(This article originally appeared in The Guardian)
A restaurant in Bloomington, Indiana, has eliminated tipping and is instead raising hourly wages for its employees. An eatery in Portland, Oregon, replaced optional tipping with a mandatory service fee. A restaurant group in Eau Claire, Wisconsin, eliminated tips and raised their minimum wages to $16 an hour. A Texas brew-pub is touting its no-tipping policy as the main reason behind its low employee turnover.
There’s no argument that a tipping model has its problems. “The case against tipping is compelling,” writes Kathryn Campo Bowen on Eater.com. “It facilitates racism, sexism and widespread wage theft; perpetuates a growing income gap between front- and back-of-house staff, particularly in cities like New York and San Francisco; and contributes to a stigma that service work is transitory.”
And if you think that the “no-tipping” model is new and brought on because of the pandemic’s impact on restaurant workers, you’re mistaken.
The practice in the US goes back to the early 20th century and became widely popular in the 1920s when prohibition cut into restaurants’ profits. But by the 2000s, a number of well-known proprietors (including famous restaurateur Danny Meyer) implemented, with much fanfare, no-tip policies in their eateries.
A survey in 2016 found that of 503 randomly sampled restaurateurs, 18% said they had already adopted no-tipping policies, 29% said they planned to do the same and 17% said they would consider implementing no-tipping if others did. The no-tipping trend seemed to have reached a tipping point.
And then … the trend reversed itself. So what happened? Turns out the tipping model was hurting restaurants because they couldn’t suddenly absorb the higher cost of wages. Maybe the brew-pub in Boerne, Texas ( population 18,232) can get by with charging their limited audience higher prices. But restaurants in more competitive markets just can’t do that unless everyone rises prices together and that’s not going to happen anytime soon.
But there was a much bigger problem: Meyer and others learned that eliminating tips hurt their employees.
“The numbers don’t lie,” David Stockwell, the owner of an Italian bistro in Brooklyn told the New York Times. “We thought it was the rare instance when a good business decision lined up with a good ethical decision. But we realized all the problems that came with the model started rearing their heads in our business.”
Stockwell’s restaurant had opened tip-free in 2016 but then reintroduced tipping in 2018. Meyer ended his no-tip policies. So did many other high-profile eateries. They couldn’t recruit people. They couldn’t retain good workers.
Should this be surprising? Not to me.
When I was in Australia a few years ago I ate at a bunch of places and was told never to leave a tip because employees were already fairly compensated. Similar models are common in many other parts of the world. Even in the UK, which I visit frequently, leaving a 20% tip as I normally do raises more than a few eyebrows. So why not here in the US?
It’s because the US is, at its core, an entrepreneurial, free-market culture. And tipping is an entrepreneurial model. Customers are conditioned to tip and employees are conditioned to earn their tips — like any entrepreneur. And like any entrepreneur the better an employee — and their organization, and their team — the more money is made.
“We treat our sections like our own small businesses,” write six workers with more than 50 years of experience in the restaurant industry. “To us, the restaurant floor is an interwoven system of independent entrepreneurs that runs like a well-oiled machine. We have no issue with an increased minimum wage for non-tipped workers, but for our industry the tipping model works for the guests, the employees and the company.”
I have countless clients that are endlessly searching for ways to motivate their employees. They try team building apps. They give out awards. They offer performance bonuses. If only they had the built-in motivational tool that is the tip. When implemented the right way, it is a tool that turns an employee into a partner. It is all the motivation needed.
Because in the end, tipping is more than just a wage and great workers want more than just a “fair wage”. They’re about making money for both themselves and their organizations. Tipping is the ultimate profit-sharing plan. It’s a chance for workers to have more control over their financial welfare. It gives them some skin in the game. If a restaurant is doing well because it’s safely operated, properly managed and delivers great food, and customers are enjoying the experience, then they will usually tip. The better the experience the better the tips. And when that happens, everyone — from the wait staff to the dishwashers — can share in the business’s success.
