Why you should (still) tip generously: a response to Michael O’Hare

Over at The Same Facts, Michael O’Hare posted a response to my earlier post about restaurant employees. Michael takes issue with my suggestion to tip generously. Here’s his rationale:

[T]o think you can do people any good in the medium to long run by generally tipping more, you have to believe the labor market in this industry doesn’t work at all. It is hard to see the wheels turn because it’s not only wages but also menu prices that adjust together when the rules change. But suppose tipping were ended, either everywhere or in a single restaurant: employers would have to offer more salary to get people to work for them, and raise menu prices, to a first approximation, by 15% or whatever the typical tip is. Not much change in anyone’s income or costs, but everything would be in the open, and the wages would be reported and taxable (maybe still higher prices, if tipping is shielding a lot of the labor cost from tax, and a good thing), and it would be much harder for employers to rip off the help. Customers take Kathy’s advice and just tip more, conversely, nearly all will be competed away from the workers as employers (and customers) pay lower wages and customers pay less for their meals.

Yes, I agree that if tipping were suddenly banned, the likely result is that markets would adjust to some extent, via increases in restaurant wages and prices. Unlike Michael, though, I’m not so sanguine that labor market in the restaurant industry works well enough that workers would entirely make up in wages what they would lose in tips. In case you haven’t noticed, the magic of the market really is not working so well for most wage earners. Productivity continues to soar but nearly everyone’s wages are stagnating or declining, and low-wage earners like restaurant employees are doing worst of all. This economy is a catastrophe and workers, especially those at the lower end of wage spectrum, have precious little bargaining power.

If tips were banned, I have every expectation that employers would opportunistically enact the equivalent of wage cuts, by refusing to make up in wages what workers would lose in tips. After all, what would stop them? The all-powerful labor unions? The many strict, scrupulously enforced labor laws that workers in this country enjoy?

More to the point is Michael’s clearly stated prior, “suppose tipping were ended.” This analysis bears the classic hallmarks of “assume a can opener” economics. Restaurant tipping in this country is a deeply held socio–economic norm that shows no signs of going away, and Michael doesn’t have any plausible suggestions as to how to get of rid of it. Even if you buy into the (dubious) “the market will work its magic” story about wages being adequately increased in lieu of tips, wages won’t adjust until a critical mass of people stop tipping. You can’t individually decide you’re going to be the one who unleashes the magic of the market and ushers in the brave new world of no tipping (eventually leading to the nirvana of higher wages). By failing to tip, you’re not some visionary. You’re just one more jerk who stiffed some poor waitress out of her livelihood.

I’ve met Michael, and he is in fact a very nice man who I’m sure would never dream of doing such a thing. But it’s clear from his post that he hates tipping. I feel his pain; I, too, loathe the practice. I’m always immensely relieved when I travel to a foreign country that dispenses with tipping; it’s so much more relaxing.

I think that many Americans, and especially many liberals, are uncomfortable with tipping, because it forces them to confront their own privilege, if only briefly and transactionally. For that one meal, you are the boss, and you have the power to decide how much to pay your “employee” — or even whether you will pay her at all. The practice is a creepy feudal holdover, and I despise it. I don’t enjoy being lady of the freaking manor, having an economically dependent person dancing attendance on me all night. And hey, isn’t feudalism what our ancestors were trying to escape?

But unless you’re in a restaurant or a country where tipping is not practiced, tipping generously is the ethical thing to do. Restaurant employees are among the many screwed-over classes of workers in our economy who are not seeing their fare share of productivity gains reflected in their wages. Generous tips are one way you can help make up for that injustice. If your inner cheapskate rebels, think of it this way: these days, dining out tends to be significantly cheaper than in the past, because relative food prices are low. If you tip well, you’re still getting a pretty good bargain, relatively speaking.

Finally, one last follow-up to that restaurant post: as I should have mentioned in the first post, there a variety of policy solutions that could greatly improve the lot of restaurant workers. Union status would significantly improve wages, benefits, and working conditions, and I strongly support efforts that strengthen workers’ rights to organize, such as the Employee Free Choice Act and (perhaps more promising) making the right to organize a civil right. I also support increasing the minimum wage, instituting a living wage, and ditching the ridiculously low federal minimum wage for employees who earn tips (which is a pathetic $2.13 an hour). Mandatory paid sick leave, paid vacation, and paid parental leave would also be excellent policy interventions. And since wage theft is such a notorious problem in this sector, toughening up the wage theft laws that exist and vigorously prosecuting employers who violate them is vital. All of the policies I’ve just identified would be a boon not just for restaurant employees, but for many other low-wage workers as well.

Kathleen Geier

Kathleen Geier is a writer and public policy researcher who lives in Chicago. She blogs at Inequality Matters. Find her on Twitter: @Kathy_Gee