts for something, and Douglas at least is well known for his generosity with regard to staff benefits. But if they’re suddenly paying less than competitive rates for front of house staff, then surely that will disincentivize those employees from being optimally productive, and many will seek other, more lucrative employment at establishments that still allow tips. This means higher training costs and lost sales and productivity while new employees are brought up to speed. It also means the best employees migrating to those establishments where they are best compensated. Getting and keeping the best people is key to success in the hospitality industry, in my experience. If you can’t, you don’t.

Why else will tipping continue? Well, aside from simple cultural inertia and the disinclination of business owners generally to undergo radical changes of business model, I think there are a few reasons. The first is, the wage increase isn’t all at once, especially for tipped workers. The reintroduction of a temporary tip credit is going to spread the wage increase out over five years (back of house employees will see their increase spread over three to five years). Yes, it will increase prices, which a study commissioned by the Mayor’s Income Inequality Advisory Committee suggests will average around .7% for every 10% the minimum wage goes up, which does not strike this writer as onerous.

On top of that, raising the floor exerts an upward pressure on lower-tier wages generally, putting more money in the pockets of those people likeliest to spend it. Add in the multiplier effect of putting money into the working (as opposed to investment) economy, and that’s hundreds of millions of dollars in circulation than weren’t there before, money people will spend on affordable luxuries like going out to eat.

Tipping at its best (for the customer) is an opportunity for generosity. There is pleasure in magnanimity, and in the implication of being in a position to be magnanimous. Alternately, it’s an opportunity to do the right thing, the having done so of which can be placed on the positive column of one’s personal ledger of better and worse acts. There’s a certain premium to that, I believe, something difficult to quantify but nonetheless significant, to both persons in particular and society in general.

What is likely much easier to quantify is the general availability of the resources necessary for generosity to occur. Put simply, people with more money in their pockets are in a better position to be generous, to have the ability to afford that particular gratuitous satisfaction and the inclination to indulge in it.

There’ll be those, of course, who’ll use the rise in wages to excuse themselves from doing the right thing, as there are already and will always ever be. Whenever you have a norm instead of a rule or a law, there will always be those who won’t abide by it because they aren’t forced to. They make life worse for everybody, generally, but then so does the weather, and you can generally do about as much about the one as about the other.

But even good people don’t like unnecessary rules in the US. It plays against our character, much as empowering us to decide our server or bartender’s compensation plays to it. Taking the gratuity out of the customer’s hands is taking a choice from them that they have come to expect. You can pull it off if you’re really good at what you do. But expectations that such radical changes to a proven business model are going to become widespread, or that longstanding cultural practices like tipping are going to go extinct in the face of a slight intensification of a known evolutionary pressure strike me as confirmation bias at best.

Time will tell if early adopters of a more European restaurant compensation model can thrive in the US. But even for well-established names in a thriving economic environment like Seattle’s hospitality industry, it’s a bold experiment. I’m curious to see how it works out for them. Who knows? Maybe they’ll hit on something that works. I’d like to think there are alternatives to the present model that include sufficient compensation to make it worth someone’s time to put up with as much shit as I did for so many years. I just don’t think any of them are going to displace tipping as it’s practiced in these United States anytime soon.

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