First of all, employee costs are not passed on directly to the consumer. Paying your employees 3x their salary does not translate into 3x cost to consumer.
Second, does it really matter how it affects their bottom line? Most restaurants are not profitable because the business decision-making is flawed from day one about more things than labor costs. Worst-case scenerio is they make less profit but then again, are you advocating that it is more important for companies to make max profit at the expense of paying a living wage to their employees?
Third, let’s flip that around and say that the employer does not have to pay ANYTHING to their employees, it is strictly tips. Would the prices go down?
Fourth, the idea that prices go up to reflect labor cost only holds to a certain extent. I’ll pay up to $25 for a good rib-eye dinner but certainly not $50. There are supply and demand curves to account for.
Of course it matter! So your argument is that, since ‘most restaurants aren’t profitable’, that they should lose even more money just so they can pay workers? Worst-case scenario is that they close. I’m saying its more important for the place to stay open and provide any jobs, than to close because it has to pay 3x more in wages that it currently does.
Ridiculous.
Businesses have to profit. If, all of a sudden, wages are tripled then prices will have to increase to make up the difference. That, and maybe in addition fewer hours put in my overworked employees. Higher prices and lower service mean less business. Even assuming that the increase effects all establishments equally, an increase in prices of 15% will be enough to keep some people home. I’m almost fed up with paying over $10 for a sit-down lunch, anyway.
Along those lines, I would be interesting to compare food item costs in states like California, Oregon, and Nevada to places like Maryland, Texas, New York, and Florida. I would bet the average meal at a place like Applebees of PF Chang’s isn’t all that different.
That’s 100% of it right there, except it doesn’t have to be a pricier place.
Look at it this way:
If a server makes 2.13/hr, that leaves them with 5.12 per hour to make in tips to ptu them at minimum wage. That’s less than 3 tables with a $2 tip each per hour, which seems to be easily attainable.
Another point of comparison is that when I was younger (summer of 1989) , I was a bus-boy at a suburban Chili’s restaurant. I made $2.01/hr + tips (yes, the server minimum has gone up a whole 12 cents, while the minimum wage has gone up $2.90 since then).
My cut of the tips was something like 1% of overall tips, tipped out by each server. I tended to go home with somewhere between 10 and 15 dollars a day in cash, and on weekends, nights or particularly busy days, I’d get upwards of 20.
That’s for working 11 am - 2 pm as a busboy- so I was making around 5 dollars an hour back then for being a busboy. Wait staff and bartenders made quite a bit more than I did.
I see a couple posts that say eliminating tipping and having restaurants pay minimum wage would cause food prices to go up “around %15”
I don’t know what percentage employee costs are in this industry, but to go from 2.13 to 7.25 is nearly a 300% in server costs. The reaction would be only a 15% rise in prices?
I was being generous, in saying that even a 15% increase in food costs would make a difference. I have no idea how much it would effect the actual price of a meal.
I thought the proposal was paying servers the “true” minimum wage in lieu of tips, not in addition to.
So sure, food prices would go up to include the true cost of the service, but since patrons wouldn’t be tipping it would likely actually cost less to eat (if the above claims about reduced wage + tipping being greater than minimum wage are true).
In the end I’d probably prefer that system purely on a tax-avoidance-reduction rationale. My out-of-pocket costs as a consumer are roughly the same and my only loss is the ability to differentiate good service from bad via my tip allocation (which I’m highly dubious of the efficacy of anyway since I basically never give a truly “bad” tip).
There is a natural experiment here. Compare the cost of a meals in two chain places, one in a full minimum wage state, and a nearby state without it. Say, one in Oregon, and one in Washington.
Given that server costs are a fairly small portion of overall costs of running a restaurant, I doubt you would see that much of a change in prices. Even if you did people would adjust. Just as they adjusted to $5 coffees and $150 jeans.
For a chain that operates in multiple states, it can handle a location in a full minimum wage state profiting less because the difference can be balanced by a state that doesn’t require full minimum wage.
If the minimum wage is required across the board, then that experiment wouldn’t be an appropriate representation.
The down side to that, as has been pointed out, is that there are plenty of servers who clear $20/hr.
Well, sure. But again, in economic theory, they are being compensated at that level because that’s what they are worth. If instead the price on the menu was the price paid either restaurants would continue to compensate their skilled wait-staff at that level or they would lose them to another restaurant that values that level of service (or, perhaps, servers would find out that their skills really aren’t worth that and their wages would go down towards the minimum).
Instead we have a system where the server compensation is vaguely tied to the cost of the product rather than the quality of the service. It’s a rather byzantine way of doing things, but so entrenched in American I doubt it’s going anywhere.
I’d prefer a system where I know that the server is making a decent (or at least minimum) wage and that my tip was a payment for good service rather than a method by which the employer gets me to make the server whole. I hate having to do the “well, 15% is minimum because without that the server is making $3 bucks an hour” calculation on what should be a different type of transaction.
Only if labor costs are 100% of the cost of the meal. Since overhead and material prices do not change, then I would expect total customer cost to go down if the servers were paid only full minimum wage and no tip.
Think of it this way. If the server cost to the restaurant went up $5.12 an hour, and each server waits 20 tables, with an average of 2 customers per table, over an 8 hour shift, then you need to increase prices by 8*5.12/20=$2.05 per table on average. I can’t remember the last time I sat to be served and tipped less than $1.
Yes, this is true, and I did read it. But surely you acknowledge that the vast majority of server compensation comes from tips in the American system. The tip is not a bonus for good service, it’s the lion’s share of server compensation. In reality at least, if not in the letter of the law.
One would think that in a system where tips were truly rewards for exceptional service rather than the bulk of the compensation the base wage rates at a fine dining establishment would be different from the wages at Olive Garden. But I don’t think that’s really the case today - the difference in take-home pay is entirely due to tips, right?
Either way, like I said, this is not changing any time soon. And it’s a rather mundane thing to get worked up about. But it is an inefficiency in the pricing of labor, IMO, and a haven for tax avoidance.
Guilty as charged. I like to tip well as I eat out often and have my favorite places to eat where I know the servers and they treat me special. I try to tip in cash as often as I can.
I worked in restaurants for a long time. My mother, father, step-father were all chefs and/or restaurant managers. Restaurant or hotel work was basically all there was in my town, the differences depending on if your parents owned a hotel or if they just worked for one.
At least in this case servers always made more money than anyone excepts the owners or people who slept their way into certain management positions. Every dining room or hotel employee wanted to be considered for server jobs and most kitchen workers would have loved to wait tables if they were more sociable and/or pretty. Servers made the most money and spent the most money. They might not have made steady upper middle class wages or anything but they certainly weren’t making less, in practice, than non-tipped hourly employees in the same industry.
Not all chain restaurants are corporate owned, so the pricing decisions will not be solely made by a corporate entity that can raise prices elsewhere to compensate for loses in some places. So you would still see pricing differences if the costs from one state to the next were radically different.
Not to mention that if opening restaurants in states like Nevada were unprofitable, or much less profitable, they wouldn’t do it. If your hypothesis is that a minimum wage with no exceptions would make prices rise substantially, or put restaurants out of business, then there would be fewer restaurants in states where that is already the reality, or you would see much higher prices. Do you have any evidence that either of these things is actually true?
Last night, I was out for a business dinner with 4 other people. Total bill was about $200. I didn’t pay, but I bet the tip was at least $30, and probably $40.
I don’t know the tipping policy of this restaurant, but let’s say that tips are shared between wait staff, bar staff, and kitchen/bussing staff. So to be conservative, my waiter received lets say $20. And he had at least 5 tables in the 2 hours I was there. Let’s say 8 tables for the whole night. $160 in tips, and he probably worked a 5 hour shift. So $32/hr in tips, on a Tuesday night.
You tell me which my server would prefer. Minimum wage, or tips.
Ok - not every restaurant is a $40/person meal. Not all restaurants are busy the whole time the staff is working. But back in the '80s, I waited tables in a decent but not fancy local family restaurant. The kind of place that would run $10/meal now. I knew lots of waitresses that regularly cashed out at the end of a Friday night, or Sunday brunch, or weekday lunch with over $100 in cash. That was 30 years ago.
I do not feel sorry for tipped wait staff. I feel much more for the busboys and dishwashers.