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Abolish Tipping to Eliminate the $2.13 Minimum Wage

Daily Ticker

’Tis the season for holiday cheer, which may involve dining out, drinking out, and travel – activities that can involve tipping. But before you open your wallet, consider what business editor at The Atlantic Derek Thompson argues in the accompanying video: Tipping is a disgrace!

“The problem with tipping is that a lot of states only pay people who are servers $2 an hour, expecting the rest of their minimum wage essentially to be made up with our generosity,” contends Thompson.

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So while the idea is that tips makes people who receive them richer, Thompson argues that it actually makes them poorer.

While the federal minimum wage is $7.25, there is an exception for people who work for tips – called the “tipped minimum wage” – of $2.13 an hour. About half of all states, according to the Huffington Post, allow restaurants to pay workers this wage, as long as they make up the difference if the server doesn’t reach the federal minimum wage after tips. Regardless, in these cases, tips are the workers wages. Patrons are essentially subsidizing the payrolls of restaurants.

Thompson also says that while we tip because we think it makes people better at their jobs, research (like this study from Cornell University) finds that people base their tips out of habit, not performance.

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The solution? Thompson argues we should “ban the practice of tipping and instead pay these workers a living wage, and bake it into what people expect to pay in the final check.”

Some restaurants have done this. The Linkery in San Diego added an automatic gratuity to all checks. High-end Japanese restaurant Sushi Yasada in New York banned tipping and raised prices to cover salaries.

One thing Thompson says not to do? Don’t be an activist with your wallet. This is not an excuse to be a Grinch and stop tipping. Check out the video for more on what Thompson sees as the solution.

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