The Tipping Point

One of New York City’s largest restaurant moguls has announced that, over the coming year, he will move away from tipping at all 13 of his restaurants, representing a seismic shift in the way we think about paying for our food.Danny Meyer is the owner and force behind Union Square Hospitality Group (USHG), a conglomerate that owns some of the city’s most prominent (and expensive) hotspots. This is not the first time that Meyer has been at the forefront of the restaurant industry. In 1993, USHG banned smoking in its restaurants, beating the city to common sense health standards by more than a decade.Nor is this the first time that Meyer has expressed his dissatisfaction with the system of tipping. In the fall of 1994, Meyer wrote that tipping was putting USHG "at a disadvantage when it comes to recognizing and promoting outstanding service,” in a newsletter sent to regular patrons.

While it is not yet clear what the ramifications of Meyer’s decisions will be, one thing is clear: Prices are going to go up. Under the system of “Hospitality Included,” which is what USHG is dubbing the new system, each dish on the menu is likely to increase in price by between 21 and 25 percent. This is a potentially risky move for Meyer and his restaurants. Prices are already high at USHG’s luxurious eateries, but even wealthy patrons are likely to flinch at seeing an $8 cup of coffee on the menu or a $20 slice of cheese cake. In many ways, these prices are simply factoring in the cost of the tip, but this is a calculation that customers are unlikely to do in their head, at least not at a time when few other restaurants have phased out tipping.

So why are Meyer and USHG doing this? Because it’s the right thing to do. Tipping is a system that seems to bring out the worst in humans, emphasizing their internal or external prejudices. According to a study conducted by Michael Lynn, a professor at Cornell's School of Hotel Administration, women are more likely to receive larger tips than men, and attractive women earn more than waitresses deemed less attractive. White servers will receive larger tips than servers of color, but this system goes both ways, as Lynn’s studies found that African American patrons consistently tip less than their white counterparts. This makes servers provide Black customers with inferior service, creating a vicious cycle. For a long time, tipping has been defended as a system that reinforces and rewards quality service. However, even this seems to be a dubious claim. Lynn’s study demonstrated that quality service has little influence over the size of the tip, accounting for just two percent of variation between tips. Furthermore, a customer purchasing a $15 hamburger instead of a $30 steak is not a measurement of how hard a server worked, or how well they performed.

Because their incomes are padded with tips, servers are provided a base salary that is well below the minimum wage. This is less of a problem in New York, where waiters earn a 20 percent tip on each meal, bringing their yearly income to more than $40,000, the equivalent of $20 per hour. At some of the city’s top restaurants, the payday can be north of $100,000.Across the country, however, waiters make an average of $2.13 per hour.Even with tips, most servers' salaries fall into the bottom quartile for American workers, and tipped employees are three times as likely to be on food stamps, according to a study by the Economic Policy Institute.

However, a more pressing concern, especially for Meyer’s restaurants, is that the system of tipping fails to reward cooks and chefs. Workers in the kitchen do not receive the same benefits from tips, but they still are allowed to be paid less than minimum wage, bringing the average income for cooks to less than $35,000 per year. In January, state laws will bring the tipped minimum up to $7.50, an increase of 50 percent. Cooks, however, will only experience a raise to $9 per hour, a 25 percent increase.This widening wage discrepancy comes at a time when New York governor Andrew Cuomo is pushing for an increase in the state minimum wage to $15 by 2018, creating a perverse scenario in which cooks could be leaving some of New York’s most upscale restaurants for a higher salary at McDonald’s. “We can’t have a situation where we are asking someone to pay $40,000 to go to the Culinary Institute of America to then work for $12.50 per hour, when they could work in fast food for $15,” says Meyer.

USHG is the most prominent group so far to phase out tipping, but opposition to the system is growing. The data clearly shows that tipping is discriminatory, unjust and ineffective. It can’t be gone soon enough, even if it means we start seeing $8 cups of coffee. At least you can now avoid the hassle of doing math when you’re tipsy.

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