In 2016, when the Danish restaurateur Claus Meyer opened his new-Nordic
restaurant Agern inside New York City’s Grand Central Terminal, he
decided that, in adherence to Danish tradition, the restaurant would not
accept gratuities. Instead, Meyer set Agern’s prices high enough to be
able to pay employees a living wage and provide them with benefits such as
health insurance, matching 401(k)s, and paid parental leave—practices
that are all but unheard of in the restaurant industry. Earlier this
month, though, Meyer announced that Agern would abandon that so-called
hospitality-included model in favor of a traditional tipping system,
and that menu prices would decrease accordingly. In an e-mail, he told
me that he felt that the policy had alienated certain diners and driven away
needed business. “The wellbeing of our staff remains crucial to our
corporate mission,” Meyer wrote, emphasizing that the restaurant’s
progressive employee benefits would remain in place.
Meyer is not the first restaurant owner who has tried, and failed, to
challenge the American tipping custom. Over the past five years, dozens
of restaurants have experimented with alternatives, including the
popular Seattle restaurants Dahlia Lounge and the Walrus and the
Carpenter; Bar Agricole, in San Francisco; and all eleven New York
restaurants in Danny Meyer’s Union Square Hospitality Group. (A Reddit
thread on the subject
lists more than two hundred establishments in North America that do not
currently accept tips.) In the past two years, though, many have quietly
returned to accepting gratuities. The casual-dining chain Joe’s Crab
Shack tried eliminating tipping at eighteen of its locations in 2015,
only to restore the practice at fourteen of them half a year later. Bar
Agricole has reinstated tipping, as have Le Pigeon and Little Bird, in
Portland, Oregon. In New York, David Chang opened Momofuku Nishi as a
gratuity-free establishment, in January, 2016, but by the time summer
came around he had decided to accept tips. Tom Colicchio also
experimented with a gratuity-included model during lunch services at
Craft, but he gave it up after a year. Some restaurant owners have
cited trouble attracting and retaining front-of-house staff as the
reason for their change of course, but the most common explanation has
been the same as Claus Meyer’s: losing tips meant losing business.
Before 2013, only a few of America’s roughly three hundred thousand
full-service
restaurants included gratuity in the price of a meal, almost all of them very
high-end establishments, such as the French Laundry, in Yountville,
California, and Alinea, in Chicago. Tipping seemed like a natural, and
inevitable, system for compensating service employees, and for Americans
travelling abroad its absence was a source of creeping discomfort. (“So
are we really going to leave . . . nothing?”) But, as some of the
restaurateurs who’ve eliminated the practice have pointed out, there is
reason to question both tipping’s economic efficiency and its
contribution to social welfare. Research conducted by Michael Lynn, at
Cornell University, who is the foremost academic authority on tipping,
has shown that people of color receive lower
tips than their white colleagues, which arguably qualifies tipping as a
discriminatory pay practice. The system perpetuates sexual misconduct,
because service workers feel compelled to tolerate inappropriate
behavior from customers who hold financial power over them. As restaurant prices
have risen, gratuities—which are
tied to sales, as a percentage—have too, so that there is now a
substantial and hard-to-defend disparity between the pay of the kitchen
workers who prepare food and the servers who deliver it. It is perhaps
telling that countries in which tipping is a social norm also tend to
experience higher levels of
corruption;
what’s the real distinction, after all, between a tip and a bribe?
On top of all that, better service does not seem to beget higher
gratuity, which is theoretically the system’s whole point. A statistical
model created by Ofer
Azar, at the Ben-Gurion University of the Negev, found only a small
correlation between tip size and service quality, leading him to
conclude that servers were motivated mainly by other factors (such as
opportunities for professional advancement or—wild idea—simply the
satisfaction of doing a good job). Another study by Lynn
showed that perceived service quality affected tip size by less than two
percentage points. A female server, by contrast, can expect to hike her
tips by an average of seventeen per cent if she wears a flower in her
hair.
Restaurants that decide to eliminate tipping typically raise menu prices
in order to cover the cost of paying their staff members a substantially higher
base wage, or else they add an automatic service charge for the same
purpose. In either case, the increase is usually less than twenty per
cent—Joe’s Crab Shack hiked prices by just twelve to fifteen per
cent—so that customers will end up paying around the same price for a
meal that they would under a tipping system. Restaurant owners can use
this new pool of revenue to provide their employees with benefits, such
as health-care coverage, retirement plans, and paid family leave, in
addition to boosting pay for kitchen workers. This means that servers
often receive new employment benefits as a result of the transition but
that their cash earnings may shrink. One can understand why some decide
to leave. The backlash from restaurant patrons is somewhat more
surprising. The cost of their meal should be about the same, with fewer
steps in the payment process and no post-prandial math. So why shouldno-tipping establishments lose business?
New research by Lynn shows that when restaurants move to a no-tipping policy, their
online customer ratings fall. One factor that explains that
dissatisfaction is how we, as consumers, respond to “partitioned” prices
versus “bundled” prices. A partitioned price divides the total cost of
an item into smaller components—say, a television listed for a hundred
and ninety dollars that has a ten-dollar shipping fee. A bundled price
would list the television, shipping included, for two hundred dollars.
Consumers tend to perceive partitioned prices as cheaper than bundled
ones. Lynn says that a customer who routinely tips fifteen per cent will
see a gratuity-included restaurant as more expensive than a traditional
restaurant with menu prices fifteen per cent lower. “In fact, a customer
who routinely tips twenty per cent”—making her total bill higher than
the gratuity-included alternative—“will still view the no-tipping
restaurant as more expensive,” Lynn told me.
Lynn found that online customer ratings fell even more dramatically when
restaurants instituted a mandatory service charge. People don’t like
price hikes, he said, but they accept the logic of a restaurant taking
on responsibility for its employees’ full wages and pricing its goods
accordingly. They hate service charges. The underlying issue is that,
while it is strongly encouraged by social norms, tipping is still
notionally optional; being automatically billed for it feels like a
“gotcha” moment. Lynn’s research also shows that customers expect
inferior service from no-tipping establishments—which biases their
views of the service they receive.
In Lynn’s study of online customer ratings, mid-scale restaurants
suffered more after instituting no-tipping policies than upscale ones,
where, he hypothesizes, customers are less price-sensitive. This
suggests that, for the time being, success with tip-free programs may be
restricted to the very high end. But that won’t necessarily stop other
restaurants from trying. Despite the ethical virtues associated with
going tipless, restaurant owners’ primary motivation to do so is likely
financial. Minimum wage is rising across the country. If the tipping
system remains, restaurants will have no choice but to raise menu prices
in order to pay their staff. Servers will then double-dip, so to speak:
they will benefit from a higher base wage while their tips also increase as menu prices climb. In
other words, the best way for restaurants to keep prices low is to
eliminate tipping. The biggest thing holding them back is customers’
suspicion that doing so is a ripoff.
Sourse: newyorker.com
