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No tip required: It should be abolished alongside passage of $15 minimum wage

The United States is now in a tiny minority of countries where this practice exists, and stands alone in the percentage of gratuity expected after dinner.

photo of article author
Michael Daigh
Paying a gratuity, or “tipping,” as a form of compensation for service employees, most notably in restaurants, is a practice that should be abolished with the passage of a $15 per hour minimum wage. The very best thing that might be said about tipping is that it is a curious atavism, originating in the feudal economies of the Middle Ages, which, depending on one’s sources, was frowned upon in the United States as fundamentally undemocratic until it became an institutionalized form of wage supplementation during the Great Depression.

The United States is now in a tiny minority of countries where this practice exists, and stands alone in the percentage of gratuity expected after dinner. Canada, Mexico, Chile, Poland, Ukraine, Egypt, and Armenia are the only other nations where gratuity is expected, and 10 percent to 15 percent is considered generously adequate. The worst that might be said of tipping is that it is a source of economic and even racial inequality, and furthermore is socially onerous.

The origin of the term “tip” is murky, possibly rooted in 17th century European thief’s cant for “to give.” Tipping became a habit of the aristocracy, and traveled to the American colonies in imitative form. After Emancipation, tipping became a favored form of compensation among employers who found that it was very profitable to hire newly freed slaves to work for gratuities alone. Consequently, American labor unions once led efforts to ban the practice altogether before those unions were largely broken by the federal government. Globally, labor was more successful.

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Institutionalized in Great Depression

When Congress passed the minimum wage in 1938, what had become a way for service employees to earn any money at all during the Great Depression became institutionalized on behalf of their employers, and a separate minimum for tipped employees was written into the law. Until 1996, it at least had the virtue of scaling alongside the real minimum wage, until Godfather’s Pizza CEO Herman Cain appealed to a Republican Congress to take that provision away, and in 18 states it has languished at $2.13 ever since.

This separate standard for a certain class of employees is what in union parlance we would refer to as a “B-scale,” a term synonymous with economic inequity. Perversely, because Americans are dimly aware of the wage plight of tipped employees, the same democratic impulses that once led us to reject tipping have transformed it into a social obligation, one felt so deeply that the quality of service itself doesn’t even matter, and only accounts for a variance of 2 percent in the final gratuity. We tip because we know that servers are on a B-scale, and we also know that they deserve more.

Tipping should be uniformly abolished alongside the passage of a no-exception $15 wage. A B-scale exists for tipped wages, and tips are obligatory because of the B-scale. The elimination of one obviates the other. As for the impacts on labor: If a tipped employee currently makes less than $15, they have already benefited. If one makes $15, nothing has been lost. For the rarified strata of servers who make $25, $30, or more, logic clearly dictates that the cash flow is already present in the system to continue to support those wages. The restaurant simply needs to raise prices by, say, 18 percent, and eliminate tipping. In a world with a minimum wage there are jobs that pay more, and server jobs are no exception. A restaurant so good that it can support such tips can also support those wages without them, and the best servers will still compete to work there.


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Deceiving the consumer, outsourcing labor costs

Why are restaurants so opposed to this? It’s how every other industry functions in the real world, but for restaurants it’s really about deceiving the consumer while also outsourcing labor costs. Tipped wages allow owners to practice a form of pricing legerdemain, subtly hiding consumer costs from the most immediate decision-making faculties. Even the most astute consumer simply does not factor adding 20 percent in to any quick calculation, at least not accurately when reading printed numbers in a social setting. This math-in-public affects decision-making regarding spending and even choice of venue. Furthermore, in a slightly slumping economy, management likely has no need to adjust prices; labor acts as the buffer, bearing all the initial losses for management in the form of a couple of percentage points here and there. It adds up.

In the near term, it is likely that eliminating tipping will complicate and elevate the form of psychological warfare on consumers. To wit: If one restaurant raises printed prices by 20 percent while instituting a “no-tipping” policy, while another places, at the end of a meal, a fine-print 20 percent “service fee” on the check, the average consumer will perceive the latter as the more affordable option, and yet will also assign blame for the additional compulsory cost on labor rather than management — even though data show they would have paid it anyway.

Exceptions and variances make the system more opaque. Hypothetically, when a consumer pays for dinner and tips 20 percent, in which following instance, assuming equal pricing, has economic fairness and transparency been satisfied? Is it when a B-scale restaurant is making outsized profits while their labor costs are externalized, or when consumers are paying up front for a living wage, plus tipping based on a deeply ingrained belief in the continued existence of a B-scale? Or perhaps when a restaurant paying a fair wage is barely making it as they keep their prices competitive with a regional competitor on a B-scale?

One might make the argument that tipping as a system is fair or transparent when a restaurant charges deceptively less by subtly shifting labor expenses on to the consumer. Yet this is merely the ideal form of a system that is historically racist and anti-labor. In fact; it’s still racist. Research has been conclusive that while quality of service has little effect on gratuity percentage, skin color absolutely does; black servers are consistently tipped less than white servers, constituting a de facto discriminatory pay system no matter what the base wage, and only by the most severe mental acrobatics can we accept this form of compensation as legal. The data regarding the sexual harassment of servers connected with favored sections and schedules is even more grotesque and compelling.

The City of St. Paul likely cannot eliminate tipping along with the passage of a minimum wage, but if it can, it ought to. Otherwise, culturally, the extinction, however slow, of this practice should begin. It already has in Seattle, and in other cities that have implemented a $15 wage. At a minimum, the St. Paul should provide guidelines, education, and encouragement for the elimination of tipping compensation altogether, in the name of economic transparency and equity for consumers and labor.

Michael Daigh is an active St. Paul citizen, a pilot, a union volunteer, and a lieutenant colonel in the U.S. Air Force. He holds a master of arts degree in history and is also the author of “John Brown in Memory and Myth.”


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