Higher pay for food service may mean worse service

Journal Sentinel files

Will service decline if tips go away? Columnist Christian Schneider thinks it might.

Aug. 26, 2015

Suppose you're doing some hiring for a Fortune 500 company and are considering two candidates with equal qualifications. A word of advice: Hire the one who has waited tables.

Being a server is the toughest job I've ever had. If you're an effective waiter, you can essentially do five jobs at once. Each table presents its own challenge, and you have to juggle them all at the same time. You're on your feet all day dealing with each customer's often-bizarre requests and need to do so with a smile. And there's no quarterly performance review — you know within minutes if you're doing a good job based on how much you make in tips.

But as The New York Times reported last weekend, the tipping culture may be in jeopardy. With cities like New York and Los Angeles moving toward $15 minimum wage laws, restaurants are beginning to ban tips and replace gratuities with either mandatory "service fees" or higher food prices. The thinking is, customers will pay a similar total amount for their food, but the extra money will then go to the restaurant to pay the higher wage.

But the demise of tipping would be a disaster for both servers and customers. For one thing, wait staff won't come close to making a similar wage without tips. If their hourly wage is increased from $2.33 — the current minimum wage for servers in Wisconsin — to a new wage of $7.50 for tipped employees, that $5.17 per hour raise boost won't touch the $30, $50, or $100 (in some places) per hour they could make in tips.

And when food prices are increased or "service fees" are added, that money is taxed at a much higher rate. Currently when an employee is tipped, they only pay income tax on the amount they earn in gratuity. (For cash tips, they're pretty much on the honor system to report their income.)

But if food prices are increased to supplant tipping, first sales tax must be paid on the increased amount by the customer, then the restaurant must pay income tax on that chunk of money, then the employee must pay income taxes on it when it finally trickles back to them in the form of a higher wage. By the time it actually hits a server's wallet, it could be half gone.

Further, tips are what ensure customers will get the best service possible. I'm pretty sure most servers only tolerate me because of the possibility I'll give them a hefty tip at the end of the meal. Tips provide the incentive for waiters and waitresses to make sure your food is delivered on time and with the right specifications. If all the servers were paid a flat rate, you'd probably get your steak thrown on your plate from halfway across the room. Think you wait a long time for your food now? Just wait until tips aren't part of the equation.

And there is no doubt higher that food prices will drive away business from restaurants that desperately need it. Even if a no-tipping policy is in effect, consumers will notice sticker shock when they walk into their favorite pizza joint and see prices have increased by 20%. Fine dining will be less affected, as wealthy customers are less sensitive to higher prices — but it's the midlevel mom-and-pop restaurants that will feel the brunt of having to increase food and beverage costs.

Granted, the non-tipping experiments are still very small, but as candidates such as former Sen. Russ Feingold push the $15 minimum wage, axing gratuities could become more commonplace. Suddenly we'd all become anti-tippers like Mr. Pink at the beginning of the film "Reservoir Dogs," who says automatic tipping "is for the birds" because waiters are "just doing their jobs."

But when "tipping culture" evaporates, their jobs will be very different. When you cap the incomes of the really good servers, you're going to get a lot less of them. Fortunately, you'll have plenty of time to reconsider while you're waiting for your spaghetti