Guestblogging for Ezra Klein today: Mr. Pink!

And the creeping range of the tip is just as insidious I think. Are you supposed to tip the hair stylist? What percentage? The pizza delivery guy, even though there's a delivery charge on the bill? The whole custom seems to be attractive to businesses to offload poor pay by blaming the worker rather than being an incentive for good work.

I agree that a fair wage would be preferrable to tipping, although it would take some getting used to. Hard to imagine waiters and delivery drivers making $15-20/hr in wages.

And you are quite right to never alter your tipping behavior. As anyone who has ever waited tables can attest to, most of the variables that can lead to poor quality service are beyond the wait staff's control.

...but for that very same reason, I never tip low, and don't really vary the amount I tip based on service.

I'm never a bad tipper, but I do vary the tips based on service. Also, the ubiquitous tip jar for counter help doesn't always get a contribution from me if the service is genuinely substandard.

Anyway, I've had this discussion numerous times with my mom, who agrees with you. I disagree with both of you. The day we eliminate tipping is the day we see a dramatic decrease in restaurant service.

And for the record, malraux, delivery charges on your bill don't go to the driver. They go directly to the store, and are most often not shared with the driver in any way. Those delivery charges are incredibly misleading, and basically amount to management picking the pockets of their drivers by misrepresenting the "delivery charge," which is really nothing of the sort.

I don't understand tip calculators. Tipping 15% is very simple. You look at the total bill and move the decimal point one digit to the left, so $86.80 becomes 8.68. Then you round that number as you choose to make the math easier, halve it, and add the half and the whole together. And that's the tip.

Round 8.68 to 9. Half of 9 is 4.5, plus 9 gives you $13.50, so that's how much you tip.

20% is even easier--you just move the decimal place and then double. 9x2=$18.

As for the practice of tipping, it's clearly an outmoded institution. Not only has it become culturally entrenched to tip a set amount regardless of the quality of service, but the whole idea of percentage-based tipping seems a little weird anyway. Why should a waiter be penalized because you chose a $15 entree instead of a $20 one, or asked for water instead of coffee? He still has to do the same amount of work. It could be argued that it's an incentive for waiters to persuade customers to go for the pricier offerings, but in reality he's still facing a crapshoot with every customer, and it's unfortunate that how much money he takes home each day is influenced by whether Jean and Jeanne Sixpaque are in the mood for cheeseburgers or hankering after some caviar.

Holy shit, man, just leave the effin tip!!

That's an interesting perspective on the whole thing.

There's another aspect to tipping though which is that it really brings up the fact that money is exchanging hands.

In pubs in the UK it's actually quite rude to tip directly so what people do instead is say "and have one for yourself" to the barman when ordering rounds of pints. The barman then charges for an extra pint and usually just keeps the cash for that for him or herself as a tip effectively.

You get then though to sort of pretend you're all friends and you just bought the bartender a pint rather than doing anything that points out as explicitly that there's an unequal relationship as directly handing over a tip in cash.

What's worse is when worker wages are predicated on them receiving tips, but the general public doesn't KNOW that they're supposed to tip. I had a ridiculous argument with a friend of mine not too long ago-- she works at the pick-up counter for an Outback Steakhouse, where you call in advance and then go get your food. Her salary depends on tips, and no one ever does it, because nobody actually realizes that it's expected. I've NEVER tipped in that situation-- I don't tip at the drive-through at McDonald's, either, which was not a comparison that made her happy.

I don't like saying "get a better job" to people, but...

The internet, never before has so much been written so often about so little.

I think we should tackle more important questions, like whether to pick our belly button lint in the morning or evening.

Random thoughts:

*Tipped employees would make more money if their employers would pay them a decent wage (which is tax-deductible to the employer) rather than off-loading the responsibility to customers and their (after-tax) earnings.

*I never varied the amount (and ignored tip jars at counter-service joints) until I started going with my kids, who make a mess.

*I'm bothered by "tip creep." It used to be 15%, then 18%, and now somebody has decided that 20% is the new norm. Taking an extra 1/5 on to the purchase price is a little extravagant.

*So too with the ubiquitous tip jars in businesses where the employees are paid normally. I hate those things; it's a blatant shake down.

*Can somebody please tell me the customary tip for a mens haircut? I figure 10%, since I got about once a month.

I have occasionally caused anxiety in my bar mates when I failed to tip the bar keep after each transaction preferring to take care of him/her at the end.

Imagine if such a rule applied to table service.

You've obviously never been to a bar where they treat you like trash until you lay down a 40% tip on your first drink, and then all of a sudden you're their best friend.

Out here in Oregon, it makes even less sense since the regular minimum wage applies to servers as well as everyone else. The result is that server jobs pay substantially better than a comparable job at a gas station, as the tips are extras on top of an already more generous minimum wage.

Despite this, I still tip generously (unless I get dreadful service, in which case I penalize to a more stringent 15%). I dunno, maybe I just want them to like me.

I tip for two reasons. One, because of the stereotype some still hold that African-Americans don't tip (therefore it's ok to give us shoddy service)and two, because my wife strokes out if I leave a small tip due to shoddy service.

Absent those constraints, I would tip when service was good enough to merit something extra, and in an amount that rewarded better service instead of simply taking my order and bringing my food or beer.

The expectation of a 15% tip no matter is just not a good thing.

she works at the pick-up counter for an Outback Steakhouse, where you call in advance and then go get your food. Her salary depends on tips, and no one ever does it, because nobody actually realizes that it's expected.

I can see a buck or two for the service of someone bringing your food to your car, but that's not comparable to the service you get sitting down and being waited on for 1-2 hours.

Essentially, this sounds like a job where the employer shouldn't be able to make someone work for tips.

Tipping isn't really the norm here in Australia. We still tip the guys that get us our beer, but it really is a reward for job well done, not the central part of their pay.

And no one calls you out on not tipping.

I will say that whenever I am in a country where one does not tip bartenders, I find bartenders to be EXTREMELY slow. My anecdotal evidence suggests they do respond to economic incentives. They want as many tips as possible, that means, serve as many drinks as possible, that means, gimmee my drink as fast as you possibly can. I like speedy drinks. I hate going to bars where you spend half your night just trying to get served a damn drink.

I will say after years of too many $5-7 beers in Manhattan (outside of the dive bars), then moving to Texas where its more like $3 a beer, tipping is a lot less of a big deal. I feel like I'm getting such a good deal that I WANT to give another dollar cuz it just seems way too cheap. IE, lower prices increase my willingness to tip, even if my tip is the same nominal amount in each case (and as a percent, even larger).

In NYC, a lot of restaurant workers have been getting killed because of different tip norms. In Europe the tip is built into the bill, in the US it's not.

Last year and early this year, we were seeing a ton of European tourism and much less American tourism, and the Europeans who were coming here were less frequent travelers. So, waiters were going broke because European diners were unintentionally stiffing them!

Of course, now the problem is that everybody's too broke to eat out, much less travel...

The only argument I can see for tipping in a restaurant is that it effectively puts waiters on commission, steering you to higher priced (and, presumably more profitable) entrees, and pushing the booze. OTOH, you could do that directly by paying them a commission of sales.

All I can say, Ezra, is that you have obviously never had to support yourself by working in the restaurant/bar industry. If you had, you would know that not only are they miserably underpaid in their hourly wage, but they work untold hours off the clock before their start times and after their closing time. The owners would still be getting that free labor, living wage or no living wage. I always looked at my tips as a way to make up for all of that.

I won't even go into all the psychopaths in the restaurant/bar industry ownership club, but suffice it to say that not even a 40% tip would be enough for most people with any sort of training or education to put up with. I'd chuck my job in post-secondary education any day if bartending paid a living wage (it would probably match what I make now) AND got rid of all the nutcases who own bars and restaurants.

He's convinced me. Gimme my dollar back.

"I don't seem to vary my tip to reward service."

That's not the point. The point is that the waiter knows that if the service isn't adequate you won't tip at all.

Compare the waiter to a salesperson in a shop. In the shop, you can walk out at any time. The deal isn't closed until the cash register sings. But in a restaurant, once you order, your money is effectively already out of your wallet. So from that point on, you need the waiter, but the waiter doesn't need you. The tip equalizes that power relationship. It's the only part of the bill that you haven't committed to pay when you order. So it gives the waiter a reason to care about you.

The waiter may not try make you personally happier than other customers, but s/he'll try to keep all his/her customers reasonably satisfied in order not to lose any of the tips. That's the point.

All I can say, Ezra, is that you have obviously never had to support yourself by working in the restaurant/bar industry. If you had, you would know that not only are they miserably underpaid in their hourly wage, but they work untold hours off the clock before their start times and after their closing time.
Geez, chill out. Klein said that he does tip because he understands how central it is to income. He said though that its a stupid custom and we should shift to a new paradigm where there's no tipping and higher wages.

I agree. I hate tipping (but I still do it for the reasons listed above.

I don't know, I like all the ritual involved in eating at a restaurant, and I think the whole process of calling for the bill and calculating the tip is a part of that. I mean, as long as we're jettisoning what little cultural heritage we have in favor of "what's rational", why not switch to the metric system? Why not start liking soccer?

Besides, without tipping, there would be no way to exercise a nuclear option in the event of spectacularly shitty service. Maybe if tips weren't the norm, spectacularly shitty service would be more common.

I always tip in restaurants, hotels and for any personal services. I've had a couple of those jobs in the past and know what a difference an extra $3 to the person who cleaned your hotel room can mean.

And yet, servers and bartenders make more and provide better service in the US than they do in non-tipping cultures.

The system works. If the results are there, why complain that the custom makes no sense?

One thing that SHOULD be adjusted in our tipping custom however. For servers, adjusting the size of the tip for the size of the check makes sense: the size of the check generally correlates positively with the server's experience and inversely with their volume. A percentage based tipping scheme keeps things relatively even and fair. On the other hand, bartenders and delivery people basically perform the same amount of work regardless of the cost of the product. Ordering a shot of Grey Goose and a Natty Boh require roughly equivalent amounts of work. So the custom should be: $1 per drink that requires no mixing, $2 per drink that requires mixing. $3 per delivery by car, $4 per delivery by bicycle. Is there some legislation we can pass to enact this custom?

it's amazing how cultural tipping is - in the US I tip 15% because if I don't the waiter will look at me like I spat on him (for decent reasons - I'm robbing him of a core part of his income).

In Japan I tip 0% for the same reason... Tipping Japanese waiters implies that you think that they wouldn't have done their utmost if you hadn't bribed them, which is deeply offensive, especially outside the big cities.

Changing that kind of cultural stuff on your own is virtually impossible, so probably best to go with the crowd on this one.

I spent too many years behind a bar. It is way different today, of course, since the chain stores typically rotate wait staff through the bar, and do not necessarily value "regulars" at the bar. In years past, bartenders, if they were any good, knew scores and stats, remembered your name and what you drink, and provided whatever company you wanted....steady conversation, or quiet support from nearby. If a regular walked in with a new girl, you made him out to be a great guy in front of her. Perhaps, if he is a "player", you might just pour his date's drinks with a heavy hand. When I worked in Vegas, my best gig was in a local spot where off duty dealers hung out. It was not at all uncommon for them to roll in after a shift, flip you a ten spot for a beer and tell you to "lock it up." (keep the balance). If there were bar-top poker machines, well, lets just say I never left work having made less than 200 dollars, and this was 20 years ago.

These days, if you like a heavy pour, tip generously the first drink, then start a tab. You bartender will manage his pour costs after sweetening your drink by shortpouring the lady that is having the Grasshopper. ;)

Yeah I don't think that this quote explains anything: They [tip], Lynn says, largely because it’s expected and diners fear social disapproval. “It is embarrassing to have another person wait on you,” the psychologist Ernest Dichter told a magazine reporter in 1960. “The need to pay, psychologically, for the guilt involved in the unequal relationship is so strong that very few are able to ignore it.” There are plenty of other cultures--South Korea and Australia--where people never tip and while not tipping I've never felt an unquenchable rush of service-related guilt. It's considered even rude to tip taxi drivers because people think that would set a bad precedent by which taxi drivers would start to expect tips.

The analogy with the surgeon would be a good one if it weren't the government hadn't made it illegal to do so. Physicians aren't allowed to take tips.

The analogy with the surgeon would be a good one if the government hadn't made it illegal to do so. Physicians aren't allowed to take tips.

You simply don't understand the concept of tipping to begin with. Tipping lowers the cost of commodities and allows poorer people to enjoy them a long with the vulgar rich you apparently hang with.

If a bar charged a tip cost with every beer, a 3 dollar beer would now be 4 or 5 dollars, thus pricing some poorer people out of the beer market.

Having rich people subsidize the cost of the beer delivering to the poor who don't tip, thus provides a voluntary means to support the poor.

If you don't tip, you are hurting the poor and making their lives less fulfilling.

A poor person may treat their family to a delivered pizza if it cost 10.00 (sometimes you get a deal for two pizzas for 15.00)...but far less poor people would order the pizza if the going in prices was 15-20 dollars.

Hope that makes you feel better about being so stingy with your tips.

I think part of the reason tipping culture is so resilient to change in the US is that businesses (especially restaurants) benefit from the system.

If tipping weren't commonplace restaurants/bars/etc would loose their justification for not paying employees minimum wages. Suddenly operating costs go way up and they have to pass that along to the customer.

Forcing the customer to pay beyond what the real cost is makes food/drinks seem cheaper than they are...and I think that we all are somewhat susceptible to buying more in that situation.

I really is annoying that living in DC means that between 10% tax & 15-20% tip every thing I eat is really costing me 25-30% more than advertised.

But I bet I would be more annoyed (and less likely to eat out) if there was no tipping but everything I bought had a 25% higher listed cost.

If a bar charged a tip cost with every beer, a 3 dollar beer would now be 4 or 5 dollars, thus pricing some poorer people out of the beer market.

That is a very inefficient bar if the operating cost charge is 33 to 67 percent on top of the inflated cost of a beer. Liquor store prices imply that the prevailing price of a beer is $1 to $2.

Fucking frogs always want a handout.

Tipping is a social indicator of a master/servant relationship. (You don't tip your lawyer.) Gotta love the class-free US for keeping the trappings of servitude.

These days, if you like a heavy pour, tip generously the first drink, then start a tab.

I worked several years behind a bar in a country where you generally don't tip bar staff. I don't begrudge it in the US, but bartenders who blank you for the second drink if you don't tip heavily on the first really do need to go fuck themselves.

I'm somewhat surprised that no one's brought up the old anti-tipping statutes. A number of states actually *banned* tipping in the progressive era, on the theory that it is anti-democratic.

Physicians aren't allowed to take tips.

You don't tip your lawyer.

Their tips are called "Christmas gifts" in the form of fruit baskets, preferably including jam (didn't you ever see "Six Degrees of Separation" ?), or alternately, a bottle of liquor (perhaps not such a great suggestion for your surgeon, though).

On principle, I advocate that bar and restaurant owners should stop being cheapskates, post the "real prices" of their menus, and pay their staff a living wage. In practice, it's gotten to the point where I'm used to an quite like and enjoy the process of tipping. Think of it as though you are the employer of your waitstaff or your barber/hairstylist: don't you want to choose the best staff and pay them well to retain them?

Another little regarded aspect of tipping ... it shifts risk to the service staff. Even twenty percent of a slow shift can be peanuts.

> Tipping isn't really the norm
> here in Australia. We still
> tip the guys that get us our
> beer, but it really is a
> reward for job well done, not
> the central part of their pay.
>
> And no one calls you out on
> not tipping.

Yet the servers in Oz will hand the bill to the American in a mixed party every time. Hmmm...

Cranky

I briefly went through the logic of this on a post at my blog, and I realized that tipping is a lot more effective than actually paying waiters what they deserve. To pay waiters what they deserve, restaurants would need to mark up prices to reflect the lost tips and then route that money to the wait staff. Diners would be outraged (for no reason). Of course, tipping creates an iffy and somewhat random mode of income, but it solves the problem of getting wages directly to waiters without upsetting customers with high prices.

Before my sister moved to the US and got a temporary job in a sports bar, I never realised that hospitality workers are actually paid less because it is assumed they will get tips. Seems odd to me that "the change people happen to have in their pocket" should be built formally into the economic system that way.

Think of it as though you are the employer of your waitstaff or your barber/hairstylist: don't you want to choose the best staff and pay them well to retain them?

You can even wear a top hat, greatcoat and wing collar while you do it, for the full-on Victorian experience!

I don't care much about the principle of the thing as about the inconvenience and embarrassment--not so much in restaurants as in cabs and other places. In restaurants I can just do the math and write down the figure on a line for tips on the credit card slip. But in cabs I am continually calculating as I look follow the sum on the meter. Then I'm figuring out how much the final figure will be, adding the tip to it, and then subtracting it from the bills that will cover it so that I can say, "Could I have x back please" instead of "Take y for a tip." I actually avoid cabs whenever possible because this gets me so uptight. I will drag a load of luggage from airport to hotel by bus just to avoid going through this.

It doesn't matter if tipping is the custom or not. Net wages to waiters will stay constant. If people suddenly stop tipping, hourly wages will have to rise, and vice versa. This is simply because the suppliers of waiters -- the waiters themselves -- don't really care which way they get paid (not counting the risk factor).

One interesting thing about tipping is that it creates a principal-agent problem between waiter and management. The waiter will cheerfully supply coffee refills, say, because they cost him zero but he reaps the payoff in the form of a larger tip.

Economists, especially whoever writes the little yellow boxes in the textbooks, frequently ruminate about why people tip, especially if they're from out of town and have no fear of reprisals from that particular waiter. Me, I'd extend the logic back a step. Why do people pay at all? At most sit-down restaurants you could be long gone before anyone would notice, let alone apprehend you. And in Chicago, anyway, if they called the cops they'd hear the guffaws in the background and a cop would show up three hours later (no blood, no cop). So why pay?

While we're on the subject, congratulations to Dr. Krugman. As someone said on another blog this morning, he should put all those gold kroners in a sack and smack Cokie or Chris upside the head whenever they pretend their opinions have merit.

I have lived in Australia for almost five years. I've gotten so used to the non-tipping culture that I don't think I'll ever go back.

Pay people a living wage. No one should have to work for charity.

"You don't tip your lawyer."

Actually, if you control a significant amount of business, your lawyer tips you. Golf outings, expensive dinners, contributions to your CEO's chosen political candidate You want to see a servile culture in action, look at the corporate lawyer-client relationship.

I'm at school, trying (desperately) to pay my tuition with three part time jobs. One of these is working as a barista, making a serving salary. While some days, people remember to tip for their lattes, I've gone entire shifts making hundreds of drinks with no tips at all.. and it hurts. I work the shop on my own.. I bus tables, cook food, clean house, manage the till, and prepare all beverages.. so making less than 30 bucks in five hours is unacceptable. I expect tips, and survive on them.
My boyfriend is easily the best waiter in his restaurant, and his tips show it. He is appreciated by all of his patrons, and often requested by name. He walks out of work with $300 on an average night, and he works hard for it. Some of his fellow servers are lazy, clumsy, whiny, and forgetful, and they make significantly less. I'm okay with this. I think tips, if customers are cooperative, allow employees to make money proportionate to the amount of work they are willing to do.
If you are dining out, be prepared to pay for it. Food and food service is, in reality, rather expensive.. and as consumers, we should take responsibility for our decisions to eat out. I support, wholly, the custom of paying for service, and paying fairly.
(And tip for that damn cup of coffee!!)

And if anybody has an enlightened point, Tyro does. Just consider yourself the employer.
If the American system paid my salary fairly, I may not be so concerned.. but as it is, I think the biggest issue is the lazy, inattentive customer.

Either Ezra is inattentive to the service he actually receives, or he has never gotten truly awful service. I have stiffed and short-tipped, but those instances were extremely blatant.

One time, the restaurant was empty, and while I'm sitting there waiting for the waitress to give me a menu or a glass of water, she was reading a book. And then argued with me when I pointed out she brought the wrong order out (damn it, I know what country gravy looks like). And then she had the gall to complain to my face that I didn't give her a 15% tip. And don't get me started on the time I was presented my bill before my food came out (which was nearly an hour after I got there).

Those are the worst times, but I can name a few other common things that rankle at me (like when a table obviously gets more attention than you from the same waitstaff).

Though in fairness, I do want to applaud Cheesecake Factory, as their service has always been pleasant (if slow due to overwhelming demand). I've never had a bad experience at any location across five states.

A few points before I post a simple model:

* Nylund compares service across countries where there is and isn't tipping of service employees. Be careful with this, as business models vary drastically. In France, for example, I notice I get high-quality products and low-quality service, even when the waiter knows I tip. I think it's partly business organization. So, there's an omitted variable bias to cross-country comparisons. I'd look at the same country and industry across time.

* X writes about creeping tips, going from 15% to 18% to 20%. Can anyone explain this? In DC, most people agree the standard has moved up to 20%. Thus, not only have food prices increased, but labor relative to food has increased. Can anyone explain this?

* There's some difference of opinion on whether service really varies based on tipping. Of course, it's highly endogenous. Can anyone think of a way to parse this out? There was a New Yorker article from a few years ago where Bill Buford tried to bribe the Maitre D' to get a table in a restaurant with a several month wait. Often, they wouldn't take the bribe, but they'd still give him a table and the service would be really good, perhaps in expectation of a good tip?

* I'll post a model on the tipping model as a way to transfer risk to workers in a minute.

The views posted here are solely my own.

A number of good points have been raised about tipping. I’m going give a model of tipping, which argues that the main effect of a tip-based system is the transfer of risk

Several writers have referred to tipping as changing the amount paid by customers or received by waiters. If we start with a competitive wage model under perfect information, where waiters are paid their reserve wage, it follows that waiters will be paid the same whether they’re paid a tip by customer or get a better salary through their employer. This might change slightly if the employee can avoid declaring tip income and can pass some surplus back to the employer. If there were no hassles to tipping and no incentive effect from tipping, a customer would also be indifferent, as the same amount of money is shelled out and the same service is received.

What about the restaurant? X mentioned that the restaurant can deduct the additional cost of the waiter’s salary (let’s call it ∆w) from its taxable revenue. I’m not sure this makes a difference, as a competitive model would have the restaurant would gross ∆w less on each meal. So, a perfectly competitive model tells us that everyone’s indifferent.

Now, what about when we start introducing a variation in demand? Restaurants have peaks and lulls, periods when they go out of fashion or when people start eating out less. When a restaurant sees a temporary decrease in demand, tips goes down, whereas a completely salaried employee’s wage could not simply vary. In a situation where the employee was paid a complete salary (wages = w + ∆w (where ∆w is a long-term average)), the restaurant would bare the costs of the downturn. While the employee would be fired if the long-term costs exceeded the long-term costs of firing him (i.e. decline in service, possibly hiring again when business picks up), we would see the restaurant bearing the short-term costs more than the employee.

In the situation of an incomplete salary (wages=w+ tip ∆w * q) and a downturn in quantity q, we see the risk being distributed to the worker. If the market were perfectly competitive – that is, the employee were previously paid the minimum needed to stay with that job – then the employee would quit and find a job elsewhere. He would bare the costs of searching for the new job. This may explain why waiter and other tipped positions tend to have high turnover. If the employee had a sufficient surplus, however, he faces bares the cost of a downturn in the restaurant’s fortunes, accepting a lower take-home pay. The inverse can also be seen, where the waiter gets more in times of boom compared to the average. Thus, under a system of tipping, we see greater risk (i.e. variation in salary) being borne by employee. This moves away from the model of the employee not bearing financial risk for his employer.

One additional reason a company might prefer tips is to discover an employee’s reserve wage. A reserve wage is the minimum an employee is willing to take before packing it up and going elsewhere. This might mean moving to another company, changing industries, leaving a city and working in a cheaper area, or going back to school to become a piano player in a whorehouse. As q decreases and an employee’s wage declines, an employer may be able to get a sense of how low the employee is willing to be paid. Obviously, this is imperfect, and it only really affects long-term employees seeking a career.

There are a few reasons (I can think of) where a sophisticated employee who understands the boom and bust cycle might prefer the job with a partial salary:
1) Short Term labor in periods of boom. This employee can receive higher total tip dollars due to higher quantity. If he expects to leave before q settles down to its long-term average (and thus the level paid out to fully salaried employees), he comes out ahead.
2) Risk-loving individuals
3) Risk premium. When an employee is paid a risk premium that compensates him for the swings in salary, he may take the riskier job. Obviously, employers will pay the cheapest risk premiums, thus benefiting risk-loving individuals and short-term employees first.

All of these factors tend to favor young or unstable labor, individuals who don’t need steady income and tend not to have families and mortgages.

Summary
In periods of high quantity, this model predicts that wages will be high and filling a job will not be difficult when a part of the salary is tips. However, when demand goes down, short-term employees will not take jobs. Only long-term employees paid a risk premium and fully salaried employees will continue working. This suggests that professions where the availability of experienced labor is essential, e.g. doctors, economic consultants or high-quality service, the fully salaried model makes more sense. Where experience and labor supply matter less, employers shift risk to workers by moving to a tip-based system.

Model:
Normal Situation with tipped waiters:
Restaurant: π = pq – w
Each Patron: pays p + ∆w
Waiter: wages = w + Δw * q.

Normal situation with salaried waiters:
Restaurant: π = (p + Δw – Δw ) q - w
Each Patron: pays p + ∆w
Waiter: wages = w + Δw * q

Downturn: q ↓: q2 With tipped waiters:
Restaurant: π = pq2 – w (1)
Each Patron: pays p + ∆w
Waiter: wages = w + Δw * q2. (2)

With Salaried waiters:
Restaurant: π = (p + Δw)q2 – Δw * q – w (3)
Each Patron: pays p + ∆w
Waiter: wages = w + Δw * q (4)

Hence,
(1)-(3) Gives ∆π= Δw(q - q2) > 0.
(2)-(4) Gives ∆wages = Δw(q2 - q)

These views are solely my own.

I served and bartended nearly all through University. Try becoming a "regular" somewhere and not consistently tipping. I dare you...

When you don't subsidize the income of very low wage workers in industries, wherein it is customary to do so, you're hurting them. It's not your fault really, but they have no choice but to blame you. The system is set up so businesses can offload slowdowns and weak performance onto their staff. If restaurants and clubs paid well they'd be in more trouble on the nights when almost no customers showed up. In tip-based industries it's the tipped staff who suffer.

Anyway, I said "nearly" all of University. Watch the movie "Waiting," it's hyperbole, but not far off. I left the work because I was a few days away from carrying around a pepper shaker full of ground up glass... Not even the gorgeous young waitresses were enough to keep me around anymore.