1 00:00:01,920 --> 00:00:06,320 Speaker 1: Welcome to brain Stuff production of I Heart Radio. Hey 2 00:00:06,400 --> 00:00:09,280 Speaker 1: brain Stuff. I'm Lauren Vogelbam, and this right here is 3 00:00:09,280 --> 00:00:14,120 Speaker 1: another classic episode. One of the many conversations that's been 4 00:00:14,160 --> 00:00:17,680 Speaker 1: going on during the COVID nineteen pandemic concerns how we 5 00:00:17,840 --> 00:00:22,520 Speaker 1: pay our service industry workforce, especially with low wage fast 6 00:00:22,560 --> 00:00:26,960 Speaker 1: food restaurants struggling to fill positions. It's increasingly clear that 7 00:00:27,000 --> 00:00:31,080 Speaker 1: the industry needs to change as we move forward. Part 8 00:00:31,080 --> 00:00:35,120 Speaker 1: of that conversation revolves around tipping and the federal tipped 9 00:00:35,159 --> 00:00:39,120 Speaker 1: minimum wage. Today's episode digs into how it works and 10 00:00:39,400 --> 00:00:44,239 Speaker 1: how it doesn't work. Hey brain Stuff, Lauren vogelbom here, 11 00:00:44,720 --> 00:00:47,559 Speaker 1: Why do restaurants use tipping? Is it a reward for 12 00:00:47,600 --> 00:00:50,360 Speaker 1: good service? Studies show that tips don't go up or 13 00:00:50,400 --> 00:00:54,080 Speaker 1: down significantly based on the quality of service. Does tipping 14 00:00:54,240 --> 00:00:58,120 Speaker 1: attract and retain better wait staff? Not really? Is it 15 00:00:58,160 --> 00:01:00,000 Speaker 1: a bribe so the waiter won't spit in your soup 16 00:01:00,000 --> 00:01:02,640 Speaker 1: the next time you come? Probably depends on the waiter. 17 00:01:03,560 --> 00:01:06,760 Speaker 1: In most countries, a service charge is included in the bill. However, 18 00:01:06,840 --> 00:01:10,319 Speaker 1: in America, instead of an upfront service charge, diner's hand 19 00:01:10,400 --> 00:01:12,800 Speaker 1: over fifteen or more of the price of the meal 20 00:01:12,880 --> 00:01:15,920 Speaker 1: to the server at their own discretion. It's not required, 21 00:01:16,160 --> 00:01:19,800 Speaker 1: but it is customary. But this seemingly generous practice has 22 00:01:19,880 --> 00:01:23,960 Speaker 1: some unpleasant hidden costs for starters. The existence of tipping 23 00:01:24,000 --> 00:01:27,160 Speaker 1: allows restaurants to pay servers a federal minimum wage of 24 00:01:27,200 --> 00:01:30,760 Speaker 1: two dollars and thirteen cents an hour, so waiters in 25 00:01:30,840 --> 00:01:34,679 Speaker 1: most states basically live and die by tips. The result 26 00:01:34,760 --> 00:01:36,880 Speaker 1: is that tipped workers are twice as likely to live 27 00:01:36,920 --> 00:01:39,800 Speaker 1: in poverty and depend on food stamps as other workers. 28 00:01:40,520 --> 00:01:44,160 Speaker 1: Then there's the opposite problem in stronger restaurant markets like 29 00:01:44,200 --> 00:01:47,039 Speaker 1: big cities. The existence of tipping means that waiters in 30 00:01:47,080 --> 00:01:49,680 Speaker 1: busy restaurants end up making a lot more money than 31 00:01:49,760 --> 00:01:52,600 Speaker 1: the cooks and dishwashers who get paid a fixed hourly 32 00:01:52,640 --> 00:01:56,080 Speaker 1: wage while working just as hard. Add to all that mess, 33 00:01:56,120 --> 00:01:58,919 Speaker 1: the fact that America's tipping system is rooted in racist 34 00:01:59,000 --> 00:02:02,800 Speaker 1: hiring practices emerged after the emancipation, when white business owners 35 00:02:02,800 --> 00:02:06,160 Speaker 1: were trying to avoid paying new black employees, and tipping 36 00:02:06,200 --> 00:02:10,400 Speaker 1: comes out looking decidedly ugly. So when does it make 37 00:02:10,440 --> 00:02:13,600 Speaker 1: sense to abandon tipping in favor of raising restaurant prices 38 00:02:13,639 --> 00:02:17,000 Speaker 1: so that all staff is paid fairly or would customers 39 00:02:17,040 --> 00:02:20,760 Speaker 1: bulk get that. Sarah Clifton is a mathematics professor at 40 00:02:20,800 --> 00:02:24,919 Speaker 1: the University of Illinois who specializes in modeling complex social behaviors. 41 00:02:25,320 --> 00:02:28,160 Speaker 1: In a recent paper, she created mathematical models of two 42 00:02:28,240 --> 00:02:32,560 Speaker 1: hypothetical competing restaurants, one with conventional tipping and one without. 43 00:02:33,040 --> 00:02:36,799 Speaker 1: The paper was published in the February issue of Chaos, 44 00:02:36,880 --> 00:02:40,560 Speaker 1: a journal from the American Institute of Physics. The key 45 00:02:40,639 --> 00:02:44,280 Speaker 1: variable in Clifton's models is the average tipping rate. Tipping 46 00:02:44,320 --> 00:02:46,440 Speaker 1: rates have been creeping up of the past few decades, 47 00:02:46,480 --> 00:02:49,240 Speaker 1: from ten percent to fifteen percent and now close to 48 00:02:50,040 --> 00:02:53,680 Speaker 1: in major US restaurant markets. Clifton's models are designed to 49 00:02:53,760 --> 00:02:56,360 Speaker 1: be as simple as possible, with every player in the 50 00:02:56,400 --> 00:03:00,400 Speaker 1: system motivated purely by monetary gain, meaning that when cooks 51 00:03:00,400 --> 00:03:02,760 Speaker 1: are paid better, they're more likely to stay, meaning that 52 00:03:02,800 --> 00:03:05,839 Speaker 1: food quality goes up. When waiters are paid less, they're 53 00:03:05,880 --> 00:03:09,720 Speaker 1: more likely to leave decreasing service quality, but eventually the 54 00:03:09,800 --> 00:03:12,840 Speaker 1: waiters would return if diners flooded the restaurant because of 55 00:03:12,840 --> 00:03:15,960 Speaker 1: the food quality, which would presumably mean more profit and 56 00:03:16,080 --> 00:03:19,679 Speaker 1: higher wages for all. What Clifton found was that when 57 00:03:19,680 --> 00:03:22,519 Speaker 1: the average tipping rate crosses a certain threshold, call it 58 00:03:22,639 --> 00:03:25,919 Speaker 1: the tipping tipping point, restaurants will make more money by 59 00:03:25,960 --> 00:03:30,560 Speaker 1: abandoning tipping. Unfortunately, Clifton doesn't have enough real world data 60 00:03:30,600 --> 00:03:35,840 Speaker 1: to calculate exactly what that magic tipping point is. Dozens 61 00:03:35,880 --> 00:03:38,560 Speaker 1: of high end restaurants across the United States, led by 62 00:03:38,600 --> 00:03:41,960 Speaker 1: New York chef and restaurant toward Danny Mayer, began experimenting 63 00:03:42,080 --> 00:03:46,119 Speaker 1: with no tipping policies. These trend setting restaurants either increased 64 00:03:46,120 --> 00:03:49,120 Speaker 1: menu prices by an average of twelve fifteen percent or 65 00:03:49,200 --> 00:03:52,920 Speaker 1: included gratuity in the final bill. That way, the restaurants 66 00:03:52,920 --> 00:03:55,840 Speaker 1: could distribute the earnings more fairly and pay everyone a 67 00:03:55,880 --> 00:03:59,240 Speaker 1: fixed hourly wage. But this plan was not popular with 68 00:03:59,280 --> 00:04:02,720 Speaker 1: the public. Michael Lynn, a professor of consumer behavior at 69 00:04:02,720 --> 00:04:06,320 Speaker 1: the Cornell University School of Hotel Administration who researches tipping, 70 00:04:06,600 --> 00:04:10,200 Speaker 1: reported that online customer reviews of no tipping restaurants went 71 00:04:10,280 --> 00:04:13,720 Speaker 1: south when those no tipping policies were instituted, and we're 72 00:04:13,760 --> 00:04:17,280 Speaker 1: worse when tips were replaced with service charges. Lynn said, 73 00:04:17,640 --> 00:04:21,360 Speaker 1: people hate service charges, and if I increase my menu prices, 74 00:04:21,400 --> 00:04:23,599 Speaker 1: They're going to think I'm more expensive, even if the 75 00:04:23,640 --> 00:04:27,279 Speaker 1: combined bill is no different in other no tipping restaurants. 76 00:04:27,360 --> 00:04:30,320 Speaker 1: It was the waiters who revolted. At Bar Agricole in 77 00:04:30,360 --> 00:04:33,280 Speaker 1: San Francisco, servers were used to making twenty five dollars 78 00:04:33,279 --> 00:04:36,359 Speaker 1: to forty dollars an hour including tips, while the kitchen 79 00:04:36,400 --> 00:04:38,920 Speaker 1: staff was only making thirteen to twenty dollars an hour. 80 00:04:39,480 --> 00:04:42,679 Speaker 1: When owner Thad Woggler decided to ditch tipping, his cooks 81 00:04:42,680 --> 00:04:45,920 Speaker 1: and dishwashers were psyched, but the serving staff kept leaving 82 00:04:45,960 --> 00:04:49,640 Speaker 1: for more traditional restaurants, so Waggler, like lots of other 83 00:04:49,680 --> 00:04:54,200 Speaker 1: pioneering restaurant owners, switched back to the normal tipping scheme. Clifton, 84 00:04:54,279 --> 00:04:57,760 Speaker 1: our mathematician, feels that these restaurateurs were simply ahead of 85 00:04:57,800 --> 00:05:00,720 Speaker 1: their time. She said, when restaurant owners get rid of 86 00:05:00,800 --> 00:05:03,479 Speaker 1: tipping too early, as we've been seeing with some really 87 00:05:03,560 --> 00:05:06,719 Speaker 1: nice restaurants, they sometimes have to reinstate it because it's 88 00:05:06,720 --> 00:05:10,920 Speaker 1: not profitable that would conform with what customers want. Her 89 00:05:10,960 --> 00:05:14,000 Speaker 1: model indicates that casual restaurants should actually make the move 90 00:05:14,040 --> 00:05:16,479 Speaker 1: before fancy ones, because the point at which the tipping 91 00:05:16,520 --> 00:05:19,160 Speaker 1: rate becomes profitable would be lower for them than in 92 00:05:19,200 --> 00:05:23,680 Speaker 1: the high end places. However, Joe's Crabshack, a decidedly not 93 00:05:23,839 --> 00:05:27,599 Speaker 1: high end chain, tested the waters in late when eighteen 94 00:05:27,640 --> 00:05:31,640 Speaker 1: of its restaurants abandoned tipping. Although customers were essentially paying 95 00:05:31,640 --> 00:05:33,640 Speaker 1: the same exact total for a meal as they were 96 00:05:33,680 --> 00:05:36,800 Speaker 1: when tipping was allowed, said they didn't like the not 97 00:05:36,880 --> 00:05:40,679 Speaker 1: tipping policy. According to restaurant research, customers said they didn't 98 00:05:40,680 --> 00:05:43,039 Speaker 1: trust management to share the money, and they felt it 99 00:05:43,040 --> 00:05:46,360 Speaker 1: took away incentive for good service. Joe's dropped the not 100 00:05:46,440 --> 00:05:49,000 Speaker 1: tipping policy less than a year after it started after 101 00:05:49,080 --> 00:05:51,599 Speaker 1: losing eight to ten of its customers during the trial. 102 00:05:52,520 --> 00:05:56,039 Speaker 1: So Americans themselves haven't reached the tipping tipping point yet. 103 00:05:56,480 --> 00:05:59,640 Speaker 1: In the meantime, restaurants will likely keep experimenting with various 104 00:05:59,640 --> 00:06:02,880 Speaker 1: tipping policies until they find one that keeps customers, waiters, 105 00:06:02,960 --> 00:06:10,600 Speaker 1: and kitchen stuff all equally happy. Today's episode is based 106 00:06:10,600 --> 00:06:12,920 Speaker 1: on the article when will we reach the tipping point 107 00:06:13,040 --> 00:06:15,800 Speaker 1: for tipping? On how stuffworks dot Com written by Patrick 108 00:06:15,880 --> 00:06:18,479 Speaker 1: ja Kaiger. Brain Stuff is production of I Heart Radio 109 00:06:18,520 --> 00:06:20,560 Speaker 1: in partnership with how stuff Works dot Com, and it's 110 00:06:20,560 --> 00:06:23,799 Speaker 1: produced by Tyler Clay. Four more podcasts my heart Radio. 111 00:06:24,000 --> 00:06:26,719 Speaker 1: Visit the i Heart Radio app, Apple podcasts, or wherever 112 00:06:26,760 --> 00:06:28,160 Speaker 1: you listen to your favorite shows.