For service employees, tipping can be either a boon to your take-home pay or a detriment to your weekly paycheck. Many restaurant servers can earn a few hundred dollars a week in tips, while a car wash attendant may receive only a few bucks. It is even worse when the employer pockets a portion. Across the country, jurisdictions have tackled these issues with minimum wage laws, labor regulations, and other legislative measures. New York State recently eliminated the tip credit for all but hospitality workers, so what is going on in The Empire State?
A tip credit is the amount of a worker’s gratuity that the employer is legally allowed to take as an allowance against minimum wage requirements. Fair or unfair? You decide.
For New York employers who have tipped workers on staff, 2020 will be the final year non-restaurant businesses can pay staff below the minimum wage and receive a credit for tips. According to an order from the New York State Department of Labor (NYSDOL), companies listed under the Miscellaneous Industries and Occupations Wage Order will be mandated to pay all workers the full minimum wage.
This new measure will be applied to a whole host of jobs, including tipped positions in car washes, dog grooming outfits, nail salons, parking garages, and wedding planning. However, full-service restaurants can keep calm and carry on by continuing to count tips as a portion of servers’ wages.
NYSDOL regulators made the decision based on a series of public consultations to learn about wages and payment practices. The 11-page report had recommended the end to the tip credit, but only for occupations that fell within its miscellaneous classification, which included more than 70,000 workers.
Organizations representing restaurants and tipped workers called it “a huge win” for the entire industry across the state. Joshua Chaisson, a server from Maine who acts as vice president of Restaurant Workers of America, says a tip credit is “what we, the workers, actually want.” The New York Hospitality Alliance told members that the report’s summary “reinforces the fact that the hospitality industry … is fundamentally different than these other industries.”
“Tipping is Unamerican!”
In the classic 1936 motion picture The Petrified Forest, the filling station and barbecue restaurant owner (played by the underrated Porter Hall) has a sign in the background that reads, “TIPPING IS UNAMERICAN – KEEP YOUR CHANGE.”
Tipping was largely absent in the U.S. until the late 19th century, when historians say the practice was imported from Europe. By the 1930s, there had been growing opposition to the soon-to-be national custom. Many Americans feared that tipping would produce a supposed master-and-servant dynamic between the customer and server, a classist system that would ostensibly be befitting of August Strindberg’s Miss Julie. Opponents to the custom also asserted that recipients of tipping were associated with low-skilled labor.
The main objection, however, was that tips would diminish workers’ rights and fair wages. A handful of states created anti-tipping laws, including Iowa, South Carolina, and Tennessee but repealed them in the late 1920s. Major newspapers published anti-tipping op-eds, and adversaries to the practice formed an anti-tipping union, particularly traveling salesmen and labor unions. Despite the crusade against gratuity, the tip survived, and it has become an awkward routine at the end of every meal. But it is not as bad as you might think.
To Tip or Not to Tip
Tipping can act as an appropriate tool for various conditions in the free-market economy. The method can function as a signal to the employer and the employee.
The average person can indeed write down a customer’s order and then serve the food on the patron’s table. This remedial task would hardly command a higher wage. But it requires a little bit more to offer a pleasant dining experience, fulfill special requests, and solve customer-related problems. When servers accomplish this, they can mostly anticipate decent tips. The restaurateur wants to achieve two things: get food from the kitchen to the dining room and ensure customers are happy. The tip coordinates the two objectives.
Moreover, because of how busy a restaurant can be, the employer cannot follow waiters around and ensure they are going above and beyond. Since customers are experiencing the server’s abilities first-hand, they can better gauge their job performance and then tip accordingly. A good tip usually means employees are doing a great job. A bad tip informs the people they need to do better.
A tip can also act as insurance for the employer. Because it costs money to advertise, hire, and train workers, the restaurant can save money by taking on young and inexperienced staff. So, if the waiter quits after a day or the employer determines the person is unacceptable for the position, the risk is minimal since tips dominate the profession’s pay.
Tipping is the extra price to pay for dining out, but it is also an incredible market solution.
Many people who work outside the food-service industry may find it reprehensible that the restaurant owner takes a portion of the staff’s tips. For those employed in the industry, the tip credit may be a better alternative than the government artificially raising their minimum wage and reducing their take-home pay at the end of the week due to cuts in hours. As previous reports have highlighted, restaurant workers typically find that the most devastating words in the English language are, “Hi! I’m from the government, and I’m here to help.”
Read more from Andrew Moran.
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