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3 reasons why we should never ban tipping

Rick Newman
The Exchange

The gratuity gets no respect.

Tipping is a staple of the hospitality industry and other parts of the economy, generating $40 billion in annual income for people who can really use the money. Yet tipping has become tedious. Passe. Abusive, even. With pressure mounting to raise the minimum wage and improve the plight of low-income workers, some crusaders want to ban tipping and raise prices so that people who depend on tips can earn more predictable incomes instead.

Kevin Reddy, CEO of fast-casual chain Noodles & Co., explained recently that his restaurants don’t allow tipping because “we don't really feel that folks should have to pay something additional. We don't want our guests to feel we're trying to upsell them."

Some local outlets have banned tipping in favor of other arrangements. Restaurateur Jay Porter ran the San Diego bistro Linkery for six years with no tipping allowed, substituting an 18% service charge on every check, with proceeds split among the entire restaurant staff. A new Washington, D.C. brewpub, The Public Option, will pay everybody at least $15 per hour while banning tips. 

Food writer Elizabeth Gunnison Dunn wrote recently in the Guardian that tipping is "irrational from an economic perspective" because it's an optional payment everybody is expected to make.

That may be somewhat true, from the narrow perspective of the diner; but tips also allow the customer to pay wait staff directly without the added cost of tip-less labor pushing up food and drink prices. From the perspective of the establishment and the workers themselves, that's a good thing. Here are three reasons we should never ban tipping:

It creates an incentive to be entrepreneurial. Anybody who’s ever worked as a waiter or bartender knows you can boost your income at least two ways: by earning bigger tips (whatever it takes to do that), and by turning over your customers faster through speedy service, which means you’ll get more customers and therefore more tips. Sure, there are flaws in this system. Tip-starved waiters, for instance, might rush customers and degrade their dining experience (which, incidentally, would degrade their tips, too). And on busy days some waiters could take more tables than they’re able to handle, impacting service for everybody.

But offering hourly pay in lieu of tips takes the hustle out of the job, since you’ll get paid the same whether you serve one customer or 50, and whether your service is great or terrible. There’s nothing wrong with punching a clock, but it does replace the incentive to maximize your income with the mere duty to show up and make it through your shift. Any work that generates an entrepreneurial vibe is important in our economy, especially since it can instill a hunger for making money that many people will never learn in school or at home.

Tips can add up to pretty good pay. When I worked as a waiter during college and after, I could easily earn 4 or 5 times the minimum wage on an hourly basis. Based on today’s minimum wage of $7.25, that would equate to $30 an hour or so on a routine lunch or dinner shift at the casual restaurants where I took orders. Suddenly $15 an hour doesn’t seem so enticing. Plus, people earning cash income have enviable flexibility in terms of the earnings they report to the IRS, although none of them, I'm sure, would do anything illegal. When I was a young adult, I worked at restaurants rather than other jobs with hourly pay because that’s where the money was. Why mess with that?

Tipping gives customers more control. Anti-tippers complain about the social pressure tipping causes, as if some poor waitress's college education and entire future rides on whether a few customers here or there leave her 25% rather than 15%. It doesn't. And my bet is the same hard-to-please anti-tippers would kvetch about the shoddy service they'd get if minimum-wage staffers replaced tip-hungry servers. Jay Porter, the California restaurateur, generated a lot of feedback when he wrote in favor of tipless restaurants last year, claiming, among other things, that “the quality of our service improved” after tipping went away. A local critic disagreed, pointing out that Porter’s restaurant failed and closed in 2013, partly because of “quirky, poorly trained service staff [who] waited tables in an off-the-cuff style that appealed to few patrons.”

Think about it: If a waiter’s pay isn’t related to the quality or speed of the service provided, what incentive is there to excel? Just wanting to keep your job? The professionalism that comes with wearing the apron? I’d rather trust the financial incentive, which is far more powerful.

Meanwhile, there’s really no reason for age-old gripes such as not knowing how much to tip or the difficulty of computing the proper amount. Tipping 15% to 20% for decent service is a no-brainer, and whether to make a statement with a bigger or smaller tip is up to you. And if you still don’t have a tipping app on your smartphone—or even a calculator, for that matter—just ask your waiter to do the math for you: Living on tips has made him better at math than most people will ever be.

Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.