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Normally, I love everything on the Priceonomics website – it is exceptional in delivering content well cited, researched, and thought provoking. Though I took major issue with a recent article entitled “A Tipless Restaurant is a Well-Run Restaurant.” I have had a great deal of experience with this subject, both as a front of the house employee as well as manager deciding the overall compensation structure for a midsize restaurant. Slate magazine has also published a piece on the subject that warrants discussion (Also got some Eater NY Coverage).

In mind, the question has deeper economic underlying considerations. Dr. Milton Friedman was a master at pointing out that the world runs on individuals working alone to pursue their common interests. I would be the first to point out that resaturant efficiency is directly tied to cooperation, yet when that cooperation becomes controlled, economic self interest is manipulated. Excellence is brought about by the the challenges of competition, not the complacence of uniformity.

No attention has been given to the point that dining out is approaching the same cost as buying and producing one’s own food. To remove tip based compensation would certainly affect this positive trend for the restaurant industry. The cost increase would immediately pass to the consumer, which psychologically would have a negative effect.

Ask anyone who has been to London and they will tell you how not great (generally) the service is there. After all, if your waiter is getting the same compensation no matter how attentive he/she is or uninterested, won’t average or below average be more frequent occurrence. The Slate piece does make some great points regarding the less than lucid legality of tips in general. Yet, as John Maynard Keynes points out, “The avoidance of taxes is the only intellectual pursuit that still carries any reward.”

Alex Mayyasi makes a few points that I would like to address individually.

1. Tips are unrelated to good service

First of all, the Slate piece as well as the Priceonomics piece cite dated studies; I would argue their irrelevance (http://www.jstor.org/discover/10.2307/2489426?uid=3739560&uid=2&uid=4&uid=3739256&sid=21102524455603 – the Feinberg study from 1986 ). Credit card behavior in the 1980s? People barely had credit cards then. While I might agree that people tip more on credit cards, I don’t think this disproves a service correlation. Even what might constitute a statistically insignificant correlation in a study can make a difference over the course of a year.

This study (http://tippingresearch.com/uploads/managing_tips.pdf) argues tips are only weakly correlated to service conducts studies in Hong Kong, Ithaca New York, and Houston Texas (places just overflowing with Michelin stars). As well, this study is based on some shaky experimentation, it ‘compared managers’ reports’ based upon server tips and found that among other activities, larger tips arose from when servers ‘draw a “Happy Face” on the backs of checks.’ Also – “authors did report finding that tips were higher at restaurants where servers do extra food preparation at the table and at restaurants where servers visit their tables very often than at restaurants where these things did not occur”

This study (http://www.ncbi.nlm.nih.gov/pubmed/12921413) based upon the magnitude of the charge being inversely related to compensation is accurate and relevant, but every hospitality professional I know is familar with the term, “auto grat”, the automatic gratuity on large parties. As well, the possibility of going above a common level of service for the reward of tipping on top of the gratuity is what motivates most large party waiters, bartenders, and sommeliers.

Basically, Good tips are not just good luck. Performance differences account for greater than 2% differences; 20-25% is what an excellent server can expect. High performing hospitality professionals seek out and advance to higher check average establishments, their compensation is tied to their knowledge, experience, and energy as well as performance,

2. It’s un-American

This is preposterous and barely relevant. Christianity is un-American, I don’t see people lining up to dismantle churches. (“Millions of innocent men, women and children, since the introduction of Christianity, have been burned, tortured, fined and imprisoned. What has been the effect of this coercion? To make one half the world fools and the other half hypocrites; to support roguery and error all over the earth… – Thomas Jefferson, Notes on the State of Virginia 1787). 

Slavery is also American. Just ask Solomon Northup or Fredrick Douglass about that (12 years as a slave.. also! highly recommend the recent documentary on James Baldwin from PBS http://www.pbs.org/wnet/americanmasters/episodes/james-baldwin/bibliography/2651/)

Service in Europe vs Service in America aren’t the same thing at all. The American ideal of service evolved under the aegis of Capitalism and Freedom. (Most) American’s have had the freedom to choose since their birth, and thus service has evolved as a differentiator in the marketplace. As an actor in a capitalist system, it has perscribed value ( service is the Alpha that investment managers are judged by). Service is how two cheesesteak places in Philadelphia can stay in business for decades, right across the street from each other. This doesn’t happen in Europe, or Canada for that matter.

3. Economists don’t get it

Which economists? Paul Krugman? Keynes? I give you Dr. Friedman again. http://www.youtube.com/watch?v=g-o0kD9f6wo

4. It’s borderline racist

Servers are better compensated because they have a different skill set and education than dishwashers and cooks. Just like lawyers are better compensated than clerks, and Doctors better compensated than administrative assistants. Why the difference in the hospitality industry? That’s not racism, it’s capitalism. The solution is not to artificially level the playing field so we feel better about the natural market forces, that would be socialism. Yes, you want to see a good looking host/hostess and yes, you want your server to speak perfect English or Spanish. That’s human nature making itself known through subconscious bias, not racism.

5. We don’t tip doctors

Yeah, but we should be! Maybe that might positively affect the standard of care. No we don’t, because they charge whatever the @$# they want. The NY Times recently reported on a study featuring data from 3,300 hospitals showing hows “wide variations not only regionally but among hospitals in the same area or city.” Why would a doctor need a tip when they charge and arm and a leg more often than they fix them?

And lastly, I’ve been a couple restaurants in San Diego.. I wasn’t impressed with the service so i’m sure a non tipped experiment down there is going to be successful. I doubt you’ll catch Danny Meyer, Daniel Boulud, or Eric Ripert changing that around anytime soon. My guess is that there would be a FOH revolt.

Removing tip based compensation in restaurants places them on a path to mediocrity of service, something that so many other industries in this country have already reached. I think tipping should be vastly expanded, we should be tipping in all kinds of professions – plumbers, politicians, doctors, lawyers, etc. Ironic how it is all but certain those professions would be uniform in their dislike of the introduction of tipping.

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