Researchers find tipping creates a pay gulf between restaurant staff
By Sarah Skidmore Sell
AP Business Writer
PORTLAND, Ore. (AP) - When the bill comes after a meal, there's no crunching numbers for the tip - just pay and go.
A small but growing number of restaurants are doing away with the tipping model that's long been the norm in the United States. It's an effort to even disparate pay among restaurant staff and offer them more predictability, as well as a means to cope with rising minimum wages and other industry changes. While restaurants that have eliminated the entrenched practice have seen mixed results - and some ended up abandoning the experiment - a number of restaurants are still trying it.
"Primarily we wanted to take the reins of compensating our employees," said Andy Fortang of Le Pigeon in Portland, Oregon, which eliminated tipping in June.
Le Pigeon raised its prices an average of 20 percent and now compensates workers with a mix of base pay and a percentage of the night's food and beverage sales. Cooks, dishwashers and other "back of the house" employees got a slight pay increase, and waitstaff, bartenders and other "front of the house" staff took a small cut, but everyone shares in the success of a busy night.
"The staff in our restaurants are well-trained, intelligent individuals and they are passionate," Fortang said. "It seems fair they be paid an award for that, instead of just leaving that to someone who may or may not leave a tip."
Some restaurant owners see tipping as a flawed system. Aaron Adams, who owns the no-tips Farm Spirit in Portland, says it creates a "weird dynamic" between the customer and server. His hope is to keep raising pay so his staff can support their families and buy homes.
Tipping also creates a pay gulf between restaurant staff. Researchers at Cornell University and Ohio State University found that in large metro areas, the median weekly wages of front-of-house employees exceeded those of back-of-house employees by 29 to 80 percent. At fine dining establishments, where the gap is largest, that means a median of $792 versus $441.
Servers in some states also contend with laws that let employers pay less - sometimes below minimum wage - and allow tips to make up the difference.
But minimum wage hikes began to raise restaurant expenses and threatened to widen the pay divide by increasing the base wage for tipped workers. A chef shortage grew more severe. And for several western states, a court upheld a federal rule that prohibits tip-sharing among all staff members, which used to be commonplace.
Only a handful of U.S. restaurants have adopted the no-tipping model, the National Restaurant Association says. It hasn't always been a success.
Thad Vogler of Trou Normand and Bar Agricole in San Francisco did away with tips at the beginning of 2015 but brought them back 10 months later because he kept losing staff to competitors that did allow tipping. Joe's Crab Shack, a national chain, reduced its no-tipping experiment from 18 restaurants to four after a poor response from customers and staff. Robert Merritt, CEO of parent company Ignite Restaurants, said the system needs to change, but "customers and staff spoke very loudly and a lot of them voted with their feet."
Still, Union Square Hospitality Group, which owns Gramercy Park Tavern and other restaurants in New York, is eliminating tipping at all its properties by the end of 2016 and said thus far guests have largely received it well. And a handful of notable Portland restaurants announced plans this summer to adopt the model, based on the success of restaurants in Brooklyn and Los Angeles.
"Everyone is looking at this because there are external issues that are pushing restaurants to look at their bottom line," said Scott Dolich of Park Kitchen, which dropped tips and raised prices in June.
Dolich says he can now pay staff equitably. He also revamped shifts so most employees work full-time and in multiple roles. Wyeth Yogi, who used to work solely in the kitchen, says he enjoys the mix of work and increased pay. But it didn't go over smoothly with everyone, and nearly all the servers left because of the change.
Other restaurants saw similar issues. ChefStable, which runs several Portland restaurants, tested a no-tipping model at its bar Loyal Legion more than a year ago. But owner Kurt Huffman said he realized it was a mistake after watching customer after customer push cash toward his staff and them having to refuse it.
"It didn't just not work," he said. "It was a revelation as to what a terrible idea it is to begin with."
After tipping returned, Huffman said the average pay for front-of-house staff jumped from $18 an hour to more than $30 an hour and service improved. He kept the higher wages for kitchen workers.
"It was clearly an idiotic business model," he said. "The people who really lose out are the servers, they are just going to get less and less and less."
Garrett Schumacher, who worked as a bartender at Loyal Legion before and after the switch, said he supported the model at first - it provided a steady wage and helped the kitchen staff. But it was a lot less pay. And tips provide a middle-class living for many, and keep restaurant prices low - two things he'd hate to see disappear.
"While it's a noble experiment, I don't know if we are ready for it as a city or a country," he said.
Published: Fri, Sep 02, 2016
