People tend not to realize how much a lot of waiters make and tipping has spread culturally rather than shrank as the tipped minimum wages have gone up.
The solution is just for prices to go up, tips to go away and restaurants to just operate like a normal business. It is hard for restaurants to raise prices when people are adding an extra 20% onto their own bill and the tipping culture is still very strong so it's hard to convince people that it is okay not to tip because you pay your waiters enough.
1. Force all restaurants to display menu items with all fees and taxes accounted for, including an expected 15% tip. People could add or remove tips at the end if needed.
2. Wait a while for people to get used to paying just for what they see in the menu.
Tell me more, why wouldn't it work? At least for steps 1 and 2 I think it would and functionally it'd be like tipping doesn't exist any more. Step 3 I agree is fuzzier.
If you say “people can add or remove tips at the end”, and 15% is built in, then everyone who has mentally adjusted to 20% will be adding 5%. And then the same sort of arms race dynamic of wanting to seem slightly more generous will get people to start this number creeping up too.
You need to do something to make it clear that you’re not supposed to add or subtract anything at the end (even if you technically can), so that the culture goes away.
I don't think that's how it would work. There's a natural limit for how much people are willing to pay on a meal - that's the entire point of this article. A tipping arms race on top of a 15% tip wouldn't make much sense.
How I see this playing out is that people would go "oh tip is already included - great" and go no further. If they're the generous type they might add a couple of dollars (say $5 on a $100 bill to make it an even 20%). But the social pressure to tip would be gone because it's already included.
You also can't ban tipping because it would be unpopular and there's no practical way to stop people from leaving extra cash on the table.
By contrast this approach is basically just showing patrons what they will actually pay when they order something, which I think would be popular.
The way it would work is that would mentally view what's supposed to be the after-tip price as a pre-tip price, and if they aren't willing to pay what they believe to be the total price, they will avoid eating there altogether, rather than being seen by their friends as a cheapskate.
I will always leave tips and encourage others to do so. And I will strongly oppose any attempt to force me not to leave tips. Stop trying to use government power to stop something I like doing.
This isn’t even a coercive proposal, it’s an attempt to use social coordination to resolve a problem that is hard to solve individually — surely you would agree that tipping is a socialized phenomenon (comparative evidence for this both cross-industry in the US and across countries even in the Anglosphere show that it’s idiosyncratic to here) so it seems odd to object to using government to non-coercively solve a social coordination mechanism - that’s a great job for government!
It appears that having been socialized into tipping you now have a preference for maintaining it. I submit that this is, contra your comment elsewhere in this thread, extremely idiosyncratic, and would take the opposite side of that bet—viz., that majoritarian preference is against paying extra money not explicitly accounted for in price for little if any marginal benefit.
Of course it's coercion. "Using social coordination" is your term for trying to use public policy to force changes in behavior that you don't like.
Look, it's not that all authoritarianism is always bad, but if you want to be an authoritarian, own it, and I hope the public resists any scheme you try to enact because the public has every right to tip their waiters whether you like it or not.
The social pressure to tip despite the fact that it fails the most cursory examination of financial self-interest is the authoritarian equilibrium that people are trying to escape here.
So what? I tip who I want to tip, and I don't want busybody liberals who don't like this to try and change my behavior or all the rest of us who want to do this.
Because of your highly virtuous attitude toward tipping, I have decided to not tip anymore, confident that your generosity will cause everything to average out. 😁
Where in my proposal am I forcing you to do anything? All I'm asking for is restaurants to display full prices at the point of purchase. No different than asking ticketmaster to do the same with concert tickets.
90% of the hate tips receive is because people perceive them as a hidden fee.
I didn't say that. I said that 90% of the criticism of tips revolves around it feeling like an extra fee (ex "do you also pay your X extra?"). The people that dislike tips (myself included) see it as an obligation, not a reward, and if you disagree just try leaving no tips in the US.
And if you like it then I have no problem with that. You will always be able to continue to leave extra cash on the table after service was completed, it's hard to see how anyone could stop you.
That’s exactly why we need to ban tipping, because without a ban we can’t get to transparent and meaningful prices, where staff know what they are getting paid and customers know what they are paying.
I think the disconnect here is that you are viewing tipping as something you get to do, whereas everyone else is viewing is as asinine behavior that they would strongly prefer *not* to do, and would never introduce ex nihilo, but that social conformance and the desire not to be perceived as a defector have made obligatory but still odious. The desire to break out of the bad social equilibrium and get rid of opprobrium for not tipping (being perceived as "jerk" as you elsewhere state) is the libertarian (rather than authoritarian) impulse trying to be exercised here. "Spending money for no reason on things that provide little value" is not something that customers do because it bring them joy, it's because they would feel guilty otherwise even though they consider the practice itself stupid. It fails the most basic tests of individual economic rationality in a way that is self-evident.
That's stupid though. You can... just not tip. Believe it or not, you'll get dirty looks and perhaps bad service, but you'll survive.
So your position is ANTI-libertarian-- you are trying to both silence the people who call you a jerk for not wanting to tip, AND discourage those of us who do the ethical thing and leave tips from tipping.
You are the first person I've ever heard of who like tipping. I'm sure I know people who are fine with it and they don't say anything, but actual proponents of it are…maybe just you.
Also, there's nothing coercive about the proposal. Do you want prices on anything else obscured and variable?
I like tipping too. For me it's the easiest, least invasive, most effective way to say: "I appreciate you and what you are doing for me" and "I see you as a person in this moment, not as an employee / business".
Ideally, that would work. But, I also think that tipping is so ingrained culturally at this point that people would feel pressured to leave a 15% tip on top of what's supposed to be transparent menu pricing that already includes the tip, with the end result being that "transparent" menu pricing isn't actually transparent anymore.
I don't think so. People wouldn't want to pay 30% + tax on an already expensive meal - there's only so much people can be bullied into paying. But I think this calls for someone to try it and see how it goes.
Fair point on the unenforcability but if you could implement it somehow (maybe get Toast to keep track of the average tip revenue per user?) then it would eliminate the incentive to just inflate the tip percentage further upon incorporating in a 15% flat tip in all the prices
One could probably get the tips by pleasing it out over a period of time like this. On balance a good thing, but this is going require people to agree. As well ad certain negative forces like online troll accounts highlighting pricing changes in a bad faith way to hold off which they will not.
Unfortunately things are trending in the opposite direction, with tipping now everywhere. I see this also infecting parts of Europe and not just the tourist areas.
Also, the problem of back of house making a lot less than servers is everywhere, although it sounds especially dire in Denver. How can you run a restaurant without cooks? I would love to get rid of all tipping, but servers are against that for obvious reasons.
By using pre-made / frozen meals. I recall this being a big deal in France a few years back where a large fraction of restaurants were (are still) doing this.
Many restaurant customers (including myself) often ask for alterations/substitutions due to food preferences. For example, a person who can't eat dairy might ask a restaurant to leave out the cheese on a dish that would normally come with cheese. You can't do that if the food is pre-made.
Pre-made meals also begs the question of why bother having a restaurant at all, when you can just buy pre-made meals at the supermarket and warm them up at home, with your own microwave.
In my experience in diners this is extremely unpopular with tipped employees. I’d be fine with more kisoks and counter service but I can’t imagine it going well for Denny’s type restaurants.
Mine is the same. Tipped employees like the money they are making and this whole plan is really trying to shift money away from them to towards the non-tipped employees.
Would be okay with that if you can get it done but like a law making casual restaurants all change things would be pretty unpopular.
Also it’s a kind of fight that would have really ugly politics based on who this would effect. You couldn’t pick a better white identity politics issue for red states than hurting waiters for cooks.
Perhaps tip pooling could serve as a useful intermediate step towards the good equilibrium; it's not as immediately toxic as trying to abolish tipping entirely, and once it's instituted front-of-house employees no longer have as strong an economic incentive to continue relying on tips.
I mean, is $21/hour in Seattle enough, though? It’s the minimum wage, but waiters have always made more than minimum wage with tips. It’s just that now restaurants are forced to pay them, too.
I’ve reduced my tip to 15% at most places, though I keep it 20% for the bar I’m a regular at. But like I said elsewhere, it’s like Cheers. The bartender sees us coming in and knows what we want and brings us our drinks without taking our order, ya know? That counts for something
I think we're heading towards a restaurant crash (sounds like Denver is already there) and subsequent reset. As prices climb, customers will begin opting into lower cost self-serve/takeout options instead. Full-service restaurants close, front-of-house staff get laid off, labor glut leads to lower/stagnant server wages, full-service restaurants become viable again.
In a way, this is the sort of thing that is the most annoying thing about liberalism. It's one thing to nudge me to consume less energy, which has these massive and obvious net benefits. Or to nudge me to not smoke tobacco, which is obviously enormously addictive and harmful.
But the problem is a lot of liberals don't really have a notion of a free society. To have a free society requires some respect for people's actual on the ground choices.
The vision of these liberals is that whenever people's free choices annoy them or they believe lead to some result they don't like, in swoops the government with its regulatory powers to push people to not do things they want to do through their revealed preferences. God forbid the public do something "wrong". Gotta use the government to put a stop to that.
Liberalism only works as a governmental philosophy if it is actually... liberal. And that means having a sense of proportion about using the state, which, remember, uses force and arms and violence to enforce its dictates. (Libertarians are not wrong about that point.) You can't be like Ko-Ko in the Mikado, banning everything that ticks you off about humanity.
I assume that all people have a mixture of libertarian impulses and communitarian impulses, and those impulses are triggered by different things in different people.
"Here's a problem that is very hard to solve via atomistic behavior, but would be easy with cooperation!" -- that's a trigger for communitarian impulses.
"Don't tell me what to do!" is an easy trigger for libertarian impulses.
All of us, I assume, feel each of these sentiments to varying degrees and in response to various situations and scenarios.
As it happens, you feel strongly about tipping. There is probably some area in which you feel that the prospects for solution via coordination are good, that offend other people as needless intrusions. There is no general solution for these disagreements.
Social conformance is an extremely powerful force in and of itself that can subvert individual choice. Often it gets things wrong and benefits from socially-mediated coordination mechanisms (i.e, government) to fix.
You're really, really, REALLY underestimating the number of rightwing people who are fed up with tip creep. This is very far indeed from an obsession of the left.
I find your absolute insistence here that tipping must be allowed, and in previous comments that it is in fact good that tips not be taxed to be an odd confluence. You absolutely demand that the government allow widespread income earning without taxing it because its personally important to you. That's not how democracy works.
I will tip servers in the current situation of a tipped minimum wage. But the whole tipping set-up seems weird and archaic to me. Why is it the custom to tip servers but not, say, your kid's special education aide, who makes less than a server but provides much more service? In fact, tipping at all seems like an odd vestige of the class system - rather than pay people a known living wage, it is up to the whims of people who can afford service how much workers make.
Worth mentioning that the West Coast states and Minnesota have banned a separate tipped minimum wage and require employers to pay the same wage regardless of whether employees are tipped
When you dine with a large group where gratuity is included, do you still add an additional tip? If not, that suggests a way forward - include a default line item labeled "gratuity" on all bills that makes it clear that the servers are already being compensated.
edit: I realize now this is just the "service charge" model noted in the article.
Noodles & Company, founded and based in Denver, has a big sign at the entrance saying "This is a no tip zone." They've been doing this since they started 30 years ago.
Isn't this anti-libertarian of you? Shouldn't a business be able to choose how its workers are paid and the workers can choose whether to work there or not? Why should you as the customer get to interfere in that relationship?
Sure - you want to hang around *outside* the business and give people tips, you are free to do so. But while you are in *their* store, you should follow the posted signs. If someone came to a prosecutor's/defense attorney's office and had a sit in, ignoring requests to leave because "justice" do you support their right to ignore the rules there as well?
Just ban tipping for 5-10 years to break the back of tipping culture. A lot of people don't carry cash any more so you'd immediately see a cutback on PoS tipping. And most states already have infrastructure in place for unannounced health and safety inspections at restaurants. It would not be hard to layer in an additional assessment to see if servers are accepting tips illegally.
We voted on this in Massachusetts in 2024 and that presumptive solution didn't fare well, losing 64-36. This was the Question 5 wording from the Secretary of State's office¹:
> A 'yes vote' would increase the minimum hourly wage an employer must pay a tipped worker to the full state minimum wage implemented over five years, at which point employers could pool all tips and distribute them to all non-management workers.
> A 'no vote' would make no change in the law governing tip pooling or the minimum wage for tipped workers.
As an aside, since it was raised below as a potential interim step, tip pooling is very unpopular with tipped workers today, and featured prominently in the arguments against question 5. Currently, Massachusetts state law only allows wait staff, bartenders and other service employees to participate in tip pooling (and "the employer must distribute the money in proportion to the work done by those employees")², and question 5 was going to overturn that. Newspaper coverage was mostly anecdotal, but it gave the impression that front-of-house employees were all but unanimously opposed. The few that were in favor that I know personally were DSA adherents or adjacent. That's evidence that support is miniscule, though not conclusive or systematic.
[ETA]
I despair of finding an authoritative answer about public support, but here are two datapoints in the attempt to find one:
- A survey conducted out of Carnegie Mellon in February 2024 found "A strong majority of tipped employees (86%) agree that the current tipping system works well for
them and does not need to be changed (somewhat agree, 24%; strongly agree, 62%)."³
- A MassINC poll found only 43 % of voters intended to vote “yes” on Question 5, while 40 % opposed and 16 % were undecided.⁴ The discrepancy between that and the final results (>20 points off) suggests many possibilities, but one is that social desirability bias exaggerates support for this.
I think it has to work in a way that sets everyone’s wages as the average of what they got in tips plus wages in the previous month or year or something.
It's not that hard. You remove the tipping system from the payment system and you put a big note on the menu saying "we build gratuities into our prices, and we do not accept tips." The problem I expect you face is that waiters rebel at this, but that's not a government problem it's a waiter problem.
Yeah I know a bartender in SF high-end restaurants that easily clears 6 figures and has for years. Now that doesn’t get you a whole lot in SF, but he’s doing all right
"Denver’s high minimum wage, especially its low tip credit, has unintentionally undermined the financial viability of full-service, labor-intensive restaurants. "
Entirely predictable. The single funniest line in the entire article is that new openings are mostly corporate, not mom and pop. Same result as when you introduce rent control. It' just baffling how that works every single time.
Another way to spin this is that there’s a reason why small businesses are given exemptions from a variety of regulations including but not limited to nondiscrimination provisions of the Civil Rights Act. See Matt’s excellent post “Small business is overrated”
I would call it a useful post but not excellent as it is quite flawed in some areas
I entirely agree with the efficiency points as well as his deconstruction of Anti Big Biz reflexive hatred (rather prevalent on the LEft but also on populist right in its own form) and elsewhere in a comment I think I said one has to avoid the fetishisation of small biz / Mom & Pop.
HOWEVER: it is taking a very static understanding of Small and Big as if they are static and unrelated, and completely ignores firm evolution. Many a Chain and Big Firm started out as a Mom & Pop and grew upwards, although that is much less prevalent nowadays especially in "meat & potatoes" industry.
A lot of small business is Churn - create and die in relatively shortish lifecycles w/o net job creation. But out of the Churn somes some break-out businesses (and here I am not talking the unique hot-house world of IT and VC as it emerged from late 90s to present - although I think the App Era is now maxed out).
It's very hard for Gov policy to differentiate these successfully (or say without a stifling bureaucratic burden - and bureaucrats are crap at venturing).
So one does need to have attention to smaller end of company sizes and attention to the effects of strangling off inadvertantly a pipeline of bog-standard companies - not the VC cutting edge industries - generating some new up-and-comers.
Also as a socio-economic argument for a certain entreprenurial class that is deeply sociologically important to America historically and has a role to play beyond the direct economic one in our overall sense of being able to make-it-big.
Blind fetishising small biz as better than big is an error, but equally an error to treat them as Yglesias did there as merely low productivity hang-overs (although one really does need to understand a lot are there, but those smaller sizes [here again ex-IT-VC rocket-ship hyperscaling] are a valuable "soil" in which in the ordinary industries world some new competitors should be able to emerge if not strangled off by regulation and policy that is blind to them.
Of course another aspect is not to mistake Entrepreneurial Start-up World as = 100% to "Cali-VC investor world focus" (sure the Microsoft google stories are cool and a real sub-set but not the only thing).
I would imagine that the ex ante prediction is based on the question "is the tip-credited minimum wage in excess of the prevailing market-clearing wage without the minimum?" If it's mostly non-binding (which it might be in Seattle or NYC but not in Denver, I don't know the numbers) then you expect much less distortion. This is kind of the Econ-101 case against minimum wages and in favor of keeping them low where they do exist.
The Econ-102 case that minimum wages are actually about surplus allocation and a counterweight to the presumptively-unequal bargaining power between employers and employees depends on actually having a surplus to allocate. If you put a price floor on labor then industries with a marginal economic product below that price floor just cease to exist. And Restaurants as a class are often very low margin -- people appear to open them because they find the restaurant business appealing rather than because they're an especially good use of capital.
(The Econ-103 case about whether it's better to have fewer, better-paying jobs versus more, lower-paying ones seems like a values / empirical call about the efficiency and social effects of government support for fewer people at a higher level versus more people at a lower level.)
So the thing at least in the NYC case (but I don’t recall Seattle too well) is the minimum wage floor was well below the prevailing wage. I do remember there were job losses in Seattle but it was at around the wage floor level.
What’s odd about Denver is the minimum wage floor is well below the hourly rates Matt was quoting - up to 38 for servers and 25 for back of house. So I don’t understand how 18 and 19 dollars an hour can be binding for these outlets in distress.
The issue is that even in a medium-sized city in TN, my nephew can make $30 an hour in tips. Having to pay the waiters more increases the disparity in earnings between cooks and waiters.
A lot of people seem to think it’s still 2010 and are unaware of how much low-end wages have gone up. Even babysitters (usually college students) typically cost around $25/hour now. Which is great, but it makes debates where people are acting like lots of Americans are making $10/hour feel like crazy talk.
I worked in restaurants in high school and college and those hourly numbers really are eye popping. Not that I have a problem with people being well compensated but I can see how it would create a dynamic that isn't sustainable.
I really took working in college towns for granted when it came to childcare. Everyone had a Rolodex 25 names long. Granted, you had high turnover as women graduated at took jobs with investment banks, but that was easier than the shiftless faceless mass of nonprofit workers who can’t get their shit together.
I live in DC and our date night babysitter charges $20/hour for one child (more for 2). No, you cannot have her contact info. If you are talking about full time
Nannies, who are not babysitters, that is much more expensive though
In Ohio last week, went to a restaurant with a friend who's daughter was the hostess --- just got a raise to $13 an hour. When we left four years ago my kids were getting under $10.
When I come across something like this, or about unions making film production in LA unaffordable, I despair a little bit at how these counter-productive policies could be reversed. Because one of the characteristics of left-of-center thought is, when we institute a policy, we are never just trying something to see if it helps: we are correcting injustice and improving on the past. The way we on the left self-describe is shot through with this: we call ourselves “progressive,” we say the arc of history bends towards justice, etc. So “never roll back something we’ve implemented” is practically an article of faith with us, regardless of the empirical results.
I was trying to write a similar comment but I’ll just superlike™️ this one instead. There should be much more policy experimentation without committing, even tacitly, to keeping them in place forever.
In principle, Kamala Harris could have said something like
> In early 2021, the economy was a mess (through no specific fault of anybody's), and what we remembered most clearly was the anemic recovery of 2009. ARRA should probably have been bigger. And we hadn't seen a major pandemic in a century; our economy today is nothing like the one we had in 1920. So we pushed for a big recovery bill, and in retrospect, the job market was more resilient than we realized. The recovery bill over-cooked inflation, and if I had it to do again (God, I hope we don't have to do that again), it would have been smaller. I think everyone was operating with the best intentions in mind and the best available information, but the world is complicated beyond our best ability to measure, and thankfully we very rarely see shocks to the economy like that one. We'd do it differently if we had it to do over, but I think we gave it our best shot.
well, that would have been nice. Unfortunately that does not seem to be how the political world works. Never admit oversight or misunderstanding or error, never accept blame.
I think this is attributable to the “gotcha” quality of political advertising—nobody wants an opponent to run no-context clips of them admitting error. I have a hazy recollection of this hurting some candidates in the 90s/ early 00s. It sucks though. One would hope that voters would assume that there’s missing context, but I guess it is or was effective enough that candidates have been terrified into submission.
I've heard that this was the reason for the stupid phrasing of Bush's "Fool me twice....you can't get fooled again." They didn't want a sound bite of Bush saying "shame on me."
That assumes you take these restaurant owners at face value. California, Seattle, Nevada and a number of other places have no tip credit and thriving restaurant scenes. So what’s wrong with Denver?
Generally things get "rolled back" by not being maintained. Or things can be passed with time limits so that they can sunset when conditions no longer apply.
Some of this comes down to an outdated understanding of capitalism from the 20th century. Yes, money always wins but that will usually means selecting for efficient chain restaurants over locally-owned ones (that would theoretically include immigrant and community entrepreneurship) and not some proletariat of service workers. Like many things, hero/villain narratives are much more clear before progress is made when the game board is more heavily tilted.
I could see a co-op system potentially aligning incentives better (a brewery near me switched to a co-op model) but it's hardly a panacea. I'm sure plenty of workers would NOT like to assume the financial risk that comes with ownership.
To bring a foreign perspective: many tourists to America find that tipping culture causes service that is 'too good' i.e. pushy, intrusive and overly servile.
This will get me cancelled in the Slow Boring community, but even people in service jobs deserve dignity and for the position to offer a sustainable long term lifestyle. Being a waiter in France isn't something you do for a few years in your teens - it's a real job that a man in his 50s can respectably hold.
The West decided a long time ago that there's a fundamental mismatch in power between workers and the bosses, and that minimum wages are a way of counteracting that. And yes, that means many businesses that would otherwise be viable aren't under a stricter labour regime.
And to really invoke an Australian perspective a Denver restaurant could go tipping optional to bring down the effective price of the meal.
In the piece(and my experience) waiters actually make a decent living. It is the non-tipped back of house people that end up not making as much.
Tipping is optional but there is still a social pressure for it. The equilibrium the One Fair Wage types would like is for the tips to be folded into the prices and then the restaurant can just pay its staff like a normal business.
It seems like the service charge was a pretty good solution. It forces front-of-the-house to share with back-of -the-house. Some people will still tip on top of the service charge anyway.
I don't understand why there isn't a lane yet for restaurants to market 'honest prices', - no service charge, no tipping - people are obviously annoyed with the ubiquity of "just a couple questions", why can't this be leveraged? (and staff get paid based on merit, rather than regressive customer bias)
calling your restaurant “tipping optional” would be meaningless, the nature of tipping culture is that you have to either prohibit tipping (or have a well-flagged service charge) if you don’t want normal people to feel they have to tip
I don't think it's even possible to prohibit tipping. Customers like tipping and probably care more about their waiter than about management trying to limit the waiter's compensation so they will tip anyway.
This. I realize internet-land is full of contrarians but I struggle to think of even a single person I know in real life who likes tipping. What makes service work fundamentally different from any other type of work and thus deserving of special consideration? I just don’t get it. The Square payment readers that have proliferated, especially since COVID, are a plague.
That is not true. I always tip 20% or more and I hate doing it. I do it because I frequent the same restaurants over time and, because there is a social expectation that you tip, not tipping would bring negative attention to me. If there was a different tipping culture, I would act differently.
I like tipping at Waffle House because they make $2.13 plus tips and the meal was fantastic, the service was terrific, and the bill was $11. You can drop a $20 tip and feel like you’re really making someone’s day (someone who’s busting their butt). It’s a good feeling, and I think they make a fair living from people like me despite the low wages.
It’s less of a good feeling being obliged to leave the same $20 for lackluster service and food on a $100 bill.
I like tipping well at my bar because I’m a regular for trivia, the bartender knows our drink orders when we walk in the door and just brings them to us, and we’ve built a community there - it’s our Cheers. It would do no good to skimp on tips there.
But at other places where a tab for 2 with drinks starts to run $80, as is usually the case in Seattle, I’ve reduced my tip amount to 15% knowing that they’re making $21/hour plus tips. I still want them to be able to afford apartments and the necessities of life in our high COL city, and $21/hour isn’t some indulgent wage here.
Likewise. It would be unfair and utterly inappropriate to take out my dislike of the US tipping "system" on a server. If you don't intent to tip, don't go to US restaurants.
So yeah, I tip faithfully and somewhat generously. But that doesn't mean I like the system! It just means as an actor of one, it's nothing I can change.
Why do waiters deserve money that their employer isn't paying them? Why shouldn't that money instead go to my garbageman or my auto mechanic or the grocery store clerk?
The whole point of the service charge is to give deserving servers (and every other employee) enough money through a clearly stated premium. Do you avoid restaurants with an explicit service charge? I prefer these businesses.
I want my money to go to the waiters though. So I tip on top of it so it does.
Indeed, under California law I have a right to insist my tips go to the waiters. The restaurant can't appropriate it and split it up. That's a good law.
I think a well-flgged service charge is enough in most cases. Most people I know will not add a tip if the restaurant has added its aotuomatic 18% surcharge for parties of 6 or more.
I once had lunch with 2 foreigners who were new to the US. In their country tipping is optional and a reward for good service. They were unhappy with their waiter so chose not to leave a tip. The waiter was upset and had the manager come over to explain that was just not done in the US. They left without tipping.
(I sat for company but had already eaten before meeting them).
Tipping is always optional, there's just a strong cultural pressure to do it.
One of my problems with the tipping model is it assumes everything is under the server's control. Maybe the food came out late and cold because the server was lazy, or maybe the back of the house is a shambles.
Yeah, I've had bad meals where the server did a fine job but the kitchen screwed up. There's not really a great way to send the right feedback there by leaving a smaller tip....
American servers are a bunch of brown nosing jagoffs. European servers are perpetually on their smoke break. Japan has a service button. A beautiful invention that would never work without Japan's deeply ingrained cultural anxiety about inconveniencing someone else.
My favourite model is Vietnam's, which Americans generally absolutely hate.
The staff stand far away, often in a cluster together near the kitchen or cash register. When you want something -- to order, to get another drink, to get the bill -- you yell out "Em ơi!" (literally: "Hey you!") across the restaurant to get their attention. (The actual volume depends on the establishment and their distance but it definitely isn't the servile American quasi-whisper "excuse me, if it isn't too much trouble could you get me another drink when you have spare moment?")
Also since there's no tipping there's no concept of "your" server, so you can just ask whoever is closest and they will help you.
This explains so much of why things are they way they are whenever my family dines at Vietnamese restaurants. Weird how that norm can carry over even when all the (FOH) staff aren't Vietnamese, like at a VROCK, or the place next to my work where it's a buncha kids from the nearby college. I always thought it was just a weird coincidence? The one time we got "regular service" with a dedicated waiter who brought refills and the bill without being asked, that was at a $$$$ high-end place (three-figure pho...), and it was honestly kinda uncanny. Gonna feel a lot less self-conscious from now on about "bothering" the staff at such places. The More You Know(tm)!
Mainland China probably has the best model, though all good patriotic Americans should despise it just because. Being a serve in a busy establishment in that country is...get this...a desirable job.
So servers there work hard and give good service. Many establishments are family-owned, as well.
So yes, believe it or not, the lack of a server looking over your shoulder to see whether you left 15, 20 0r 25% does not render service any worse.
The culture of service work as a profession is one of the differences between the US and Europe, and is now pretty deeply rooted. The thing about culture and regulation, though, is that often culture will win out over regulation, or regulation will have to be fit to culture if the regulators want to maintain the appearance of control. One of the things we are failing to note here is what tipping offers to the customer—it has traditionally been a way to demonstrate that one is “flush” and can impress their friends by paying extra for service, as well as a way to maintain the illusion of control over what one pays, even if in practice that payment tends to fall within a pretty narrow range. Getting rid of tipping might make economic sense but it clearly is going nowhere in the USA (Don’t forget, last year’s election might have turned on “no tax on tips”—it was at least a very popular promise).
Traditionally there is little to distinguish a "tip" from a "bribe" as well. Though obviously most tipped employees no longer have the ability to deliver much in the way of favors in exchange.
I think you have a point. We were recently in Italy, and one of the things that bemused me was how much of the service staff were middle aged men, something you rarely see here unless it's in a very high end spot.
"Being a waiter in France isn't something you do for a few years in your teens - it's a real job that a man in his 50s can respectably hold."
But wage differentials can't explain this, because US waiters make about the same.
The national median US waiter makes $36.5k/year. According to the figures I can find, French waiters average about €21-23,000 / year*, perhaps with a modest bump down outside of major tourist areas (to ~€17-19K). I took a brief look at other European countries and they're a little lower (Spain at €15-17) or a little higher (Germany, at €27-33).
This is rounding off a lot of distinctions: the variation in pay in the US is probably greater than that across most of Europe, and these figures don't factor in different kinds of government support or provision of services (which of course, the US has as well - plus many things cost more in Europe, too). I don't see how you can tell a story about these financial differences that explains the social discrepancy that you're reporting.
> even people in service jobs deserve dignity and for the position to offer a sustainable long term lifestyle.
I absolutely believe the PEOPLE deserve dignity. Why should the POSITION offer a reasonable chance at a lifetime career, if even a grizzled thirty-year veteran is not really offering added value over somebody six months into the job?
Half the people have IQs below 100, man. And we don’t have a ton of factory assembly line work that provides a good living anymore.
They may not have them in your state, but if you’ve ever been to a Waffle House, especially on a Saturday or Sunday morning, you should watch them call out orders and the way the grill guy sets out plates in a row with like an onion at 4:00 and cheese at 10:00 to help them memorize the orders without the benefit of being written down. It’s kinda mesmerizing. They have that system because a lot of their cooks are hired on work-release and are illiterate. But man can they cook! And the waitresses usually don’t speak proper English and half of them have face tattoos, but they’re sweet as pie. Hard to see them doing much else, but they bust their butts and deserve a little piece of the economic pie too.
A man in his 50s can still respectably maintain a career in the US as a server-although it's likely that he would either choose the more stable, less Wild West route of going into management, or promote into bartender if he wants to stay in the server environment.
And given the reputation the Australian hospitality industry has earned for wage theft...maybe be careful about those thrown stones.
The problem is progressives, alongside most of the population if we're being honest, don't believe prices reflect a precariously low margin balance between revenues and expenses. They think business owners are all stinking rich vultures using accounting trickery to lie about their fat returns.
I looked this up, and you're right. Full disclosure: I used GPT-5 thinking to find this data and do the calculations below, so there may be errors, though it looked right when I eyeballed it. Chat log: https://chatgpt.com/share/68b5f616-c26c-8002-88a8-11f234bb3240
Takeaways: Drugs (pharma) is 10th of 91 industries, with 25% margins after R&D amortization. That is ~1.5 standard deviations above th median of ~11%. Not super out of band or anything, but definitely on the high side.
Ideally using something like Return on Equity would be more applicable here. However, so much of the value of pharma comes from intangible assets, which are not recorded in Book Value under US GAAP. Adjusting for it using Ewens' methods in the paper below would bring US Pharma ROEs from low 20% to ~10%, in line with the rest of the US market. But then it becomes a question of how valuable the US should allow these patents to be.
Unlike with the social network based tech firms I think its unclear whether or not the pharma companies are capturing true economic rents. The question surrounding whether or not pharma are vultures or not involves the cycle:
1. U.S Gov enables high Post-Tax Income/Sales (Net Profit Margin (NPM)) through strong patent protections and little to no gov level price negotiation. US Consumers pay significantly more than they would have under a different system.
2. While firm NPMs are high, the value is being driven into significant R&D.
3. More of the value of the firm is derived from this R&D then other industries/regions. Post-Tax Income/(Firm Book Value + R&D Value(Intangibles)) is in line with other Industries after accounting for intangibles there. This is using the Ewens method below.
Thus, the answers to whether or not Pharma can be milked fall under:
1. Is the marginal R&D result worth or not worth broad based higher costs to the consumer?
2. Is the capitalization of intangibles method overstating the value of R&D?
I know something about the restaurant scene in Denver. What’s missing from this article is the insane inflation in real estate prices in downtown and then RiNo (river north). This is also missing in any discussion about DC. It’s a little baffling to me, because it’s a symptom of the real problem with commercial real estate coming down the pipe. Companies can’t afford the rent, and the commercial owners can’t find tenants to keep up their loan payments.
Kelly Whitaker isn’t mentioned in this article. Neither are the Italian places in sunnyside or the old school Mexican places in Santa Fe (a neighborhood). The reason those places hold on is because the real estate is cheap (wolf’s tailor, Garibaldis, the cherry tomato) or they have huge outside investment and people will pay NYC prices for the intense service experience (Tavernetta, but really Frasca).
Not just a Denver thing, but restaurants are going to need to hire fewer servers. That’s just the way things are going.
I think the high cost of real estate due to our low interest loan binging since, well really the Greenspan era, is causing systemic effects. I still remember my real estate agent neighbor telling me in 2003 that they could raise home prices because the low interest would offset the increase. And here we are now with high prices but not so cheap interest rates anymore. BTW she wasn't kidding about prices rising---the house across the street sold for $178,000 in 1998...by the time I moved in 2003 it was going for close to a $million.
I’ve been hearing in a lot of cities about a glut of commercial space, with zoning regulations requiring ground floor retail that ends up sitting vacant. I don’t know how to reconcile these two stories.
definitely not an expert, but my understanding is that there are two big things here: 1) landowners are very reluctant to lower rent because it may force harsher terms on their financing. 2) restaurant space is usually rented as completely unfurnished - the tenant is responsible for installing the kitchen, booths, tables, etc. the expense is usually significant.
This is a classic. Glad to see it linked because I forgot to save it.
The "x months of rent free" solution is really common and quite appreciated during the build-out process. My friend who opened a coffee shop figured the building owner was being really nice. And he actually does seem pretty decent (especially since the guy who owns the buildings across the street is a total jerk) though this setup incentivizes him to do the nice thing.
Is the basic dynamic here that reducing tip credit increases the non tip wage for servers, but patrons didn't reduce how much they tip, so it's a price increase for patrons and an imbalance with other employees?
I think labor activists have good reasons for opposing the tipped wage rules but it's hard to fix them without actual culture change, and the culture seems to be going in the wrong direction.
While I know labor activists oppose tipped wage rules, how much do they actually publicly campaign against tipping on the grounds that it is unnecessary? Because certainly one of the things I've noticed is that on-line communities that skew towards progressive values -- which you'd think would have above average awareness of what "labor activists" think -- are also the places I'm most likely to see militancy on the importance of increasing the percentage that you tip because restaurant servers are allegedly living in abject poverty.
I think the peer social pressure to tip a lot has declined while the pressure of the server literally holding the toast terminal while you punch the number in has increased.
Fair point about the server holding the terminal. I've noticed an increasing number of terminals also come with preset percentages starting at 18%, so you have to manually input something lower. (I also just recently for the first time encountered a terminal where the lowest preset was 20% and the highest was 30%!)
Oh yes, I've caught that several times! I always make a point of mentally calculating what 20% of the final bill is to ballpark whether the tip is being calculated on the post-tax versus pre-tax amount. Another tricky one that I've encountered is the restaurant applying a substantial (typically 15 to 18%) "service charge" for large parties, PLUS having a separate tip request on top of that.
I am 1000% behind the large-group service charge--holy crap, we're a big headache for y'all, and I'm kind of sorry--but SPELL IT OUT. Then we're all on the same page and everything is gravy.
The charge for large parties makes sense, there are so many stories out there about large parties not tipping that it has to be done (large groups tend to require a lot of service and tend to stay longer). The way to approach this is to see that a service charge has been added and therefore an additional tip is optional—maybe add 5% if you like, or don’t.
I'm assuming that's just part of the point of sale system and not something they are trying to sneak by you but yes it's always awkward to try to clarify.
the working hypothesis is something like: if you can afford to go to a restaurant then you need to tip as much as possible and be grateful you privileged prick
I think it isn't unnecessary in most cases, and especially not by the lights of the activists. At fancy restaurants like the ones described, you would want to still tip but a bit less (an even harder change to explain). And at cheap restaurants I think relying on management to make up the tipped wage is overly trusting.
I am always skeptical when I read these stories - it feels like restaurant owners doing special pleading on the general challenges of running a successful business. Half of restaurants say they’re going to close this year? Come on, that strains credulity.
Genuine question I always want to ask - how are restaurants in Europe profitable then? They are labor intensive. They pay waiters solid wages with effectively no tipping. They turn the tables less frequently than American restaurants as people linger. And if anything, the prices are lower and markups on wine are smaller.
And yet you don’t hear these sob stories from restaurant operators there. So what’s their secret?
I was just in Portugal for two weeks. The minimum wage for waiters and restaurant workers, in Lisbon and Porto, the two big cities, and the top tourist hells, was the equivalent of about $5 US. The waiters will accept tips but don't expect them. Their secret is that Europe, especially the poorer countries like Portugal, is not nearly as prosperous as we are. Uber drivers in Lisbon were starving too and I heard half a dozen stories about how hard it was to make a living and pay the rent w/o working two jobs.
Sure but that has nothing to do with the issue of whether low tip credits makes it unaffordable to run a restaurant (which is what Denver restaurateurs claim).
The major Iberian tourist cities are a bit of an edge case as they have rents and cost of living pushed up by heavy tourism (without the policy choices to take advantage and compensate for that) while also still being fairly poor. Europe is poorer than the US but a lot of popular tourist cities like Paris or Rome don't have this problem.
Many fewer servers. Like 1 at many “casual” spots. And that server makes almost nothing, but has healthcare and retirement taken care of by the state.
Additionally, most of the really low end restaurants in Europe own their building (same in NYC) so they don’t go out of business. There are also varying subsidies for restaurants in other countries.
Theres a real crisis though of these low and mid level restaurants closing in Europe and the UK though. Pubs are collapsing.
Having just come back from Europe, I can say there was definitely more than 1 server at the restaurants (not super high end) we went to.
And if that is the secret, is there a particular reason American restaurants haven’t adapted? Would the American consumer stop going to restaurants if there were fewer servers?
Isn’t it roughly true that half of restaurants close in their first year, and that even among established restaurants, a significant fraction are close to closing at some point in any year?
Literally zero to do with tip credits. California, not exactly a cheap place to do business does not even have one and yet lots of restaurants that would describe themselves in an identical situation.
the graph seems to indicate that this decrease is significantly larger than the usual fluctuations. of course there's not a lot of evidence that it's that and only that change. (as a comment mentioned this it not happening all over the city. though of course it's not surprising that some areas are more resilient and others - where other things are also negatively affecting businesses - are less.)
I was recently in Norway, which is a very expensive country without a tipping culture, although that is changing (pretty much all card machines now have a tipping option and not just in tourist areas).
I just looked up the stats, and the median salary in dollars for waiters in Norway is about $18k with the average about $30k. $30k is a bit under $15/hour, assuming full-time employment. Meanwhile the post says that servers in Denver are getting double that or more while Denver has a significantly lower cost of living compared to Norway.
But the restaurant in Denver only needs to pay $15 an hour! The rest is coming from tips. That’s why I don’t buy the whining from the restaurant owners.
The difference is the cost of living, and the fact that what someone pays at a restaurant includes the tip cost. Maybe it would work out better if people in the US didn’t have to assume they will need to add 15-20% for the cost of the food.
In another comment I mentioned Casa Bonita, which is in a Denver suburb, and they pay, controversially, $30/hour for wait staff with no tipping but a 15% surcharge.
Yeah, the other thing is now we’ve reached an equilibrium and restaurants know what they can charge for folks to pay. They’ve staffed for that equilibrium. If you increased tip credit back to previous levels, management would keep the same prices and pocket the profits. Is that the end of the world? No, they might use that profit to expand the restaurant or improve the food or something, but in many cases they wouldn’t.
Once you have an equilibrium there are consequences to changing it, even if that equilibrium wasn’t the result of optimal choices. And I doubt we’d see lower menu prices
Overall I have a theory that restaurant profit margins have increased materially post-pandemic and restaurant owners just don’t want people to know it (and would rather people think price increases are tied to food inflation or whatever).
I was just watching the British Fallows restaurant YouTube channel and they said their menu prices are 4x what they cost the individual dishes at including ingredients and overhead. So any changes will have a 4x effect in their case.
I have heard this many times but it is obviously a silly model for pricing. 4x variable costs, sure, but not fixed costs (because you can reduce the impact of those via throughput).
Anyways what all of this confirms for me - and this is not some massive secret - is that chefs (like many artists) are generally terrible businesspeople.
Additionally, the median wait staff wage in Norway is about $9/hour ($18k a year). I’m not sure why the average is almost double the median. I can’t find the median for Denver to compare, but this says the bottom 10% make $28k while the top 10% make $66k. Either way a lot more than Norway’s median.
It's showing that in Norway, where the COL is higher, waitstaff generally get paid the same or less, especially when tipping is factored in, compared to Denver. Hence my original point. Labor costs do matter.
Official numbers are difficult to assess because they include both doner counters and three star restaurants. I haven’t been in Norway since January unless things have changed in six months they are relying heavily on immigrants in the restaurant industry.
But to be clear the $30-50 per hour isn’t paid by the restaurants! The restaurant is only on the hook for $15 of that in this story, and yet they claim that is unsustainable. I don’t buy it.
Ok but the very specific claim the restaurants here are making is that they need a bigger tip credit so that they can pay their servers less and survive. I still fail to see why that’s needed given the situation elsewhere.
While this may be narrowly true, I would bet any amount of money that France has a higher proportion of workers being paid minimum wage than the US does
I haven’t searched - but the fact that (as someone noted above) you see middle-aged servers, that being a waiter is considered a “career” unlike here, and that they don’t need tips to supplement their income all suggest it’s not a minimum wage job.
This could be explained by labor market in France being much weaker overall. So while middle age folks have many more options in most US metros, in France being a server is a relatively competitive employment option.
Outside of Michelin starred places (which aren’t any cheaper in Europe), restaurants in Europe have half the staff of their U.S. equivalents which is why the meal takes twice as long.
Which part? I spend a couple months of the year in Western Europe every year and have eaten in 1-3 stars all over the world. I stand by both points (server-customer ratio and Michelin star costs). (A bib gourmand is generally cheaper in Europe and even in Scandinavia.)
California, oregon, washington etc have high min wages, and and also had decades of a relative staff pay gap. Denver has calcified itself in this restaurant model. The states above, due to no credit, give their restaurants leeway, thanks to a Trump first term rule (a stopped clock situation fwiw) where establishments could enforce tip pooling and stipulate a percentage to be distributed to other staff. 3% of food sales to the cooks for instance to bring up their wages to market (everyone NEEDS cooks and more of them). This rankled certain staff, but thrilled others as you may expect, and has been done more across the board and the pandemic was an opportunity to ingrain it culturally. Denver also needs to just learn that the middle class of casual dining restaurants just aren’t profitable with a heavy service staff. Don’t compete with Chili’s, find a niche.
You could ask the same question about restaurants in the US. I've been abroad for a spell, but I'm now back in the US and in the latter half of August I've eaten in (pauses to recollect) a dozen or so nice places in America, including a Michelin-starred place in SF, and (yesterday) a seaside restaurant in Gloucester, MA that had a long queue of patrons 20 minutes before opening (reservations not accepted).
Many restaurants are doing find in the US. OTOH, it wouldn't shock me to see the restaurant sector's share of US gdp has dropped a bit. Oh well...
The restaurant business really is brutal though. Restaurants that are full every day at lunch and dinner pretty routinely close because they were just not able to make enough to meet expenses.
I have always assumed this is because chefs, like many creatives, are just really bad at business rather than being an iron law of restaurants. It’s literally the entire plot of The Bear!
100% true. Also, accountants make soulless bad places to eat and enjoy because of what they value and don’t value. A chef worth his salt flat out will not work at a place where he lacks say or directional input. One needs the other. The bear actually does a great job at showing needed practicality skills (but it’s hard for me to watch).
I’m late to commenting, but one thing I didn’t see addressed in the otherwise super interesting article (thank you, Halina!) was the prior explosion of the Denver restaurant scene. So I’m wondering if part of this is a correction.
I lived in the Denver/Boulder area for 20 years, and I remember the boom starting just after the recession—Denver was just teeming with new, excellent restaurants, making a name for itself as a culinary hotspot. Boulder actually had, reportedly, a higher concentration of great restaurants per capita, too. I think the popularity of cooking shows also took off around that time, and celebrity chefs became a big thing.
Maybe people’s interest in buzzy restaurants is just…not what it was a decade ago?
A lot of my favorite restaurants have closed since inflation and interest rates have gone up.
One of my hobby horses is it’s kind of weird having people yell at companies who have employees on public assistance. Government aid to the poor seems like a better diffuse cost than driving the pay for dishwashers up and making everything that relies on low productivity employees less affordable.
Indeed, having the government "prop up" minimum wage with something like the EITC strikes me as a great way to have both dignity of work and enough money.
1) “Mr. Padró implemented a service charge model to pay all employees….”
what’s the “service charge model” and how does it evade the minimum wage and tipped wage problems?
2) this bit puzzled me:
“House Bill 1208, signed into law in June, allows municipalities to expand the tip credit. In his signing statement, Governor Jared Polis called it an essential step in correcting “out-of-whack tipped wage minimums.” Ms. Tronco, who testified for the bill….”
If it expands the tip credit, then doesn’t it make the problem worse? And wouldn’t Ms Tronco be against it? So, maybe you could say more about what the bill does?
Could be! I'm happy to guess, and comparing guesses is a standard way of filling up the comments section, but I was sort of hoping that Ms. Bennet could just provide an authoritative answer.
This is the bill summary from the Colorado Legislator website:
"Colorado law allows a local government to establish local minimum wages in excess of the statewide minimum wage established in the state constitution. A local government that enacts a minimum wage must provide a tip offset for tipped employees in an amount equal to the tip offset amount described in the state constitution, which is $3.02.
The act states that on and after January 1, 2026, a local government that has enacted a code or an ordinance imposing a minimum wage that exceeds the state minimum wage may increase the amount of the tip offset associated with the local minimum wage; except that a local government shall not impose a tip offset in an amount that allows a tipped employee to earn less than the state minimum wage minus $3.02."
Without seeing the law, that’s sort of how it worked before but with a much lower minimum wage. You could take the tips out of the minimum wage calculation.
My understanding of the service charge model is that the owner imposes a service charge- say 20% - on all bills and then distributes it to all workers (back and front of house). The owner presumably pays all workers the true minimum wage or more. Some people might still add a tip on top of the service charge. Wait staff don't like it because their income is higher if they get to keep the tips. Some customers don't like it because they think tips should be optional and should go to the wait staff and not the cooks.
The argument for the customers is that if you have a fixed 20% surcharge, not including it in base prices doesn’t even have a fig leaf of justification and it’s just obscuring prices. This is admittedly a coordinated-action problem for restuarants competing on headline price in this model, which is a good reason to involve government to solve it.
In NYC the Xi’an Famous Foods chain has a strict no tipping policy. For a while Danny Meyer restaurants were also no tipping. But they ran into the problem that idiot customers thought their menus were 20% higher than they should be and didn’t account for the lack of tipping. It’s the classic resort fee issue with hotels. Service included pricing only works if everyone does it.
In theory you can have a strict no-tipping policy (which is incentivized either individually or collectively as to keep out of pocket expenses lower for the customer) so while I don't want to dismiss this because social conventions are weird, and it's not like I myself haven't referenced a service charge in that manner, it just seems odd that it should be load-bearing.
Ed.: Another way to phrase this is that if the chief benefit of breaking it out is informational, it seems weird that the only effective way to convey that information should be by keeping it out of base prices. Not impossible, mind you, but weird.
The Alamo Drafthouse switched to a service charge and also advertises before the movie that tips aren't necessary("but always greatly appreciated")
Since then I've added an additional tip once, when we went and ordered almost nothing except water, I added a small amount but the clear service charge nature of it makes it easy for me not to tip.
There are some famous restaurants that tried to do a universal service charge or just fold things into menu prices to help pay back of house staff more (brown people) and the front of half wait staff (white) revolted and forced the restaurant to return to tipping.
As someone who lives in Denver and just yesterday paid slightly over $200 for dinner with tax and tip (15%) at a "fast casual" restaurant for seven people (which included two elderly people who ate side dishes for their meals and only one person having an alcoholic beverage), I'm in this picture and I don't like it.
"You hired a team of servants to prepare a broad selection of food for you, and then they did all the cleanup. That should cost a lot of money."
Why?
The issue is that the government legislated up the cost. That's a choice. Not some law of nature. "Servants" can be quite inexpensive at market wages. The country is today wealthier than when you were growing up.
Also there are economies of scale in cooking. It should arguably be cheaper for a casual restaurant to have professionals buy a ton of food and make it for lots of people than for a single person to buy groceries and spend that time / money on their own.
I agree that, a few decades ago when I was a kid, eating out even at McDonald's or other bottom-tier fast food places was a rare treat. I'm not sure why we should aspire to bring that back though! When I'm a moderately successful lawyer and I'm cutting back on eating out or scrimping on appetizers, desserts, etc. when I do eat out, that implies the situation is even more dire for the 85%+ of the population who make less money than me and also aren't in the food service industry.
honestly that doesn't seem outlandish at all. i'd expect pay at least as much locally and no one is writing stories about how expensive the city i live in is.
"Fast casual" meaning like Chipotle or Panera, without table service? Then a 15% tip seems extremely high, and (pre tax and tip) $23 per person seems pretty high.
But if fast casual means a chain restaurant with table service, Chili's or the like, that sounds completely reasonable.
I'm not generally an anxious person, but I'm imagining being the first at a large table to order and making a very reasonable guess about whether we were indulging in libations... only for the entire rest of the table to stay dry.
The people here saying that it’s not expensive are either in extremely HCOL areas or are being intentionally dense. $200 for fast casual per person is an insane amount. I would have guessed much closer to $150 max.
Germans are incredibly prolific in mid-market B2B software market (so many Jira add-ons seem to be built by German companies), I wonder if it's the lower wages that lead them into that market? I think Germany also provides incentives to form smaller companies too IIRC
People tend not to realize how much a lot of waiters make and tipping has spread culturally rather than shrank as the tipped minimum wages have gone up.
The solution is just for prices to go up, tips to go away and restaurants to just operate like a normal business. It is hard for restaurants to raise prices when people are adding an extra 20% onto their own bill and the tipping culture is still very strong so it's hard to convince people that it is okay not to tip because you pay your waiters enough.
My plan to end tips would be something like:
1. Force all restaurants to display menu items with all fees and taxes accounted for, including an expected 15% tip. People could add or remove tips at the end if needed.
2. Wait a while for people to get used to paying just for what they see in the menu.
3. Tipping culture goes away on its own.
That’s not going to work unless you make an explicit ban on tips.
Tell me more, why wouldn't it work? At least for steps 1 and 2 I think it would and functionally it'd be like tipping doesn't exist any more. Step 3 I agree is fuzzier.
If you say “people can add or remove tips at the end”, and 15% is built in, then everyone who has mentally adjusted to 20% will be adding 5%. And then the same sort of arms race dynamic of wanting to seem slightly more generous will get people to start this number creeping up too.
You need to do something to make it clear that you’re not supposed to add or subtract anything at the end (even if you technically can), so that the culture goes away.
I don't think that's how it would work. There's a natural limit for how much people are willing to pay on a meal - that's the entire point of this article. A tipping arms race on top of a 15% tip wouldn't make much sense.
How I see this playing out is that people would go "oh tip is already included - great" and go no further. If they're the generous type they might add a couple of dollars (say $5 on a $100 bill to make it an even 20%). But the social pressure to tip would be gone because it's already included.
You also can't ban tipping because it would be unpopular and there's no practical way to stop people from leaving extra cash on the table.
By contrast this approach is basically just showing patrons what they will actually pay when they order something, which I think would be popular.
The way it would work is that would mentally view what's supposed to be the after-tip price as a pre-tip price, and if they aren't willing to pay what they believe to be the total price, they will avoid eating there altogether, rather than being seen by their friends as a cheapskate.
I will always leave tips and encourage others to do so. And I will strongly oppose any attempt to force me not to leave tips. Stop trying to use government power to stop something I like doing.
This isn’t even a coercive proposal, it’s an attempt to use social coordination to resolve a problem that is hard to solve individually — surely you would agree that tipping is a socialized phenomenon (comparative evidence for this both cross-industry in the US and across countries even in the Anglosphere show that it’s idiosyncratic to here) so it seems odd to object to using government to non-coercively solve a social coordination mechanism - that’s a great job for government!
It appears that having been socialized into tipping you now have a preference for maintaining it. I submit that this is, contra your comment elsewhere in this thread, extremely idiosyncratic, and would take the opposite side of that bet—viz., that majoritarian preference is against paying extra money not explicitly accounted for in price for little if any marginal benefit.
Of course it's coercion. "Using social coordination" is your term for trying to use public policy to force changes in behavior that you don't like.
Look, it's not that all authoritarianism is always bad, but if you want to be an authoritarian, own it, and I hope the public resists any scheme you try to enact because the public has every right to tip their waiters whether you like it or not.
The social pressure to tip despite the fact that it fails the most cursory examination of financial self-interest is the authoritarian equilibrium that people are trying to escape here.
Do you tip the grocery store? Your doctor's staff? Your Amazon driver?
So what? I tip who I want to tip, and I don't want busybody liberals who don't like this to try and change my behavior or all the rest of us who want to do this.
Because of your highly virtuous attitude toward tipping, I have decided to not tip anymore, confident that your generosity will cause everything to average out. 😁
Where in my proposal am I forcing you to do anything? All I'm asking for is restaurants to display full prices at the point of purchase. No different than asking ticketmaster to do the same with concert tickets.
90% of the hate tips receive is because people perceive them as a hidden fee.
How do you know that 90% of people hate tips? They leave them! Maybe a lot of us actually LIKE rewarding service!
I didn't say that. I said that 90% of the criticism of tips revolves around it feeling like an extra fee (ex "do you also pay your X extra?"). The people that dislike tips (myself included) see it as an obligation, not a reward, and if you disagree just try leaving no tips in the US.
And if you like it then I have no problem with that. You will always be able to continue to leave extra cash on the table after service was completed, it's hard to see how anyone could stop you.
Tell your last point to the rest of the people in this thread, who very much want to stop me.
That’s exactly why we need to ban tipping, because without a ban we can’t get to transparent and meaningful prices, where staff know what they are getting paid and customers know what they are paying.
At least you are out front about the fact that you are trying to ban conduct you don't like.
I think the disconnect here is that you are viewing tipping as something you get to do, whereas everyone else is viewing is as asinine behavior that they would strongly prefer *not* to do, and would never introduce ex nihilo, but that social conformance and the desire not to be perceived as a defector have made obligatory but still odious. The desire to break out of the bad social equilibrium and get rid of opprobrium for not tipping (being perceived as "jerk" as you elsewhere state) is the libertarian (rather than authoritarian) impulse trying to be exercised here. "Spending money for no reason on things that provide little value" is not something that customers do because it bring them joy, it's because they would feel guilty otherwise even though they consider the practice itself stupid. It fails the most basic tests of individual economic rationality in a way that is self-evident.
That's stupid though. You can... just not tip. Believe it or not, you'll get dirty looks and perhaps bad service, but you'll survive.
So your position is ANTI-libertarian-- you are trying to both silence the people who call you a jerk for not wanting to tip, AND discourage those of us who do the ethical thing and leave tips from tipping.
I’m not sure what basis you’re drawing upon to advocate so strongly to tip.
That I like doing it and don't like people who try and stop me from doing things I like to do because of public policy arguments I don't agree with?
Calm down boomer
You are the first person I've ever heard of who like tipping. I'm sure I know people who are fine with it and they don't say anything, but actual proponents of it are…maybe just you.
Also, there's nothing coercive about the proposal. Do you want prices on anything else obscured and variable?
There's nothing obscured here, because you can tip zero if you want (although you shouldn't). The tip is optional.
I like tipping too. For me it's the easiest, least invasive, most effective way to say: "I appreciate you and what you are doing for me" and "I see you as a person in this moment, not as an employee / business".
why the fuck you like tips.... escapes but have fun.
>>Stop trying to use government power to stop something I like doing.<<
Like doing? LIKE? Spicy take!
I take it you've never lived abroad.
I'd be overjoyed to see tipping go simply for the reduction in price opacity.
Ideally, that would work. But, I also think that tipping is so ingrained culturally at this point that people would feel pressured to leave a 15% tip on top of what's supposed to be transparent menu pricing that already includes the tip, with the end result being that "transparent" menu pricing isn't actually transparent anymore.
I don't think so. People wouldn't want to pay 30% + tax on an already expensive meal - there's only so much people can be bullied into paying. But I think this calls for someone to try it and see how it goes.
What it's gotta be is the average tip for that restaurant rather than 15%
No way to really know what that is. 15% is the minimum acceptable tip so it's the lowest common denominator
Fair point on the unenforcability but if you could implement it somehow (maybe get Toast to keep track of the average tip revenue per user?) then it would eliminate the incentive to just inflate the tip percentage further upon incorporating in a 15% flat tip in all the prices
One could probably get the tips by pleasing it out over a period of time like this. On balance a good thing, but this is going require people to agree. As well ad certain negative forces like online troll accounts highlighting pricing changes in a bad faith way to hold off which they will not.
Unfortunately things are trending in the opposite direction, with tipping now everywhere. I see this also infecting parts of Europe and not just the tourist areas.
Luckily, Japan seems to have escaped the tipping trend.
Also, the problem of back of house making a lot less than servers is everywhere, although it sounds especially dire in Denver. How can you run a restaurant without cooks? I would love to get rid of all tipping, but servers are against that for obvious reasons.
> How can you run a restaurant without cooks?
By using pre-made / frozen meals. I recall this being a big deal in France a few years back where a large fraction of restaurants were (are still) doing this.
https://www.nytimes.com/2014/01/29/business/international/in-france-a-battle-to-keep-menus-fresh.html
Many restaurant customers (including myself) often ask for alterations/substitutions due to food preferences. For example, a person who can't eat dairy might ask a restaurant to leave out the cheese on a dish that would normally come with cheese. You can't do that if the food is pre-made.
Pre-made meals also begs the question of why bother having a restaurant at all, when you can just buy pre-made meals at the supermarket and warm them up at home, with your own microwave.
Interesting!!
In my experience in diners this is extremely unpopular with tipped employees. I’d be fine with more kisoks and counter service but I can’t imagine it going well for Denny’s type restaurants.
Mine is the same. Tipped employees like the money they are making and this whole plan is really trying to shift money away from them to towards the non-tipped employees.
Would be okay with that if you can get it done but like a law making casual restaurants all change things would be pretty unpopular.
Also it’s a kind of fight that would have really ugly politics based on who this would effect. You couldn’t pick a better white identity politics issue for red states than hurting waiters for cooks.
Perhaps tip pooling could serve as a useful intermediate step towards the good equilibrium; it's not as immediately toxic as trying to abolish tipping entirely, and once it's instituted front-of-house employees no longer have as strong an economic incentive to continue relying on tips.
I would never work at a restaurant with tip pooling
I mean, is $21/hour in Seattle enough, though? It’s the minimum wage, but waiters have always made more than minimum wage with tips. It’s just that now restaurants are forced to pay them, too.
It does seem weird that $15 an hour (after the tip credit) would be that inflationary. Compared to $9 an hour, it might be $2 extra a table
I mean we don’t have a tip credit at all. But all the same, I think we’ve adapted to a new equilibrium that’s acceptable
do people tip
less in seattle because of the guaranteed wage? seems fair. like make 10-15% standard
I’ve reduced my tip to 15% at most places, though I keep it 20% for the bar I’m a regular at. But like I said elsewhere, it’s like Cheers. The bartender sees us coming in and knows what we want and brings us our drinks without taking our order, ya know? That counts for something
I think we're heading towards a restaurant crash (sounds like Denver is already there) and subsequent reset. As prices climb, customers will begin opting into lower cost self-serve/takeout options instead. Full-service restaurants close, front-of-house staff get laid off, labor glut leads to lower/stagnant server wages, full-service restaurants become viable again.
"labor glut leads to lower/stagnant server wages"
Not if Denver's city council keeps raising the minimum wage.
I prefer self-service anyway.
Tips aren't going away. If that's your reform you have no reform, only a quixotic dream.
Specifically you will never stop me from tipping servers, and I bet a lot of other Americans are like me.
"Specifically you will never stop me from tipping servers,...."
Dilan, I love you and respect your writing, but this is starting to sound a little obsessive.
IF THE RESTAURANT BANS ME FOR TIPPING THE SERVERS I WILL FACE GOD AND WALK BACKWARDS INTO HELL.
I will absolutely tip. Nobody's going to tell me not to tip. I think you folks who are trying are doing an Objectively Bad Thing.
"...going to tell me not to tip...."
I don't have any particular view on tipping, but I admire your resolve.
In a way, this is the sort of thing that is the most annoying thing about liberalism. It's one thing to nudge me to consume less energy, which has these massive and obvious net benefits. Or to nudge me to not smoke tobacco, which is obviously enormously addictive and harmful.
But the problem is a lot of liberals don't really have a notion of a free society. To have a free society requires some respect for people's actual on the ground choices.
The vision of these liberals is that whenever people's free choices annoy them or they believe lead to some result they don't like, in swoops the government with its regulatory powers to push people to not do things they want to do through their revealed preferences. God forbid the public do something "wrong". Gotta use the government to put a stop to that.
Liberalism only works as a governmental philosophy if it is actually... liberal. And that means having a sense of proportion about using the state, which, remember, uses force and arms and violence to enforce its dictates. (Libertarians are not wrong about that point.) You can't be like Ko-Ko in the Mikado, banning everything that ticks you off about humanity.
I assume that all people have a mixture of libertarian impulses and communitarian impulses, and those impulses are triggered by different things in different people.
"Here's a problem that is very hard to solve via atomistic behavior, but would be easy with cooperation!" -- that's a trigger for communitarian impulses.
"Don't tell me what to do!" is an easy trigger for libertarian impulses.
All of us, I assume, feel each of these sentiments to varying degrees and in response to various situations and scenarios.
As it happens, you feel strongly about tipping. There is probably some area in which you feel that the prospects for solution via coordination are good, that offend other people as needless intrusions. There is no general solution for these disagreements.
Social conformance is an extremely powerful force in and of itself that can subvert individual choice. Often it gets things wrong and benefits from socially-mediated coordination mechanisms (i.e, government) to fix.
You're really, really, REALLY underestimating the number of rightwing people who are fed up with tip creep. This is very far indeed from an obsession of the left.
I find your absolute insistence here that tipping must be allowed, and in previous comments that it is in fact good that tips not be taxed to be an odd confluence. You absolutely demand that the government allow widespread income earning without taxing it because its personally important to you. That's not how democracy works.
I will tip servers in the current situation of a tipped minimum wage. But the whole tipping set-up seems weird and archaic to me. Why is it the custom to tip servers but not, say, your kid's special education aide, who makes less than a server but provides much more service? In fact, tipping at all seems like an odd vestige of the class system - rather than pay people a known living wage, it is up to the whims of people who can afford service how much workers make.
Worth mentioning that the West Coast states and Minnesota have banned a separate tipped minimum wage and require employers to pay the same wage regardless of whether employees are tipped
Have there been any studies on the effects of this on the market for servers? Any unintended consequences?
Chicago is also in the process of phasing it out.
When you dine with a large group where gratuity is included, do you still add an additional tip? If not, that suggests a way forward - include a default line item labeled "gratuity" on all bills that makes it clear that the servers are already being compensated.
edit: I realize now this is just the "service charge" model noted in the article.
Yes, I add an additional tip. 20% of the entire meal cost including the service charge. The waiters work hard!
Wait, you tip 20% on top of a 20% auto-gratuity?!
Absolutely. Every time. i want to make sure the waiter gets the money.
So when the auto gratuity is not added, do you tip 40%?
If you think the waiter isn’t getting the auto gratuity at a restaurant you should report it, not pay double!
Noodles & Company, founded and based in Denver, has a big sign at the entrance saying "This is a no tip zone." They've been doing this since they started 30 years ago.
If I ever eat there, I will leave a tip and they will not stop me.
Isn't this anti-libertarian of you? Shouldn't a business be able to choose how its workers are paid and the workers can choose whether to work there or not? Why should you as the customer get to interfere in that relationship?
Businesses can certainly decide how much to pay workers, but that doesn't mean I can't give them more.
Sure - you want to hang around *outside* the business and give people tips, you are free to do so. But while you are in *their* store, you should follow the posted signs. If someone came to a prosecutor's/defense attorney's office and had a sit in, ignoring requests to leave because "justice" do you support their right to ignore the rules there as well?
Just ban tipping for 5-10 years to break the back of tipping culture. A lot of people don't carry cash any more so you'd immediately see a cutback on PoS tipping. And most states already have infrastructure in place for unannounced health and safety inspections at restaurants. It would not be hard to layer in an additional assessment to see if servers are accepting tips illegally.
We voted on this in Massachusetts in 2024 and that presumptive solution didn't fare well, losing 64-36. This was the Question 5 wording from the Secretary of State's office¹:
> A 'yes vote' would increase the minimum hourly wage an employer must pay a tipped worker to the full state minimum wage implemented over five years, at which point employers could pool all tips and distribute them to all non-management workers.
> A 'no vote' would make no change in the law governing tip pooling or the minimum wage for tipped workers.
As an aside, since it was raised below as a potential interim step, tip pooling is very unpopular with tipped workers today, and featured prominently in the arguments against question 5. Currently, Massachusetts state law only allows wait staff, bartenders and other service employees to participate in tip pooling (and "the employer must distribute the money in proportion to the work done by those employees")², and question 5 was going to overturn that. Newspaper coverage was mostly anecdotal, but it gave the impression that front-of-house employees were all but unanimously opposed. The few that were in favor that I know personally were DSA adherents or adjacent. That's evidence that support is miniscule, though not conclusive or systematic.
[ETA]
I despair of finding an authoritative answer about public support, but here are two datapoints in the attempt to find one:
- A survey conducted out of Carnegie Mellon in February 2024 found "A strong majority of tipped employees (86%) agree that the current tipping system works well for
them and does not need to be changed (somewhat agree, 24%; strongly agree, 62%)."³
- A MassINC poll found only 43 % of voters intended to vote “yes” on Question 5, while 40 % opposed and 16 % were undecided.⁴ The discrepancy between that and the final results (>20 points off) suggests many possibilities, but one is that social desirability bias exaggerates support for this.
¹ https://www.sec.state.ma.us/divisions/elections/publications/information-for-voters-24/quest_5.htm
² Mass.gov, "Pay and Recordkeeping" [https://www.mass.gov/guides/pay-and-recordkeeping#:~:text=Tip%20pooling%20and%20service%20charges,work%20done%20by%20those%20employees]
³ https://files.constantcontact.com/0d5bb3c6be/5f54e7be-63cf-4756-a211-03833a3772d0.pdf#:~:text=%E2%80%A2%20A%20strong%20majority%20of,very%20unlikely%2C%2059
⁴ https://www.wbur.org/news/2024/09/24/massachusetts-ballot-questions-polling
If the wait staff are truly making $35 an hour plus, just include the service in the check, make menu prices reflect this and eliminate tipping.
I think it has to work in a way that sets everyone’s wages as the average of what they got in tips plus wages in the previous month or year or something.
It's not that hard. You remove the tipping system from the payment system and you put a big note on the menu saying "we build gratuities into our prices, and we do not accept tips." The problem I expect you face is that waiters rebel at this, but that's not a government problem it's a waiter problem.
How much do a lot of waiters make? And how many is a lot of waiters?
It highly depends on the place, but I’m pretty sure servers at high end places do quite well for themselves
Almost 15 years ago, I was involved with an accounts person at a high end steak house. Waiting there was a six-figure job.
Yeah I know a bartender in SF high-end restaurants that easily clears 6 figures and has for years. Now that doesn’t get you a whole lot in SF, but he’s doing all right
Mega based take
"Denver’s high minimum wage, especially its low tip credit, has unintentionally undermined the financial viability of full-service, labor-intensive restaurants. "
Entirely predictable. The single funniest line in the entire article is that new openings are mostly corporate, not mom and pop. Same result as when you introduce rent control. It' just baffling how that works every single time.
Another way to spin this is that there’s a reason why small businesses are given exemptions from a variety of regulations including but not limited to nondiscrimination provisions of the Civil Rights Act. See Matt’s excellent post “Small business is overrated”
that would be this one specifically: https://www.slowboring.com/p/small-business-is-not-the-answer
I would call it a useful post but not excellent as it is quite flawed in some areas
I entirely agree with the efficiency points as well as his deconstruction of Anti Big Biz reflexive hatred (rather prevalent on the LEft but also on populist right in its own form) and elsewhere in a comment I think I said one has to avoid the fetishisation of small biz / Mom & Pop.
HOWEVER: it is taking a very static understanding of Small and Big as if they are static and unrelated, and completely ignores firm evolution. Many a Chain and Big Firm started out as a Mom & Pop and grew upwards, although that is much less prevalent nowadays especially in "meat & potatoes" industry.
A lot of small business is Churn - create and die in relatively shortish lifecycles w/o net job creation. But out of the Churn somes some break-out businesses (and here I am not talking the unique hot-house world of IT and VC as it emerged from late 90s to present - although I think the App Era is now maxed out).
It's very hard for Gov policy to differentiate these successfully (or say without a stifling bureaucratic burden - and bureaucrats are crap at venturing).
So one does need to have attention to smaller end of company sizes and attention to the effects of strangling off inadvertantly a pipeline of bog-standard companies - not the VC cutting edge industries - generating some new up-and-comers.
Also as a socio-economic argument for a certain entreprenurial class that is deeply sociologically important to America historically and has a role to play beyond the direct economic one in our overall sense of being able to make-it-big.
Blind fetishising small biz as better than big is an error, but equally an error to treat them as Yglesias did there as merely low productivity hang-overs (although one really does need to understand a lot are there, but those smaller sizes [here again ex-IT-VC rocket-ship hyperscaling] are a valuable "soil" in which in the ordinary industries world some new competitors should be able to emerge if not strangled off by regulation and policy that is blind to them.
Of course another aspect is not to mistake Entrepreneurial Start-up World as = 100% to "Cali-VC investor world focus" (sure the Microsoft google stories are cool and a real sub-set but not the only thing).
“Entirely predictable” isn’t something I’ve seen evidence for elsewhere (eg Seattle and NYC). Care to share?
I would imagine that the ex ante prediction is based on the question "is the tip-credited minimum wage in excess of the prevailing market-clearing wage without the minimum?" If it's mostly non-binding (which it might be in Seattle or NYC but not in Denver, I don't know the numbers) then you expect much less distortion. This is kind of the Econ-101 case against minimum wages and in favor of keeping them low where they do exist.
The Econ-102 case that minimum wages are actually about surplus allocation and a counterweight to the presumptively-unequal bargaining power between employers and employees depends on actually having a surplus to allocate. If you put a price floor on labor then industries with a marginal economic product below that price floor just cease to exist. And Restaurants as a class are often very low margin -- people appear to open them because they find the restaurant business appealing rather than because they're an especially good use of capital.
(The Econ-103 case about whether it's better to have fewer, better-paying jobs versus more, lower-paying ones seems like a values / empirical call about the efficiency and social effects of government support for fewer people at a higher level versus more people at a lower level.)
So the thing at least in the NYC case (but I don’t recall Seattle too well) is the minimum wage floor was well below the prevailing wage. I do remember there were job losses in Seattle but it was at around the wage floor level.
What’s odd about Denver is the minimum wage floor is well below the hourly rates Matt was quoting - up to 38 for servers and 25 for back of house. So I don’t understand how 18 and 19 dollars an hour can be binding for these outlets in distress.
The issue is that even in a medium-sized city in TN, my nephew can make $30 an hour in tips. Having to pay the waiters more increases the disparity in earnings between cooks and waiters.
That’s the most egregious part. The back of house work harder IMO
Might be binding with respect to the non tip credited portion?
There isn’t any tip crediting in Washington State. NY has it though.
Yes, this makes sense
California does not have a tip credit, yet supports a tourism worthy restaurant industry.
The thing is, Denver actually sucks
Few understand this
A lot of people seem to think it’s still 2010 and are unaware of how much low-end wages have gone up. Even babysitters (usually college students) typically cost around $25/hour now. Which is great, but it makes debates where people are acting like lots of Americans are making $10/hour feel like crazy talk.
I worked in restaurants in high school and college and those hourly numbers really are eye popping. Not that I have a problem with people being well compensated but I can see how it would create a dynamic that isn't sustainable.
A babysitter in DC is $35 an hour and supply is so constrained you try to hide their identity when you find a good one.
Sounds like the price is too low. Why are babysitters in DC so underpaid?
Yes, I should add that it’s $25/hour in flyover country.
I really took working in college towns for granted when it came to childcare. Everyone had a Rolodex 25 names long. Granted, you had high turnover as women graduated at took jobs with investment banks, but that was easier than the shiftless faceless mass of nonprofit workers who can’t get their shit together.
I live in DC and our date night babysitter charges $20/hour for one child (more for 2). No, you cannot have her contact info. If you are talking about full time
Nannies, who are not babysitters, that is much more expensive though
Before the pandemic the going rate (in flyover country) was $10-12. Date nights are almost unaffordable now.
I got paid $10/hr in flyover country in 2009. The rate didn't change for a decade?
In Ohio last week, went to a restaurant with a friend who's daughter was the hostess --- just got a raise to $13 an hour. When we left four years ago my kids were getting under $10.
When I come across something like this, or about unions making film production in LA unaffordable, I despair a little bit at how these counter-productive policies could be reversed. Because one of the characteristics of left-of-center thought is, when we institute a policy, we are never just trying something to see if it helps: we are correcting injustice and improving on the past. The way we on the left self-describe is shot through with this: we call ourselves “progressive,” we say the arc of history bends towards justice, etc. So “never roll back something we’ve implemented” is practically an article of faith with us, regardless of the empirical results.
I was trying to write a similar comment but I’ll just superlike™️ this one instead. There should be much more policy experimentation without committing, even tacitly, to keeping them in place forever.
In principle, Kamala Harris could have said something like
> In early 2021, the economy was a mess (through no specific fault of anybody's), and what we remembered most clearly was the anemic recovery of 2009. ARRA should probably have been bigger. And we hadn't seen a major pandemic in a century; our economy today is nothing like the one we had in 1920. So we pushed for a big recovery bill, and in retrospect, the job market was more resilient than we realized. The recovery bill over-cooked inflation, and if I had it to do again (God, I hope we don't have to do that again), it would have been smaller. I think everyone was operating with the best intentions in mind and the best available information, but the world is complicated beyond our best ability to measure, and thankfully we very rarely see shocks to the economy like that one. We'd do it differently if we had it to do over, but I think we gave it our best shot.
well, that would have been nice. Unfortunately that does not seem to be how the political world works. Never admit oversight or misunderstanding or error, never accept blame.
I think this is attributable to the “gotcha” quality of political advertising—nobody wants an opponent to run no-context clips of them admitting error. I have a hazy recollection of this hurting some candidates in the 90s/ early 00s. It sucks though. One would hope that voters would assume that there’s missing context, but I guess it is or was effective enough that candidates have been terrified into submission.
I've heard that this was the reason for the stupid phrasing of Bush's "Fool me twice....you can't get fooled again." They didn't want a sound bite of Bush saying "shame on me."
“I don’t want to get made fun of for saying ‘shame on me.’”
*monkey’s paw curls*
That checks out. Thanks, I hate it.
That is wayyyyyy too complicated for the Median Undecided Swing Voter! See also: “If you’re explaining, you’re losing.”
Although thinking about it more, maybe something like California rolling back CEQA is a counter-example? Maybe there's hope!
I hope it ends up that way, but I’m a little bit concerned that the vetocracy will find novel strategies. Fingers crossed though!
I think it's different when you roll back a policy that everyone who voted on is mostly dead
That assumes you take these restaurant owners at face value. California, Seattle, Nevada and a number of other places have no tip credit and thriving restaurant scenes. So what’s wrong with Denver?
Article says "tourism volume", which sounds plausible.
Agree. It feels like an outlier to be so expensive and suffering at the same time. I’m going there this weekend and will keep my eyes open.
I went to Rioja in Denver for an anniversary in June and it was excellent - highly recommended!
Wonder if minwage: cost of living ratio is off
But the market wage is much higher so this would take care of any misalignment of that ratio.
Generally things get "rolled back" by not being maintained. Or things can be passed with time limits so that they can sunset when conditions no longer apply.
Some of this comes down to an outdated understanding of capitalism from the 20th century. Yes, money always wins but that will usually means selecting for efficient chain restaurants over locally-owned ones (that would theoretically include immigrant and community entrepreneurship) and not some proletariat of service workers. Like many things, hero/villain narratives are much more clear before progress is made when the game board is more heavily tilted.
I could see a co-op system potentially aligning incentives better (a brewery near me switched to a co-op model) but it's hardly a panacea. I'm sure plenty of workers would NOT like to assume the financial risk that comes with ownership.
To bring a foreign perspective: many tourists to America find that tipping culture causes service that is 'too good' i.e. pushy, intrusive and overly servile.
This will get me cancelled in the Slow Boring community, but even people in service jobs deserve dignity and for the position to offer a sustainable long term lifestyle. Being a waiter in France isn't something you do for a few years in your teens - it's a real job that a man in his 50s can respectably hold.
The West decided a long time ago that there's a fundamental mismatch in power between workers and the bosses, and that minimum wages are a way of counteracting that. And yes, that means many businesses that would otherwise be viable aren't under a stricter labour regime.
And to really invoke an Australian perspective a Denver restaurant could go tipping optional to bring down the effective price of the meal.
In the piece(and my experience) waiters actually make a decent living. It is the non-tipped back of house people that end up not making as much.
Tipping is optional but there is still a social pressure for it. The equilibrium the One Fair Wage types would like is for the tips to be folded into the prices and then the restaurant can just pay its staff like a normal business.
It seems like the service charge was a pretty good solution. It forces front-of-the-house to share with back-of -the-house. Some people will still tip on top of the service charge anyway.
I don't understand why there isn't a lane yet for restaurants to market 'honest prices', - no service charge, no tipping - people are obviously annoyed with the ubiquity of "just a couple questions", why can't this be leveraged? (and staff get paid based on merit, rather than regressive customer bias)
https://www.nytimes.com/2020/07/20/dining/danny-meyer-no-tips.html
I think it is hard to be the first mover off the tipping equilibrium because the wait staff can leave for better pay elsewhere
calling your restaurant “tipping optional” would be meaningless, the nature of tipping culture is that you have to either prohibit tipping (or have a well-flagged service charge) if you don’t want normal people to feel they have to tip
I don't think it's even possible to prohibit tipping. Customers like tipping and probably care more about their waiter than about management trying to limit the waiter's compensation so they will tip anyway.
“Customers like tipping”
Citation needed.
This. I realize internet-land is full of contrarians but I struggle to think of even a single person I know in real life who likes tipping. What makes service work fundamentally different from any other type of work and thus deserving of special consideration? I just don’t get it. The Square payment readers that have proliferated, especially since COVID, are a plague.
Yeah, I mean special education aides, nurse aides, and social workers deserve much more than they get.
The fact that so many people do it is evidence they like tipping.
That is not true. I always tip 20% or more and I hate doing it. I do it because I frequent the same restaurants over time and, because there is a social expectation that you tip, not tipping would bring negative attention to me. If there was a different tipping culture, I would act differently.
You’re a smart guy but this is an idiotic comment.
I hate tipping and I tip.
I like tipping at Waffle House because they make $2.13 plus tips and the meal was fantastic, the service was terrific, and the bill was $11. You can drop a $20 tip and feel like you’re really making someone’s day (someone who’s busting their butt). It’s a good feeling, and I think they make a fair living from people like me despite the low wages.
It’s less of a good feeling being obliged to leave the same $20 for lackluster service and food on a $100 bill.
I like tipping well at my bar because I’m a regular for trivia, the bartender knows our drink orders when we walk in the door and just brings them to us, and we’ve built a community there - it’s our Cheers. It would do no good to skimp on tips there.
But at other places where a tab for 2 with drinks starts to run $80, as is usually the case in Seattle, I’ve reduced my tip amount to 15% knowing that they’re making $21/hour plus tips. I still want them to be able to afford apartments and the necessities of life in our high COL city, and $21/hour isn’t some indulgent wage here.
https://www.slowboring.com/p/denver-piece/comments/dilan.esper.comment
I hate tipping and only do it because I have to. If a restaurant put up a big sign saying "tipping optional" I would definitely not tip.
Likewise. It would be unfair and utterly inappropriate to take out my dislike of the US tipping "system" on a server. If you don't intent to tip, don't go to US restaurants.
So yeah, I tip faithfully and somewhat generously. But that doesn't mean I like the system! It just means as an actor of one, it's nothing I can change.
I bet most of us would and, in my opinion, those of us who did would be better people because waiters deserve the money.
Bringing up morality in your argument is ridiculous.
Why do waiters deserve money that their employer isn't paying them? Why shouldn't that money instead go to my garbageman or my auto mechanic or the grocery store clerk?
Because they are providing a personal service to me that I appreciate. The same reason for all tipping.
And by the way, why is it your business to decide who "deserves" money I choose to give out?
The whole point of the service charge is to give deserving servers (and every other employee) enough money through a clearly stated premium. Do you avoid restaurants with an explicit service charge? I prefer these businesses.
I want my money to go to the waiters though. So I tip on top of it so it does.
Indeed, under California law I have a right to insist my tips go to the waiters. The restaurant can't appropriate it and split it up. That's a good law.
I think a well-flgged service charge is enough in most cases. Most people I know will not add a tip if the restaurant has added its aotuomatic 18% surcharge for parties of 6 or more.
I once had lunch with 2 foreigners who were new to the US. In their country tipping is optional and a reward for good service. They were unhappy with their waiter so chose not to leave a tip. The waiter was upset and had the manager come over to explain that was just not done in the US. They left without tipping.
(I sat for company but had already eaten before meeting them).
Tipping is always optional, there's just a strong cultural pressure to do it.
"The manager would like to speak with you" is a definite inversion of the trope!
One of my problems with the tipping model is it assumes everything is under the server's control. Maybe the food came out late and cold because the server was lazy, or maybe the back of the house is a shambles.
Yeah, I've had bad meals where the server did a fine job but the kitchen screwed up. There's not really a great way to send the right feedback there by leaving a smaller tip....
American servers are a bunch of brown nosing jagoffs. European servers are perpetually on their smoke break. Japan has a service button. A beautiful invention that would never work without Japan's deeply ingrained cultural anxiety about inconveniencing someone else.
My favourite model is Vietnam's, which Americans generally absolutely hate.
The staff stand far away, often in a cluster together near the kitchen or cash register. When you want something -- to order, to get another drink, to get the bill -- you yell out "Em ơi!" (literally: "Hey you!") across the restaurant to get their attention. (The actual volume depends on the establishment and their distance but it definitely isn't the servile American quasi-whisper "excuse me, if it isn't too much trouble could you get me another drink when you have spare moment?")
Also since there's no tipping there's no concept of "your" server, so you can just ask whoever is closest and they will help you.
This explains so much of why things are they way they are whenever my family dines at Vietnamese restaurants. Weird how that norm can carry over even when all the (FOH) staff aren't Vietnamese, like at a VROCK, or the place next to my work where it's a buncha kids from the nearby college. I always thought it was just a weird coincidence? The one time we got "regular service" with a dedicated waiter who brought refills and the bill without being asked, that was at a $$$$ high-end place (three-figure pho...), and it was honestly kinda uncanny. Gonna feel a lot less self-conscious from now on about "bothering" the staff at such places. The More You Know(tm)!
Mainland China probably has the best model, though all good patriotic Americans should despise it just because. Being a serve in a busy establishment in that country is...get this...a desirable job.
So servers there work hard and give good service. Many establishments are family-owned, as well.
So yes, believe it or not, the lack of a server looking over your shoulder to see whether you left 15, 20 0r 25% does not render service any worse.
The culture of service work as a profession is one of the differences between the US and Europe, and is now pretty deeply rooted. The thing about culture and regulation, though, is that often culture will win out over regulation, or regulation will have to be fit to culture if the regulators want to maintain the appearance of control. One of the things we are failing to note here is what tipping offers to the customer—it has traditionally been a way to demonstrate that one is “flush” and can impress their friends by paying extra for service, as well as a way to maintain the illusion of control over what one pays, even if in practice that payment tends to fall within a pretty narrow range. Getting rid of tipping might make economic sense but it clearly is going nowhere in the USA (Don’t forget, last year’s election might have turned on “no tax on tips”—it was at least a very popular promise).
Traditionally there is little to distinguish a "tip" from a "bribe" as well. Though obviously most tipped employees no longer have the ability to deliver much in the way of favors in exchange.
I think you have a point. We were recently in Italy, and one of the things that bemused me was how much of the service staff were middle aged men, something you rarely see here unless it's in a very high end spot.
"Being a waiter in France isn't something you do for a few years in your teens - it's a real job that a man in his 50s can respectably hold."
But wage differentials can't explain this, because US waiters make about the same.
The national median US waiter makes $36.5k/year. According to the figures I can find, French waiters average about €21-23,000 / year*, perhaps with a modest bump down outside of major tourist areas (to ~€17-19K). I took a brief look at other European countries and they're a little lower (Spain at €15-17) or a little higher (Germany, at €27-33).
This is rounding off a lot of distinctions: the variation in pay in the US is probably greater than that across most of Europe, and these figures don't factor in different kinds of government support or provision of services (which of course, the US has as well - plus many things cost more in Europe, too). I don't see how you can tell a story about these financial differences that explains the social discrepancy that you're reporting.
* https://www.erieri.com/salary/job/waiter-waitress/france/paris, https://worldsalaries.com/average-waiter-waitress-salary-in-france/ https://www.salaryexpert.com/salary/job/waiter-waitress/france
> even people in service jobs deserve dignity and for the position to offer a sustainable long term lifestyle.
I absolutely believe the PEOPLE deserve dignity. Why should the POSITION offer a reasonable chance at a lifetime career, if even a grizzled thirty-year veteran is not really offering added value over somebody six months into the job?
Half the people have IQs below 100, man. And we don’t have a ton of factory assembly line work that provides a good living anymore.
They may not have them in your state, but if you’ve ever been to a Waffle House, especially on a Saturday or Sunday morning, you should watch them call out orders and the way the grill guy sets out plates in a row with like an onion at 4:00 and cheese at 10:00 to help them memorize the orders without the benefit of being written down. It’s kinda mesmerizing. They have that system because a lot of their cooks are hired on work-release and are illiterate. But man can they cook! And the waitresses usually don’t speak proper English and half of them have face tattoos, but they’re sweet as pie. Hard to see them doing much else, but they bust their butts and deserve a little piece of the economic pie too.
Without opining on the economics of the matter, I approve of the paean to Waffle House.
It’s the best thing the South has going. I eat there soooo much whenever I visit the fam in Mississippi
I respect and honor my server at Denny's. I'd prefer holding that position to not be their highest aspiration in their professional life.
My impression is that the pushy and overly servile demeanor is demanded by management as part of training
We ARE tipping optional. Anyone can be a jerk and stiff their waiter. We are just good human beings and don't do that.
Which is why we have to end the option by banning tips, so that good human beings won’t undermine fair pay.
A man in his 50s can still respectably maintain a career in the US as a server-although it's likely that he would either choose the more stable, less Wild West route of going into management, or promote into bartender if he wants to stay in the server environment.
And given the reputation the Australian hospitality industry has earned for wage theft...maybe be careful about those thrown stones.
So it would appear that waving your hand and saying “there are no trade offs” has failed as policy (again)
The problem is progressives, alongside most of the population if we're being honest, don't believe prices reflect a precariously low margin balance between revenues and expenses. They think business owners are all stinking rich vultures using accounting trickery to lie about their fat returns.
I mean for big pharma they’re right but not so for restaurants, grocery stores, and even healthcare service provision
Are they even right for big pharma? I think once you amortize the cost of new drug discovery the margins are much thinner?
I’m pretty sure that they’re still ultra high margin
I looked this up, and you're right. Full disclosure: I used GPT-5 thinking to find this data and do the calculations below, so there may be errors, though it looked right when I eyeballed it. Chat log: https://chatgpt.com/share/68b5f616-c26c-8002-88a8-11f234bb3240
Raw data on post-R&D margins per sector:
https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/margin.html
Takeaways: Drugs (pharma) is 10th of 91 industries, with 25% margins after R&D amortization. That is ~1.5 standard deviations above th median of ~11%. Not super out of band or anything, but definitely on the high side.
Ideally using something like Return on Equity would be more applicable here. However, so much of the value of pharma comes from intangible assets, which are not recorded in Book Value under US GAAP. Adjusting for it using Ewens' methods in the paper below would bring US Pharma ROEs from low 20% to ~10%, in line with the rest of the US market. But then it becomes a question of how valuable the US should allow these patents to be.
https://www.nber.org/system/files/working_papers/w25960/w25960.pdf
The high margins are reflective of the high risk inherent in the industry.
Unlike with the social network based tech firms I think its unclear whether or not the pharma companies are capturing true economic rents. The question surrounding whether or not pharma are vultures or not involves the cycle:
1. U.S Gov enables high Post-Tax Income/Sales (Net Profit Margin (NPM)) through strong patent protections and little to no gov level price negotiation. US Consumers pay significantly more than they would have under a different system.
2. While firm NPMs are high, the value is being driven into significant R&D.
3. More of the value of the firm is derived from this R&D then other industries/regions. Post-Tax Income/(Firm Book Value + R&D Value(Intangibles)) is in line with other Industries after accounting for intangibles there. This is using the Ewens method below.
Thus, the answers to whether or not Pharma can be milked fall under:
1. Is the marginal R&D result worth or not worth broad based higher costs to the consumer?
2. Is the capitalization of intangibles method overstating the value of R&D?
https://www.nber.org/system/files/working_papers/w25960/w25960.pdf
If only someone had foreseen this...
I know something about the restaurant scene in Denver. What’s missing from this article is the insane inflation in real estate prices in downtown and then RiNo (river north). This is also missing in any discussion about DC. It’s a little baffling to me, because it’s a symptom of the real problem with commercial real estate coming down the pipe. Companies can’t afford the rent, and the commercial owners can’t find tenants to keep up their loan payments.
Kelly Whitaker isn’t mentioned in this article. Neither are the Italian places in sunnyside or the old school Mexican places in Santa Fe (a neighborhood). The reason those places hold on is because the real estate is cheap (wolf’s tailor, Garibaldis, the cherry tomato) or they have huge outside investment and people will pay NYC prices for the intense service experience (Tavernetta, but really Frasca).
Not just a Denver thing, but restaurants are going to need to hire fewer servers. That’s just the way things are going.
I think the high cost of real estate due to our low interest loan binging since, well really the Greenspan era, is causing systemic effects. I still remember my real estate agent neighbor telling me in 2003 that they could raise home prices because the low interest would offset the increase. And here we are now with high prices but not so cheap interest rates anymore. BTW she wasn't kidding about prices rising---the house across the street sold for $178,000 in 1998...by the time I moved in 2003 it was going for close to a $million.
I’ve been hearing in a lot of cities about a glut of commercial space, with zoning regulations requiring ground floor retail that ends up sitting vacant. I don’t know how to reconcile these two stories.
definitely not an expert, but my understanding is that there are two big things here: 1) landowners are very reluctant to lower rent because it may force harsher terms on their financing. 2) restaurant space is usually rented as completely unfurnished - the tenant is responsible for installing the kitchen, booths, tables, etc. the expense is usually significant.
What two stories? The lack of housing and the glut of commercial space?
The glut of commercial space I've heard alleged elsewhere and the high price of commercial space alleged in this thread.
It’s “extend and pretend.” David M turned me on to the story:
https://open.substack.com/pub/postsuburban/p/why-do-commercial-spaces-sit-vacant
This is a classic. Glad to see it linked because I forgot to save it.
The "x months of rent free" solution is really common and quite appreciated during the build-out process. My friend who opened a coffee shop figured the building owner was being really nice. And he actually does seem pretty decent (especially since the guy who owns the buildings across the street is a total jerk) though this setup incentivizes him to do the nice thing.
This is worth reading for everyone.
Yeah, one of those pieces where afterward you really feel like you better understand the thing in question
Probably need to fix rents and wages
100% correct. It’s a model issue.
Is the basic dynamic here that reducing tip credit increases the non tip wage for servers, but patrons didn't reduce how much they tip, so it's a price increase for patrons and an imbalance with other employees?
I think labor activists have good reasons for opposing the tipped wage rules but it's hard to fix them without actual culture change, and the culture seems to be going in the wrong direction.
While I know labor activists oppose tipped wage rules, how much do they actually publicly campaign against tipping on the grounds that it is unnecessary? Because certainly one of the things I've noticed is that on-line communities that skew towards progressive values -- which you'd think would have above average awareness of what "labor activists" think -- are also the places I'm most likely to see militancy on the importance of increasing the percentage that you tip because restaurant servers are allegedly living in abject poverty.
I think the peer social pressure to tip a lot has declined while the pressure of the server literally holding the toast terminal while you punch the number in has increased.
Fair point about the server holding the terminal. I've noticed an increasing number of terminals also come with preset percentages starting at 18%, so you have to manually input something lower. (I also just recently for the first time encountered a terminal where the lowest preset was 20% and the highest was 30%!)
Several local restuarants (not all) base the tip total on the *post* tax amount, which I find genuinely offensive.
Oh yes, I've caught that several times! I always make a point of mentally calculating what 20% of the final bill is to ballpark whether the tip is being calculated on the post-tax versus pre-tax amount. Another tricky one that I've encountered is the restaurant applying a substantial (typically 15 to 18%) "service charge" for large parties, PLUS having a separate tip request on top of that.
I am 1000% behind the large-group service charge--holy crap, we're a big headache for y'all, and I'm kind of sorry--but SPELL IT OUT. Then we're all on the same page and everything is gravy.
The charge for large parties makes sense, there are so many stories out there about large parties not tipping that it has to be done (large groups tend to require a lot of service and tend to stay longer). The way to approach this is to see that a service charge has been added and therefore an additional tip is optional—maybe add 5% if you like, or don’t.
I'm assuming that's just part of the point of sale system and not something they are trying to sneak by you but yes it's always awkward to try to clarify.
That’s always what I based it on anyway
yeah I was going to say I recently saw 20-25-30... maybe if the preset is above 20% we should just agree to tip zero.
18-20-22 is whatever.
Always bring cash and you avoid this problem.
Tip creep/tip inflation is truly one of the trends keeping America from going cash free.
the working hypothesis is something like: if you can afford to go to a restaurant then you need to tip as much as possible and be grateful you privileged prick
I think it isn't unnecessary in most cases, and especially not by the lights of the activists. At fancy restaurants like the ones described, you would want to still tip but a bit less (an even harder change to explain). And at cheap restaurants I think relying on management to make up the tipped wage is overly trusting.
Yes, you are correct.
I am always skeptical when I read these stories - it feels like restaurant owners doing special pleading on the general challenges of running a successful business. Half of restaurants say they’re going to close this year? Come on, that strains credulity.
Genuine question I always want to ask - how are restaurants in Europe profitable then? They are labor intensive. They pay waiters solid wages with effectively no tipping. They turn the tables less frequently than American restaurants as people linger. And if anything, the prices are lower and markups on wine are smaller.
And yet you don’t hear these sob stories from restaurant operators there. So what’s their secret?
I was just in Portugal for two weeks. The minimum wage for waiters and restaurant workers, in Lisbon and Porto, the two big cities, and the top tourist hells, was the equivalent of about $5 US. The waiters will accept tips but don't expect them. Their secret is that Europe, especially the poorer countries like Portugal, is not nearly as prosperous as we are. Uber drivers in Lisbon were starving too and I heard half a dozen stories about how hard it was to make a living and pay the rent w/o working two jobs.
No disagreement that Portugal is poor, but the Paris region is quite rich. And it has no shortage of restaurants.
And no shortage of tourists to fill them. Denver does not have this luxury.
Well then maybe they should not have put the airport halfway to Portugal.
/this is just a shitpost, not a policy comment
Are the restaurant workers rich? Paris famously has no ugly underbelly, right?
Dude, the underbelly is not made up of waiters at bistros.
Most of the staff at those establishments are not waiters. I’m just saying that those people aren’t wealthy living the high life overall.
Sure but that has nothing to do with the issue of whether low tip credits makes it unaffordable to run a restaurant (which is what Denver restaurateurs claim).
The major Iberian tourist cities are a bit of an edge case as they have rents and cost of living pushed up by heavy tourism (without the policy choices to take advantage and compensate for that) while also still being fairly poor. Europe is poorer than the US but a lot of popular tourist cities like Paris or Rome don't have this problem.
IOW the cost of living is vastly lower in Porto than Cincinnati.
Many fewer servers. Like 1 at many “casual” spots. And that server makes almost nothing, but has healthcare and retirement taken care of by the state.
Additionally, most of the really low end restaurants in Europe own their building (same in NYC) so they don’t go out of business. There are also varying subsidies for restaurants in other countries.
Theres a real crisis though of these low and mid level restaurants closing in Europe and the UK though. Pubs are collapsing.
Having just come back from Europe, I can say there was definitely more than 1 server at the restaurants (not super high end) we went to.
And if that is the secret, is there a particular reason American restaurants haven’t adapted? Would the American consumer stop going to restaurants if there were fewer servers?
Because we like fast service
American service expectations are very very different.
Isn’t it roughly true that half of restaurants close in their first year, and that even among established restaurants, a significant fraction are close to closing at some point in any year?
Yeah for sure - that’s why I don’t buy that it has anything to do with low tip credits.
Literally zero to do with tip credits. California, not exactly a cheap place to do business does not even have one and yet lots of restaurants that would describe themselves in an identical situation.
the graph seems to indicate that this decrease is significantly larger than the usual fluctuations. of course there's not a lot of evidence that it's that and only that change. (as a comment mentioned this it not happening all over the city. though of course it's not surprising that some areas are more resilient and others - where other things are also negatively affecting businesses - are less.)
I was recently in Norway, which is a very expensive country without a tipping culture, although that is changing (pretty much all card machines now have a tipping option and not just in tourist areas).
I just looked up the stats, and the median salary in dollars for waiters in Norway is about $18k with the average about $30k. $30k is a bit under $15/hour, assuming full-time employment. Meanwhile the post says that servers in Denver are getting double that or more while Denver has a significantly lower cost of living compared to Norway.
https://www.erieri.com/salary/job/waiter-waitress/norway
But the restaurant in Denver only needs to pay $15 an hour! The rest is coming from tips. That’s why I don’t buy the whining from the restaurant owners.
The difference is the cost of living, and the fact that what someone pays at a restaurant includes the tip cost. Maybe it would work out better if people in the US didn’t have to assume they will need to add 15-20% for the cost of the food.
In another comment I mentioned Casa Bonita, which is in a Denver suburb, and they pay, controversially, $30/hour for wait staff with no tipping but a 15% surcharge.
And over half of the commenters sang to themselves Cartman’s Casa Bonita song in their heads once you mentioned it
Casa Bonita is a weird case because it only exists as a weird joke
Would slightly lower labor costs for only a portion of the restaurant’s staff really drive noticeably lower menu costs? I’m skeptical.
Yeah, the other thing is now we’ve reached an equilibrium and restaurants know what they can charge for folks to pay. They’ve staffed for that equilibrium. If you increased tip credit back to previous levels, management would keep the same prices and pocket the profits. Is that the end of the world? No, they might use that profit to expand the restaurant or improve the food or something, but in many cases they wouldn’t.
Once you have an equilibrium there are consequences to changing it, even if that equilibrium wasn’t the result of optimal choices. And I doubt we’d see lower menu prices
Overall I have a theory that restaurant profit margins have increased materially post-pandemic and restaurant owners just don’t want people to know it (and would rather people think price increases are tied to food inflation or whatever).
It’s not slightly lower. You may be skeptical, but that’s exactly what the restaurant owners in the OP are saying.
I was just watching the British Fallows restaurant YouTube channel and they said their menu prices are 4x what they cost the individual dishes at including ingredients and overhead. So any changes will have a 4x effect in their case.
I have heard this many times but it is obviously a silly model for pricing. 4x variable costs, sure, but not fixed costs (because you can reduce the impact of those via throughput).
Anyways what all of this confirms for me - and this is not some massive secret - is that chefs (like many artists) are generally terrible businesspeople.
Additionally, the median wait staff wage in Norway is about $9/hour ($18k a year). I’m not sure why the average is almost double the median. I can’t find the median for Denver to compare, but this says the bottom 10% make $28k while the top 10% make $66k. Either way a lot more than Norway’s median.
https://coloradosun.com/2025/03/18/do-most-metro-denver-restaurant-servers-make-less-than-40000-a-year/
Right but again none of this has anything to do with what the restaurant’s costs are!
It's showing that in Norway, where the COL is higher, waitstaff generally get paid the same or less, especially when tipping is factored in, compared to Denver. Hence my original point. Labor costs do matter.
Official numbers are difficult to assess because they include both doner counters and three star restaurants. I haven’t been in Norway since January unless things have changed in six months they are relying heavily on immigrants in the restaurant industry.
That’s surprising! I assumed that restaurants in Norway were so expensive because of labor costs!
labor in europe, compared to the us, is cheap.
waiters aren't making $30-$50 an hour in europe.
But to be clear the $30-50 per hour isn’t paid by the restaurants! The restaurant is only on the hook for $15 of that in this story, and yet they claim that is unsustainable. I don’t buy it.
because it's part of the overall ticket that goes into a person's choice of whether to eat at a restaurant or not.
Ok but the very specific claim the restaurants here are making is that they need a bigger tip credit so that they can pay their servers less and survive. I still fail to see why that’s needed given the situation elsewhere.
a larger tip credit would reduce servers' wages and reduce the overall ticket.
i have no idea if it would actually be of sufficient magnitude to alter people's eating choices, but it's moving in the right direction.
Every other business needs to pay the full minimum wage.
Kinda. Maybe for folks living on the margin. But we’re not all that rational, there’s a reason why all prices end in .99
The restaurant isn't paying the $15/hour either. You are.
How so?
Right now in Denver, minimum wage is ~$18 and restaurants get a $3 tip credit, so they pay $15.
What’s germane to this story isn’t how much servers make in tips, it’s how much restaurants need to spend.
The restaurant is just a pass through for your money. In exchange, they give you food and a nice time out.
I'm not going to do any serious research info this, but DC and Denver and such seem to have a higher minimum wage than Paris.
My understanding is that servers in Paris are paid well above minimum wage.
While this may be narrowly true, I would bet any amount of money that France has a higher proportion of workers being paid minimum wage than the US does
The first page of Google results is telling me otherwise but I genuinely don't know. What source do you have in mind?
I haven’t searched - but the fact that (as someone noted above) you see middle-aged servers, that being a waiter is considered a “career” unlike here, and that they don’t need tips to supplement their income all suggest it’s not a minimum wage job.
And the popular Paris by Mouth substack says they are paid a “living wage”. https://parisbymouth.com/tipping-in-paris-everything-you-need-to-know/
This could be explained by labor market in France being much weaker overall. So while middle age folks have many more options in most US metros, in France being a server is a relatively competitive employment option.
Higher density and less car-centric urban layouts result in more customers? More generous social benefits mean that salaries don't have to be as high?
I'm just spitballing here...
Outside of Michelin starred places (which aren’t any cheaper in Europe), restaurants in Europe have half the staff of their U.S. equivalents which is why the meal takes twice as long.
This just isn’t true in my experience.
Which part? I spend a couple months of the year in Western Europe every year and have eaten in 1-3 stars all over the world. I stand by both points (server-customer ratio and Michelin star costs). (A bib gourmand is generally cheaper in Europe and even in Scandinavia.)
Ah I see you were just in Norway. Scandinavia doesn’t count.
Whoops wrong person. Sorry.
California, oregon, washington etc have high min wages, and and also had decades of a relative staff pay gap. Denver has calcified itself in this restaurant model. The states above, due to no credit, give their restaurants leeway, thanks to a Trump first term rule (a stopped clock situation fwiw) where establishments could enforce tip pooling and stipulate a percentage to be distributed to other staff. 3% of food sales to the cooks for instance to bring up their wages to market (everyone NEEDS cooks and more of them). This rankled certain staff, but thrilled others as you may expect, and has been done more across the board and the pandemic was an opportunity to ingrain it culturally. Denver also needs to just learn that the middle class of casual dining restaurants just aren’t profitable with a heavy service staff. Don’t compete with Chili’s, find a niche.
>how are restaurants in Europe profitable then?<
You could ask the same question about restaurants in the US. I've been abroad for a spell, but I'm now back in the US and in the latter half of August I've eaten in (pauses to recollect) a dozen or so nice places in America, including a Michelin-starred place in SF, and (yesterday) a seaside restaurant in Gloucester, MA that had a long queue of patrons 20 minutes before opening (reservations not accepted).
Many restaurants are doing find in the US. OTOH, it wouldn't shock me to see the restaurant sector's share of US gdp has dropped a bit. Oh well...
The restaurant business really is brutal though. Restaurants that are full every day at lunch and dinner pretty routinely close because they were just not able to make enough to meet expenses.
I have always assumed this is because chefs, like many creatives, are just really bad at business rather than being an iron law of restaurants. It’s literally the entire plot of The Bear!
I suspect it's broader than that, but I know basically nothing about the difficulties of running a restaurant.
100% true. Also, accountants make soulless bad places to eat and enjoy because of what they value and don’t value. A chef worth his salt flat out will not work at a place where he lacks say or directional input. One needs the other. The bear actually does a great job at showing needed practicality skills (but it’s hard for me to watch).
I’m late to commenting, but one thing I didn’t see addressed in the otherwise super interesting article (thank you, Halina!) was the prior explosion of the Denver restaurant scene. So I’m wondering if part of this is a correction.
I lived in the Denver/Boulder area for 20 years, and I remember the boom starting just after the recession—Denver was just teeming with new, excellent restaurants, making a name for itself as a culinary hotspot. Boulder actually had, reportedly, a higher concentration of great restaurants per capita, too. I think the popularity of cooking shows also took off around that time, and celebrity chefs became a big thing.
Maybe people’s interest in buzzy restaurants is just…not what it was a decade ago?
A lot of my favorite restaurants have closed since inflation and interest rates have gone up.
One of my hobby horses is it’s kind of weird having people yell at companies who have employees on public assistance. Government aid to the poor seems like a better diffuse cost than driving the pay for dishwashers up and making everything that relies on low productivity employees less affordable.
"If you have employees on public assistance, we're charging you the cost of the public assistance."
"Ok."
(Stops hiring poor people)
Indeed, having the government "prop up" minimum wage with something like the EITC strikes me as a great way to have both dignity of work and enough money.
Absolutely
“Restaurants hit a tipping point,” Mr. Wasserman said.
The obvious solution to the whole problem is to forbid tipping but instead to pay servers in Treasury Inflation-Protected Securities.
[ducks]
Thanks for a great story with original reporting.
Two things that I would love to hear more about:
1) “Mr. Padró implemented a service charge model to pay all employees….”
what’s the “service charge model” and how does it evade the minimum wage and tipped wage problems?
2) this bit puzzled me:
“House Bill 1208, signed into law in June, allows municipalities to expand the tip credit. In his signing statement, Governor Jared Polis called it an essential step in correcting “out-of-whack tipped wage minimums.” Ms. Tronco, who testified for the bill….”
If it expands the tip credit, then doesn’t it make the problem worse? And wouldn’t Ms Tronco be against it? So, maybe you could say more about what the bill does?
Is expanding the tip credit allowing the restaurant to count more of the tips against the wage they have to pay?
Like if the minimum wage was $20 but there was a $5 tip credit you would only pay them $15 as long as they made at least $5 in tips.
"Is expanding the tip credit ....?"
Could be! I'm happy to guess, and comparing guesses is a standard way of filling up the comments section, but I was sort of hoping that Ms. Bennet could just provide an authoritative answer.
This is the bill summary from the Colorado Legislator website:
"Colorado law allows a local government to establish local minimum wages in excess of the statewide minimum wage established in the state constitution. A local government that enacts a minimum wage must provide a tip offset for tipped employees in an amount equal to the tip offset amount described in the state constitution, which is $3.02.
The act states that on and after January 1, 2026, a local government that has enacted a code or an ordinance imposing a minimum wage that exceeds the state minimum wage may increase the amount of the tip offset associated with the local minimum wage; except that a local government shall not impose a tip offset in an amount that allows a tipped employee to earn less than the state minimum wage minus $3.02."
https://leg.colorado.gov/bills/hb25-1208
"...may increase the amount of the tip offset...."
Okay, that looks like the part that the restaurant owners can get behind.
Minimum wage is specified in the state constitution? Crazy.
yes, exactly.
Without seeing the law, that’s sort of how it worked before but with a much lower minimum wage. You could take the tips out of the minimum wage calculation.
My understanding of the service charge model is that the owner imposes a service charge- say 20% - on all bills and then distributes it to all workers (back and front of house). The owner presumably pays all workers the true minimum wage or more. Some people might still add a tip on top of the service charge. Wait staff don't like it because their income is higher if they get to keep the tips. Some customers don't like it because they think tips should be optional and should go to the wait staff and not the cooks.
The argument for the customers is that if you have a fixed 20% surcharge, not including it in base prices doesn’t even have a fig leaf of justification and it’s just obscuring prices. This is admittedly a coordinated-action problem for restuarants competing on headline price in this model, which is a good reason to involve government to solve it.
having it as a service charge rather than an undisclosed part of the price is so that customers know they don't have an obligation to tip.
In NYC the Xi’an Famous Foods chain has a strict no tipping policy. For a while Danny Meyer restaurants were also no tipping. But they ran into the problem that idiot customers thought their menus were 20% higher than they should be and didn’t account for the lack of tipping. It’s the classic resort fee issue with hotels. Service included pricing only works if everyone does it.
Resort fees are just straight up lying about per diem rates.
Yes but when one hotel does it all the others in the same price range and location have to do it.
In theory you can have a strict no-tipping policy (which is incentivized either individually or collectively as to keep out of pocket expenses lower for the customer) so while I don't want to dismiss this because social conventions are weird, and it's not like I myself haven't referenced a service charge in that manner, it just seems odd that it should be load-bearing.
Ed.: Another way to phrase this is that if the chief benefit of breaking it out is informational, it seems weird that the only effective way to convey that information should be by keeping it out of base prices. Not impossible, mind you, but weird.
The Alamo Drafthouse switched to a service charge and also advertises before the movie that tips aren't necessary("but always greatly appreciated")
Since then I've added an additional tip once, when we went and ordered almost nothing except water, I added a small amount but the clear service charge nature of it makes it easy for me not to tip.
I think most people think of it as tip is included/manadatory. I know some people don't like it because they think tips should be optional.
They are usually much lower, but it's like the "coperta" in Italy or "service compris" in France.
There are some famous restaurants that tried to do a universal service charge or just fold things into menu prices to help pay back of house staff more (brown people) and the front of half wait staff (white) revolted and forced the restaurant to return to tipping.
"My understanding of the service charge model...."
Thanks, Bob M, useful explanation.
As someone who lives in Denver and just yesterday paid slightly over $200 for dinner with tax and tip (15%) at a "fast casual" restaurant for seven people (which included two elderly people who ate side dishes for their meals and only one person having an alcoholic beverage), I'm in this picture and I don't like it.
The expectation that dining out should be inexpensive is kind of staggering to me.
You hired a team of servants to prepare a broad selection of food for you, and then they did all the cleanup. That should cost a lot of money.
It appears we had a brief period of time where dining out was so inexpensive that everyone forgets what is actually happening when you eat out.
When I was growing up we dined out roughly 4-5 times per year. That was more indicative of the type of luxury it really is.
"You hired a team of servants to prepare a broad selection of food for you, and then they did all the cleanup. That should cost a lot of money."
Why?
The issue is that the government legislated up the cost. That's a choice. Not some law of nature. "Servants" can be quite inexpensive at market wages. The country is today wealthier than when you were growing up.
Also there are economies of scale in cooking. It should arguably be cheaper for a casual restaurant to have professionals buy a ton of food and make it for lots of people than for a single person to buy groceries and spend that time / money on their own.
If this is the fault of the government legislating up the cost, why are so many restaurants having a hard time hiring at the current wages?
Inexpensive servants require a class of people making very low wages.
I agree that, a few decades ago when I was a kid, eating out even at McDonald's or other bottom-tier fast food places was a rare treat. I'm not sure why we should aspire to bring that back though! When I'm a moderately successful lawyer and I'm cutting back on eating out or scrimping on appetizers, desserts, etc. when I do eat out, that implies the situation is even more dire for the 85%+ of the population who make less money than me and also aren't in the food service industry.
honestly that doesn't seem outlandish at all. i'd expect pay at least as much locally and no one is writing stories about how expensive the city i live in is.
$28/person doesn't sound that outlandish.
"Fast casual" meaning like Chipotle or Panera, without table service? Then a 15% tip seems extremely high, and (pre tax and tip) $23 per person seems pretty high.
But if fast casual means a chain restaurant with table service, Chili's or the like, that sounds completely reasonable.
Chain with table service.
I'm not generally an anxious person, but I'm imagining being the first at a large table to order and making a very reasonable guess about whether we were indulging in libations... only for the entire rest of the table to stay dry.
NOPE, NOT A FAN
Well, in my case another two of the seven guests were minors, and everyone else at the table knew that my wife and I don't drink.
The people here saying that it’s not expensive are either in extremely HCOL areas or are being intentionally dense. $200 for fast casual per person is an insane amount. I would have guessed much closer to $150 max.
To be very clear, that was just over $200 total for the table, NOT per person!
I understood what you meant
Sorry, I was just concerned since you wrote, "$200 for fast casual per person . . . ."
Oh, I fat fingered that part.
I meant in total for that many people.
Slightly less than $30 all in for dinner per person seems fairly reasonable?
For fast casual? I'd be inclined to think closer to $20 per person.
How much do you think it should cost?
Knowing in advance that two people would not be ordering entrees, I had mentally budgeted it as probably averaging less than $20 per person.
Reading this article gets me revved up again to push more for a negative income tax over a minimum wage.
"Reading this article gets me revved up again ...."
If you don't need that coffee, I'll take it.
“push more for” how?
If there is no shortage of jobs, food or places to eat I am not sure the number of restaurants is a useful indicator of anything.
Also Denver waiters make more than three times as much as managers in the British Civil Service.
Yes it’s stunning how poor Europe is. Mississippi shit miners make more than the queen of England (/s but only barely)
One of my friends went from an important job in the House of Commons to a marketing job in a small city in America and makes several times more money.
To save on salaries, Google has outsourced some software jobs to... Germany.
Germans are incredibly prolific in mid-market B2B software market (so many Jira add-ons seem to be built by German companies), I wonder if it's the lower wages that lead them into that market? I think Germany also provides incentives to form smaller companies too IIRC
King at this time 🤨
"Things ain't been the same since the shit mine closed"