Why Undertipping Makes You A Real Jackass, Ctd

A reader writes:

I tip fairly generously and don’t really mind tipping when I go out. But why does the blame on low restaurant worker wages always fall to the jackass diner? Why not on the jackass restaurant owner? Is there any other industry where we put none of the blame for wages on the owner? If I had my choice, we would eliminate all tipping and just raise the prices to make up the difference. (If you get a chance, listen to the great Freakonomics podcast on tipping.)

Another also takes exception:

Excuse me? The jackasses in this situation are two:

one, the politicians who short-changed professions when writing minimum-wage laws. If they add waiters to the law, half (or more) of this problem goes away.

The other are the restaurants, who use the fact that tipping is required to falsely advertise prices. Force them to pay their waiters a proper wage and throw in requiring taxes to be included in the price, and then we’ll talk. But when a restaurant falsely claims I can eat there for, say, $20 per person, and it turns out that after taxes and, yes, tipping, it’s more like $35 … I think I’m entitled to feel cranky that I was lied to.

As to whether I’m an undertipper? Well, the target keeps moving, doesn’t it? I was used to 10%. Now it is 15% minimum. Soon, it sounds like it will be 20%, with various interest groups already calling for 25%.

Since the above jackasses won’t do their jobs, I’m the one left holding the invisible bill to pay these people? And I still get called a jackass for doing so? This is the primary reason why I have stopped going to places that have waiters, if I can help it.


Tipping is another cost-of-living expense that competes with the cost of living raise that regular workers are not getting. I tip pretty high even for bad service (which I get more often than good service, mostly because restaurants are understaffed to save even more money). So the headline should be: “restaurants are being jackasses for being like every other company and squeezing the low person on the totem pole.”

One thing to consider: if restaurants were forced to pay a higher wage, they would likely compensate by raising the price of their meals, especially since most restaurants operate on really tight margins. So the customer could be paying the same amount in the end – less tip, but a higher base price. Another reader changes tack:

Labor lawyer here. The tip credit is one of the most misunderstood areas of wage and hour law. The tip credit only covers what the employer has to pay the employee. The Fair Labor Standards Act (FLSA) still requires that the employee walk away with minimum wage for the week. So, for example, where the tip credit minimum wage is $2.13 this does not mean that employees at these joints earn just $2.13 per hour; they are required to be paid no less than full minimum wage. That means if their tips fall short of minimum wage, the employer has to make up the difference.

So an employee at a cheap diner may sometimes make more than minimum wage in tips, and sometimes less, forcing the employer to make up the difference. An employee at a high-end restaurant will often make more than minimum wage once tips are included, but the employer only has to pay them $2.13 per hour. The employer has to cover the difference to whatever the local minim wage is, so any raises to minimum wage are also raises for tipped workers (e.g. once Seattle’s minimum wage reaches $15 per hour, employers will have to make sure their tipped employees leave with $15/per hour).

As such, it really shouldn’t matter whether we ever raise the tipped minimum wage again, because the law already requires that tipped workers receive regular minimum wage at the end of the day. Instead we can focus on raising the minimum wage, or expanding the earned income tax credit, or both.

In practice, however, this is more complicated because there is a lot of labor law violations in the sectors where tipped workers work, both with employers underpaying employees and employees under-reporting tips. Raising the tipped minimum wage might ensure that tipped workers get paid a certain amount on the books. It often strikes me as a bit of a misguided to address issues of fraud and under-reporting with a new minimum wage, instead of better protections against fraud and wage theft themselves, though it seems that some of this misguided thinking comes from the fact that people believe that tipped workers are only entitled to $2.13 in minimum wage.