Yes, pay the staff for their work!

Restaurants should end tipping for good

Opinion by Corey Mintz

It’s not the end of tipping — unfortunately.

Like most cities, Chicago has a much lower minimum wage for restaurant staff and other workers who receive tips — $9.48 per hour compared to $15.80 for other workers. Earlier this month, the city council voted to phase out the “subminimum wage” over the next five years.

The Wall Street Journal described this as Chicago eliminating the “tips-as-wage system,” which makes it sound like a ban on tipping. Some, like economist Steve Hanke, are framing this as a sad day for diners, based on the belief that the financial incentive of tips is the only way to manage and motivate service staff.

Nick Kokonas, co-founder of restaurant software company Tock, argues the same, but from a positive perspective.

“Simply put, tips will be eliminated entirely and restaurants will eventually move to a service charge equivalent to the tips,” Kokonas wrote on Twitter in advance of Chicago’s vote, citing some of the benefits of this shift: equalized pay between cooks and servers, less discrimination, seasonal stability of wages.

All of this is misleading.

While I wish this ordinance was a harbinger for the end of tipping in Chicago, having watched this play out in my hometown of Toronto, Ontario, where tipping still occurs at most restaurants, I think that the people predicting this are wrong.

Based on my experience and research, I expect Chicago will see a small handful of restaurateurs transitioning to service fees instead of tips (and getting review-bombed by people who think the money is going to the owners). But the majority of restaurants will leave tipping in place over fear that the sticker shock from folding the true labor cost into the menu prices will scare off customers, and that their best servers will leave them for venues where they can make the most money.

Indeed, if tips are what most people claim — a voluntary gift for good service, on top of an employee’s livable wage — this law won’t change that. What’s more, the restaurant business is based on an emotional relationship with diners, who for the past century have gotten used to this system, and it’s very hard to change it.

It’s a shame, because tipping has always been a scam that enables restaurants to suppress labor costs, which keeps menu prices down. This sustains the illusion of an affordable dining experience because the customer is expected to pay for the labor of service staff instead of the employer.

But tips are really just a replacement for a livable wage. If restaurants had to pay a living wage to their front-of-house staff instead of expecting diners to pay employees “voluntarily,” their labor costs would rise, and prices with them.

Letting customers determine the earnings of a business’ staff, thereby subjecting them to the whims and abuses of guests, was always an odious way to employ people. Tipping emerged as a model for employing formerly enslaved Black workers without having to pay them a real wage, if anything at all.

It can lead to economic racial discrimination and suppression of wages for cooks. It’s a horrible system that most companies in North America wouldn’t accept.

Instead, restaurants should pay a living wage (if the revenue does not cover the actual cost of labor, what kind of business is it?), raise menu prices to reflect the true cost, and engage with diners about the value of treating employees like professionals, rather than plan for them to depend on the personal charity of diners.

I recently went to a hospitality conference to moderate a panel about tipping. Every owner or manager I spoke with described attracting, hiring and retaining good staff as their number one challenge.

In my research on innovative models in hospitality, the operators I engage with, the ones challenging industry orthodoxy in a variety of ways, are holding on to their best people. Many have done this by eliminating tips, as the non-tipping restaurants usually offer better wages and benefits. They also offer more consistent hours, an investment in employees’ professional growth, and most importantly a workplace where cooks and servers are not pitted against each other due to their pay disparity.

These businesses have effectively strategized to attract and retain quality employees. Those workers stick around because they are service professionals who want to grow their jobs into careers while being treated with respect.

There are some owners who still hold on to the idea that cooks work for love of food, while servers are mercenaries, motivated only by money. Despite today’s dire labor shortage, precious few restaurants seem willing to re-examine their employment model in order to address it.

The problem I encounter, when speaking with operators candidly, is that diners have little understanding of how tips work. I still encounter people who insist it’s an acronym for “to insure prompt service.”

There’s a type of diner who enjoys the power that tipping grants them over workers, who belittles service staff and expects tipped employees to flirt with them. They are a minority. But if restaurants won’t evolve because their business is catering to the worst kind of customer, they are less practitioners of providing memorable culinary experiences than they are trapped in an abusive relationship.

I hope that this is a real moment of truth for the hospitality leaders of Chicago — and for other cities around the country.