Image: © Nan Palmero via Wikimedia Commons

Would banning tips improve hospitality work?

Some American hospitality companies are experimenting with banning tipping and raising staff wages instead.

Minimum wages are supposed to ensure that everybody who works earns enough to live. For as long as they’ve been around, people have disagreed over how high the minimum wage should be (and even whether there should be one).

But you’d probably struggle to find anyone who thinks someone in the USA could live on £1.65 an hour, which is the US government’s minimum wage for some workers. For comparison, the UK’s hourly minimum wage for over-25-year-olds is £8.21.

The reason this minimum wage is so low is that the government expects the workers being paid it - usually hospitality staff - to also receive tips from their customers. Indeed, they expect customers to tip enough to put the employee’s average hourly wage up to at least £5.63. (If they don’t, the employer has to cover the difference.) That’s why when you go out to eat and drink in the States you’re heavily encouraged to tip, and tip well.

Paying people in this way, however, throws up a host of problems. Wages can vary wildly each month, and the unpredictability makes it hard for workers to budget. Staff feel like they have no choice but to appease badly behaved and abusive customers, and customers feel guilted into tipping even if the service they received was poor.

Perhaps most worryingly, the tipping system creates big wage inequalities. Implicit or explicit prejudice means customer-facing staff often receive different amounts of tips than their colleagues of different races, genders, nationalities or sexualities. And workers who don’t deal with customers get zero tips directly, and subsequently often end up making much less money.

Because of these problems, some businesses are trying out banning tips. Instead, they uniformly up all staff wages and pay for the raise by increasing the prices they charge customers. But this system causes problems of its own. Restaurants who tried it said their diner numbers went down, as people were put off by the higher food prices. And wait staff who had previously got the most tips hated the change - and often quit - because while many of their back-of-house colleagues were getting paid more, their own salary decreased.

Read our explainer on: minimum wages.

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Reader Comments

  • WhereAreTheVikings

    What a terrible, terrible shame. Western Civilization nurtured capitalism, and now capitalism is destroying it. And these young people seem to welcome the invasion of their homeland. The media and schools have been very efficient in wiping out all traces of blood and soil.

    • prollawalllynotahumanoid

      Capitalism isn’t the problem. It’s corrupt politicians taking bribes and kickbacks from Globalists and the Chinese.

      • WhereAreTheVikings

        Maybe I should have said crony capitalism. Although Italians importing Chinese to make “Italian leather” shoes is not crony capitalism. It is capitalism, pure and simple.

        • prollawalllynotahumanoid

          That would be crony capitalism and globalism combined. They aren’t concerned with the affect their policies have upon their citizens, the health and welfare of their society and culture or their economy. What it isn’t is fair-free trade to further national interests.

          • WhereAreTheVikings

            I’ve always seen them as one and the same, but perhaps they need to be named individually, just to bring home the point.

      • WhereAreTheVikings

        But now that travel is so easy and borders are virtually down through H1bs and the like, theoretically you can’t blame capitalists for the pursuit of cheaper labor, although I do heartily blame them not being more patriotic than that. Perhaps the emerging nationalism will force them to voluntarily do what they should have morally been doing all along, and that is employing business practices that preserve their countries and nationalities. The government should be doing everything it can to encourage that, to the extent that small government should do anything but guard the borders and strictly, drastically, limit immigration.

      • Henry Lam

        It is China with its corrupted mindset affecting the world.

        • prollawalllynotahumanoid

          No it is not. Capitalism is the fairest and least corrupt system of all.

          Socialism and communism is based on authoritarianism, coercion and police intimidation. It has and always will be rife with criminality, bribes and kickbacks.

          Corruption can be anywhere but it is the very basis of socialism and communism.

    • Henry Lam

      The government is too weak. They do not understand the mindset of communists and how they educate their people. Those communist people are only loyal to their country and could be dangerous. The immigration law should only accept those who accepted multiculturalism and taught from a democratic education system. This virus events clearly has shown how stupid to take China as a friend.

      • WhereAreTheVikings

        The government is not too weak. Just weak-minded about some things.

  • Gabi Rodrigues

    For how many days can a country maximum close their borders to foreigners maximum? Like now, with the virus, everyone is using 30 days. Can it be more?