Restaurants are Eschewing Tipping for Paying Living Wages, But Does it Work?

March 13th 2015

Alicia Lutes

For many people, the institution of tipping is seen as a net positive because it gives wait staff an incentive to perform to higher standards, empowers the diners, and allows the restaurateurs to pay their servers and managers less. But several restaurants are trying a radical new approach: paying living wages. And guess what? It's actually working out to a lot of people's benefit — in many cases even better than the old system.

Tipped workers are, in general, hit especially hard during tough economic times, with customers leaving smaller tips (or omitting tip-based services altogether) in order to be fiscally responsible. Because — despite claims to the contrary — customers largely tip the same each time, relying on personal habits rather than tipping based on service. So once servers who rely on the tipping system learn that the quality of their work won't necessarily increase their revenue, service quality can suffer because servers take on more guests in order to maximize profits or become cynical about the system. Sometimes, servers will then rely on stereotypes or guest profiling — figuring out who are the best tippers and focusing their service on them. And a poor tip from a disgruntled customer won't get a server punished for poor performance: If and when tip is withheld due to sub-par service, the server is under no obligation to disclose that to their manager or other higher-ups. So, you can forget about that issue getting resolved.

Which — you guessed it — means a lot of unhappy customers being served by a lot of unhappy waitstaffers. And with tip-based workers being more than twice as likely to fall under the federal poverty line, it's no wonder.

Right around now that famous line from Franklin Roosevelt might be clanging around in your head — "No business which depends for existence on paying less than living wages to its workers has any right to continue in this country." Which is why it's so refreshing to see places like the restaurant William Street Common in Philadelphia paying its employees at least $15 an hour in addition to health benefits and paid sick leave. According to the owners, in their first week they've not only stayed "right in line with our budget," but in their tip-pool (customers are allowed to tip, but it all goes into a communal bucket, so to speak), "it looks like there’s going to be money after the first week in the [tip] pool even though we overstaffed for the opening."

There's also the case of the now-closed (because the owners moved to San Francisco), but highly successful story of The Linkery in San Diego, California, where the banning of tips garnered them better service, happier staffers, and netted the restaurant more money. Similar restaurants all around the country are also doing the same, with overwhelmingly positive results.