No Tipping Is No Bueno – An AnCap Perspective

This article originally appeared at monicaperezshow.com. I am reprinting it because of its relevance to this recent article: New Class-Action Lawsuit Accuses Chefs of No-Tipping ‘Conspiracy’. Nice title–way to prejudice the reader!

Capitalist society is self-ordering and tipping proves it!

Anarcho-capitalists claim that capitalist society is self-ordering. Hayek called it “spontaneous order.” Understanding this concept constituted my ancap epiphany. The premise is simple: arms-length transactions give rise to all the apparatuses needed to conduct and secure them.
I frequently take opportunities to point out to people in my everyday life that all the order we see around us is a function of our voluntary actions and self-interest. Rarely if ever do we see police forcing us to pay for our orders at McDonald’s. The counter-argument inevitably is: “The knowledge that the police are just a phone call away is what keeps everyone acting right.” I disagree, and the custom of tipping waiters and waitresses demonstrates why.
I was a waitress for seven years. In all that time, I can remember only a handful of tips that weren’t fair. I got 15% or more virtually every single check. Why? There is no law that a tip must be paid. None. The waitress could call you names on the way out, but she couldn’t call a cop on you. Why do people tip, and tip fairly–generously even? Perhaps it’s a sense of justice, perhaps it is fear of censure…whatever it is, it is a self-enforcing rule with no legal consequences for breaking it, yet it is almost never broken.

So why is there a movement to replace tipping with a higher minimum wage for waitresses?

Recently, I was in a restaurant in Berkeley California and I could hear the conversation of the three people–an American couple and a woman who sounded German–at the table next to me. The man said something like, “Our wait-people here make next to nothing and have to count on us to leave them tips which are touch and go. That’s American capitalism for ya.” (Not kidding.) It was all I could do to stop myself from setting that poor misled tourist straight.
I started waitressing at Friendly’s before I was 16 (though I said I was 16) and I started waitressing at a restaurant/bar before I was 21 (though I said I was 21!) Back then–I can’t bring myself to tell you how long ago that was–but back then, I worked six nights a week while attending community college. I remember distinctly averaging $17 per hour after taxes week in and week out. I had my own apartment, my own car, paid for everything on my own and I was only 19. I recall a snobbish friend of my cousin saying “You’re waitressing? Do you want to see if I can get you a job at the bank where I work?” I looked at my cousin like, “Did this chick just fall off the turnip truck? She makes half what I make–max!”
My five older sisters and I always knew that the only way we could make anywhere near what our brothers made in construction was to waitress, so we did. I, for one, loved it and only decided to go to college for fear that I would not be able to waitress forever, but as for quality of life, it was the best: time flew as I rushed around or chatted with customers, food and drinks were free for staff after hours and I didn’t have to be at work til 5 o’clock in the afternoon!
Given my fondness for the profession (I still think I might want to be a bartender in retirement 🙂 ), I was alarmed when I witnessed the trend to eliminate tipping in restaurants. The first article I read on the subject explained that the restaurateur instituted a $15 wage for wait staff, banned tipping and raised menu prices 21%. A recent Wall Street Journal article discusses famous New York restaurateur Danny Meyer planning to raise prices 20-25% while raising starting salaries to $14 per hour. Another WSJ article reports that TV-chef and Craft-chain founder Tom Colicchio plans to follow in Meyer’s footsteps because tipping is racist and sexist. (Not kidding.) These articles portray the restaurateurs as heroes, but the math suggests otherwise.
When I waitressed–decades ago, mind you–my receipts were around $800 per night, my tips always averaged above 15%, if even slightly, but let’s say 15% (though Meyer admits average tips at his New York City restaurants run a whopping 21%!), so I took in $120 minimum, and I tipped out the busboy 15% of that (we all did, and there were six of us, so he did well). Rounding, I made roughly $100 on a decent night (slow nights brought the average down a little, but I worked them anyway). That was a five-or-so hour shift (5pm-10pm) and the restaurant couldn’t give us hours and hours of cleaning (“side-work”) like some chains would because they only paid us the minimum wage for tip-earners–around $2 an hour. (My check ended up being $0.00 though because of the way taxes were calculated, so my net was my cash take–around $100 per night.)
It was a great gig, and that was a long time ago–I’m certain both receipts and tip percentages have gone up considerably since then. Even against these old tip-haul numbers, however, a $15 an hour wage would not be a good deal for wait staff. Here’s the math: If I had made $15 per hour and the restaurant raised the prices or added a surcharge of 20%, the boss would get an additional $160 on my $800 of receipts and I would earn $75, fully-taxed, for my five hour shift…maybe $60 net. So you, as the customer, pay 20% instead of having the option to pay what you think is fair, the restaurateur now pays me $13 more per hour than he used to–so $65 more per night–but also has an increase in revenue of $160 (forget the busboy–he was already making standard minimum wage, only now he won’t get any extra)…you pay more, the restaurateur gets an extra $95 a night (of taxable revenue) and the waitress makes way less–way less. So much less, as a matter of fact, it likely will be enough to put waiters and waitresses in a lower economic class, unable to live alone, etc.
So…cui bono? The government will get more taxes from both the restaurant and the working class wait staff, restaurateurs will make more as gross revenues rise by 20-25% not fully offset by increased wages and taxes, and most important, a perfect example of the self-ordering society will be tossed down the memory hole.
Update (3/25/2016):

Why Restaurant Automation Is on the Menu
Forget about robot waiters, but technology helps cut government-imposed costs. And consumers like it.

Update (10/17/2016): It’s the government, stupid…

Apparently in the Bay Area, the extreme rise in minimum wages was accompanied by a provision that excludes tipping from the compensation calculation! As a result, servers and businesses earn less and the government gets way more in taxes.

The Great Restaurant Deluge
Between the skyrocketing cost of doing business and the unprecedented level of competition, Bay Area restaurant owners are sounding the alarm: A storm is coming.