Speaker 1: Welcome to brain Stuff production of I Heart Radio. Hey
Speaker 1: brain Stuff. I'm Lauren Vogelbam, and this right here is
Speaker 1: another classic episode. One of the many conversations that's been
Speaker 1: going on during the COVID nineteen pandemic concerns how we
Speaker 1: pay our service industry workforce, especially with low wage fast
Speaker 1: food restaurants struggling to fill positions. It's increasingly clear that
Speaker 1: the industry needs to change as we move forward. Part
Speaker 1: of that conversation revolves around tipping and the federal tipped
Speaker 1: minimum wage. Today's episode digs into how it works and
Speaker 1: how it doesn't work. Hey brain Stuff, Lauren vogelbom here,
Speaker 1: Why do restaurants use tipping? Is it a reward for
Speaker 1: good service? Studies show that tips don't go up or
Speaker 1: down significantly based on the quality of service. Does tipping
Speaker 1: attract and retain better wait staff? Not really? Is it
Speaker 1: a bribe so the waiter won't spit in your soup
Speaker 1: the next time you come? Probably depends on the waiter.
Speaker 1: In most countries, a service charge is included in the bill. However,
Speaker 1: in America, instead of an upfront service charge, diner's hand
Speaker 1: over fifteen or more of the price of the meal
Speaker 1: to the server at their own discretion. It's not required,
Speaker 1: but it is customary. But this seemingly generous practice has
Speaker 1: some unpleasant hidden costs for starters. The existence of tipping
Speaker 1: allows restaurants to pay servers a federal minimum wage of
Speaker 1: two dollars and thirteen cents an hour, so waiters in
Speaker 1: most states basically live and die by tips. The result
Speaker 1: is that tipped workers are twice as likely to live
Speaker 1: in poverty and depend on food stamps as other workers.
Speaker 1: Then there's the opposite problem in stronger restaurant markets like
Speaker 1: big cities. The existence of tipping means that waiters in
Speaker 1: busy restaurants end up making a lot more money than
Speaker 1: the cooks and dishwashers who get paid a fixed hourly
Speaker 1: wage while working just as hard. Add to all that mess,
Speaker 1: the fact that America's tipping system is rooted in racist
Speaker 1: hiring practices emerged after the emancipation, when white business owners
Speaker 1: were trying to avoid paying new black employees, and tipping
Speaker 1: comes out looking decidedly ugly. So when does it make
Speaker 1: sense to abandon tipping in favor of raising restaurant prices
Speaker 1: so that all staff is paid fairly or would customers
Speaker 1: bulk get that. Sarah Clifton is a mathematics professor at
Speaker 1: the University of Illinois who specializes in modeling complex social behaviors.
Speaker 1: In a recent paper, she created mathematical models of two
Speaker 1: hypothetical competing restaurants, one with conventional tipping and one without.
Speaker 1: The paper was published in the February issue of Chaos,
Speaker 1: a journal from the American Institute of Physics. The key
Speaker 1: variable in Clifton's models is the average tipping rate. Tipping
Speaker 1: rates have been creeping up of the past few decades,
Speaker 1: from ten percent to fifteen percent and now close to
Speaker 1: in major US restaurant markets. Clifton's models are designed to
Speaker 1: be as simple as possible, with every player in the
Speaker 1: system motivated purely by monetary gain, meaning that when cooks
Speaker 1: are paid better, they're more likely to stay, meaning that
Speaker 1: food quality goes up. When waiters are paid less, they're
Speaker 1: more likely to leave decreasing service quality, but eventually the
Speaker 1: waiters would return if diners flooded the restaurant because of
Speaker 1: the food quality, which would presumably mean more profit and
Speaker 1: higher wages for all. What Clifton found was that when
Speaker 1: the average tipping rate crosses a certain threshold, call it
Speaker 1: the tipping tipping point, restaurants will make more money by
Speaker 1: abandoning tipping. Unfortunately, Clifton doesn't have enough real world data
Speaker 1: to calculate exactly what that magic tipping point is. Dozens
Speaker 1: of high end restaurants across the United States, led by
Speaker 1: New York chef and restaurant toward Danny Mayer, began experimenting
Speaker 1: with no tipping policies. These trend setting restaurants either increased
Speaker 1: menu prices by an average of twelve fifteen percent or
Speaker 1: included gratuity in the final bill. That way, the restaurants
Speaker 1: could distribute the earnings more fairly and pay everyone a
Speaker 1: fixed hourly wage. But this plan was not popular with
Speaker 1: the public. Michael Lynn, a professor of consumer behavior at
Speaker 1: the Cornell University School of Hotel Administration who researches tipping,
Speaker 1: reported that online customer reviews of no tipping restaurants went
Speaker 1: south when those no tipping policies were instituted, and we're
Speaker 1: worse when tips were replaced with service charges. Lynn said,
Speaker 1: people hate service charges, and if I increase my menu prices,
Speaker 1: They're going to think I'm more expensive, even if the
Speaker 1: combined bill is no different in other no tipping restaurants.
Speaker 1: It was the waiters who revolted. At Bar Agricole in
Speaker 1: San Francisco, servers were used to making twenty five dollars
Speaker 1: to forty dollars an hour including tips, while the kitchen
Speaker 1: staff was only making thirteen to twenty dollars an hour.
Speaker 1: When owner Thad Woggler decided to ditch tipping, his cooks
Speaker 1: and dishwashers were psyched, but the serving staff kept leaving
Speaker 1: for more traditional restaurants, so Waggler, like lots of other
Speaker 1: pioneering restaurant owners, switched back to the normal tipping scheme. Clifton,
Speaker 1: our mathematician, feels that these restaurateurs were simply ahead of
Speaker 1: their time. She said, when restaurant owners get rid of
Speaker 1: tipping too early, as we've been seeing with some really
Speaker 1: nice restaurants, they sometimes have to reinstate it because it's
Speaker 1: not profitable that would conform with what customers want. Her
Speaker 1: model indicates that casual restaurants should actually make the move
Speaker 1: before fancy ones, because the point at which the tipping
Speaker 1: rate becomes profitable would be lower for them than in
Speaker 1: the high end places. However, Joe's Crabshack, a decidedly not
Speaker 1: high end chain, tested the waters in late when eighteen
Speaker 1: of its restaurants abandoned tipping. Although customers were essentially paying
Speaker 1: the same exact total for a meal as they were
Speaker 1: when tipping was allowed, said they didn't like the not
Speaker 1: tipping policy. According to restaurant research, customers said they didn't
Speaker 1: trust management to share the money, and they felt it
Speaker 1: took away incentive for good service. Joe's dropped the not
Speaker 1: tipping policy less than a year after it started after
Speaker 1: losing eight to ten of its customers during the trial.
Speaker 1: So Americans themselves haven't reached the tipping tipping point yet.
Speaker 1: In the meantime, restaurants will likely keep experimenting with various
Speaker 1: tipping policies until they find one that keeps customers, waiters,
Speaker 1: and kitchen stuff all equally happy. Today's episode is based
Speaker 1: on the article when will we reach the tipping point
Speaker 1: for tipping? On how stuffworks dot Com written by Patrick
Speaker 1: ja Kaiger. Brain Stuff is production of I Heart Radio
Speaker 1: in partnership with how stuff Works dot Com, and it's
Speaker 1: produced by Tyler Clay. Four more podcasts my heart Radio.
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