The Economics of Tipping

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A reminder for all of us.

I still occasionally get the guest who will say, “I can buy this wine for half this price at the store.”  Which is true, but it doesn’t come with a staff to serve it and a crew of chefs ready to cook you an incredible meal from a fully stocked kitchen.  I wonder if the same people have ever priced grapes at the grocery store.  If they want to get really serious about cutting out the mark up, that would be an even cheaper place to start.  Better yet, if they buy seeded grapes they could plant the seeds and never have to pay for a bottle of wine again.

Most of you understand the absurdity of this logic.  Those who do not understand have already stopped reading to go buy grapes.  At each step along the process of making the bottle of wine the cost of goods and service, along with a healthy profit margin, are passed along to the next stage.  From grape to cellar, farmers, vintners, bottlers, distributors, and restaurants all add to the price of the bottle in advance.  There is one exception to this rule.  The person who opens the bottle and pours it actually makes that wine less expensive.  At the most basic level, the person who serves the wine pays for part of the bottle for you.

The reason for this is that the person who pours the wine is paid far less than minimum wage.  In 44 states the wage for servers is well below the federal minimum wage.  In some cases it is as low as $2.13 an hour, but generally it is between $3.00-$4.00/ hour.  State and federal law allow this because servers are expected by the government to receive tips.  Every other person involved in the production of the wine took his or her salary in advance.  The server allows you to determine it.  They reduce the cost even more by agreeing to pay the person who set up the table, the bartender who retrieved the wine, and the person who cleans up the table after you leave.  This occurs whether you tip them or not.

This is not just true of wine, but of the food you order.  If restaurant were required to make up the difference between what servers are now paid and the minimum wage, the cost would be passed directly to the consumer.  The server pays for the fries you eat with your burger.  Over the course of all the guests a waiter serves during the course of an evening it would not take much to get them up to minimum wage, but that is probably not in your best interest either.

The 14 year old girl with multiple facial piercings and a three month baby bump that hands you your meal at the drive thru is probably not who you want serving you for two hours during your grandparent’s 50th anniversary dinner.  Even she makes a couple dollars over minimum wage.  To attract the caliber of server you would want to have serving you on your special occasions would cost a considerable amount per hour.  If you paid that rate up front with the price of your meal, it would tack a great deal more onto your check.  It would also not provide motivation for a server to work quickly or smile as your child grinds saltines into the floor beneath them.

It is not just the service that you see which would have to be paid for either.  Your server showed up hours before you arrived to prepare.  A server who spent an hour cutting a case of lemons before you arrived so you could have the lemon in your water.  A server carried a heavy rack of glasses out of the dishroom to get that water to you faster and then got a five pound bucket of ice out of the machine to keep your water cold.  They also have been by more times than you have even noticed with a pitcher to keep it full.  A server cut the bread you eat before your meal.  They also scooped the butter you spread on it.  A server spent five minutes polishing the glasses your wine is poured in to make sure there were no watermarks.  When you complete your meal, there is no need to clean up after yourself.  The server who just picked up their uniform from the dry cleaners will be crawling under your booth to clean everything before the next table arrives.  No matter what percent you tip, none of this appears on your check.

While they are taking care of you they are serving other tables as well.  They are trying to keep calm the table to your left that doesn’t understand why their well done has taken eight minutes already and is still not ready.  They are answering the same question for each person at the table to your right.  They are trying to not think about the lovely people who sat at your table before you who did not feel tipping was required.  They are getting waved down by other server’s tables.  They have been there since 10:30 and will be there until the clock says 10:30 again.  They will be right back with your hot tea.

Your server does all of this in the hope that you will have a great experience.  They grin and bear it through all of the rotten guests hoping that someone will appreciate the service of a professional.  They hope that at the end of the meal you will show your appreciation in the form of a tip.  They hope that after they have paid the bartenders, bussers, and food runners out of their tips that there is enough left over after their bills for them to be able to sit down do a decent meal at whatever restaurant is still open.  Regardless of the quality of service they receive, they will tip well after that meal.  They understand.

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6 Responses to The Economics of Tipping

  1. Becky November 11, 2010 at 12:14 pm #

    I’m glad you wrote about this today. I worked, at one point, for a fine dining French restaurant in Jo Co which is no longer in existence (for good reason) which had an extensive wine list. One day, the food critic for the Star decided to review us and one of her comments in the final, published review was about a bottle of wine that, while good, cost $32 in the restaurant and she could have bought it in Berbiglia for $17. I was flabbergasted that, of all people, a restaurant critic would have an issue with 100% markup on a bottle of wine, as if ours was the only establishment doing this.

    I wanted to say to her that if she wanted wholesale prices to stop going to restaurants.

    Really. A seasoned restaurant reviewer. Gah.

    • tipsfortips November 11, 2010 at 12:22 pm #

      I think you are well aware of my opinion of most food critics including our local one.

  2. Maggie Wilson November 11, 2010 at 1:14 pm #

    It’s writing like this that will bridge the gap between servers and guests. Knowledge and understanding is powerful! It is often difficult to remember all of these factors when you’ve had to pick the kids up from school, scramble to get homework done, prepare things ready for a babysitter, arrange to have your spouse leave early from work and fight traffic to get to the restaurant. After all that, we sometimes fell exhausted and entitled…but reading this gentle and creative reminder will make all of us better consumers. Well done!

  3. Jessi November 11, 2010 at 3:15 pm #

    At my restaurant I tip out 7.9 percent of my sales. It really takes a huge cut out of my pay when people who in their country do not tip, so they think that applies here as well, and I end up paying for the privledge of waiting on them. And that oh so generous 10 percent tip really does not go that far when I do the math at the end of the night either.

  4. yellowcat November 11, 2010 at 11:33 pm #

    Excellent post!!

    I can’t tell you how many times I’ve heard how someone could buy something for half the price at Walmart. My response is always the same: “So do it.” When faced with outright apathy at their idiotic statement, they always order and shut up.

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