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fair wage

New York restaurateur eliminates bad tippers in his restaurants with a smart new pricing strategy.

Tipping has been standard practice in the United States for over a century.

But why don't we just pay it all in one bill? Let's start at the beginning.

Photo by Nan Palmero/Flickr.

Tipping was started in the 17th century by British aristocrats as what journalist Paul Watcher describes as "a sprinkle of change for social inferiors." It was brought to the U.S. by rich Americans who vacationed in Europe after the Civil War.

When the practice arrived, people weren't that into it — it was viewed as un-American. Despite that, it stuck with us, and today about 4.3 million people make a living mostly on tips.

How did tipping go from being just a little something extra to a full-on means to an end?

The big change came in 1966, when the Fair Labor Standards Act was amended with a subminimum wage for tipped workers and a tip credit for employers.

Through tip credits, employers of tipped workers are being subsidized by consumers at record levels. Chart by Economic Policy Institute.

That change allowed employers of tipped workers to offload the responsibility of paying the legal federal minimum wage onto their customers.

The current federal minimum for tipped workers (those earning more than $30 per month in tips) of $2.13 an hour hasn't budged since 1991, when the inflation-adjusted value of the dollar was 75% higher than it is today. By comparison, the federal minimum wage has been increased six times in the same period.

There's a growing trend in the service industry to toss the tipping system.

One of the latest to join is famed New York restaurateur Danny Meyer, who you may know better as the founder of Shake Shack.

Shake Shack gained national fame after creating burger and fries recipes that turned everyone within a three block radius of their exhaust fan into a beef-craving zombie. This is the original Shake Shack in Madison Square Park, New York City. Photo by Lucius Kwak/Flickr.

Meyer is eliminating the traditional tipping system by building a service charge (and then some) into the prices at all of his full-service restaurants. He wrote on his company website that tipping was getting in the way of their ability to provide "meaningful career opportunities and advancement" for their 1,800 employees.

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According to New York Eater, Meyer has been talking about it for decades. In a 1994 newsletter, he explained his qualms with the practice of tipping:

"The American system of tipping is awkward for all parties involved: restaurant patrons are expected to have the expertise to motivate and properly remunerate service professionals; servers are expected to please up to 1,000 different employers (for most of us, one boss is enough!); and restaurateurs surrender their use of compensation as an appropriate tool to reward merit and promote excellence."

All-inclusive pricing could make tipping a thing of the past.

Not all tipped workers struggle under the current system, but most of them aren't servers in fancy restaurants with the guarantee of 20% commissions on every sale. Meyer wants the shift away from tipping to "right what has been a labor of wrong."

"Tipping is awkward," says Danny Meyer. Photo by Nicholas Kamm/AFP/Getty Images.

The restaurants will not only take responsibility for fairly compensating their servers, but the price hikes are also going to lift the bottomed-out wages of non-tipped employees, like front-of-the-house staff, cooks, and even entry-level managers.

Photo via iStock.

This could be the start of a new era of humane hospitality.

Meyer is giving the no-tips model some important visibility and traction, but small businesses around the country beat him to implementing all-inclusive pricing.

One of those businesses is Lanesplitter, my go-to pizza joint here in Oakland. They call it a "sustainably served" model. Their employees earn living wages and have access to paid time off, health care, and overtime pay — things all workers deserve.

Sure, ditching the tip might feel like a big change, but when you consider all the downsides, it's hard to argue against it. Thankfully, it looks like more people are beginning to recognize that.

From Your Site Articles

Advertisers have gotten a bad rap for ignoring people's best interests, and banks have been among the worst.

They spend huge sums of money on ads touting what are often enough raw deals. So when I heard the New York Metropolitan Transportation Authority (MTA) was taking down hundreds of ads by a bank, I was instinctively excited.

But then I saw the ad:

Image by Amalgamated Bank.

This wasn't a typical advertiser. They weren't luring people into predatory products. They were promoting good.

"#RaiseTheWage" on a banking ad? A bank supporting a policy that doesn't just enrich the rich? I could imagine the rider response being a blend of joy and bewilderment. Of course, I came to learn that the advertiser was no ordinary bank.

Photo by The All-Nite Images/Flickr.

According to its website, Amalgamated Bank is the largest majority union-owned bank in the country, and for nearly 100 years, they've catered to people and institutions "fighting for social and economic justice."

To the bank's dismay, the MTA withdrew the ad buy because they want the transit system to be politics-free.

An MTA spokesperson said their ad buyer "erroneously" approved the six-figure deal for 1,260 ads placed in subway stations and train cars. He explained that the ads were in violation of their viewpoint-neutral policy.

Photo by Metropolitan Transportation Authority/Flickr.

Amalgamated Bank head Keith Mestrich had this to say:

"It's outrageous that the MTA would ban an ad that promotes giving New Yorkers a living wage. The #RaiseTheWage‬ campaign is not about politics, it's about giving the people of New York a fighting chance and Amalgamated Bank is very proud to support and promote this important campaign."

We could grant the MTA benefit of the doubt, but they don't exactly deserve it.

The agency has been called out before for their selective enforcement of the policy.

GIF from "Real Housewives of Orange County."

A judge ruled against the MTA when they tried to remove ads promoting a new comedy documentary called "The Muslims Are Coming," without ever having batted an eye at CNN ads for the Republican presidential debate.

It's sad that in tough times, speaking up for working people can be conflated with politics instead of patriotism.

And it's astonishing that when a business involved in an industry notorious for exploiting people wants to sing a different and more positive tune, a worker- and taxpayer-funded agency, like the MTA, can be so quick to hit the mute button.

If the MTA really wants to be viewpoint-neutral, then they should be clear about the rules and consistent with enforcement. In other words...

GIF from "Breaking Bad."

When her dad had a heart attack, she watched her brave mom put on a fancy dress and get to work.

A minimum-wage job used to be capable of supporting a small family. But over the course of one senator's life, that changed.

One of the reasons Sen. Elizabeth Warren supports raising the minimum wage is that her family survived on it when it was much higher, in today's dollars, than it is today. Her mom suddenly had to go make a living, and minimum wage was the starting point. She talked about that as a guest on "The Late Show with David Letterman." It's a great story.

If you have two minutes, this is really worth seeing.

My German friend thinks our system of tipping is absurd. Here's some stuff to back that up.

Tipped workers in the United States come from all ages and backgrounds.

When it comes down to it, those tips mean the difference between paying the bills and not. And to my friend's point: In Germany, most service workers are actually paid well. Tips are basically a little bonus. Not here.

And these folks work for $2.13 an hour before tips even come into play; when they get stiffed, that $2.13 is, frankly, totally absurd.

So ... in another country where people are compensated fairly, feel free to make tips optional. Otherwise, consider what happens to these people who work every day for a living.

Gap went for fairer pay even though the rest of the country wasn't really doing it? Cool.

True

Because companies in America just plain aren't required by law to pay employees more than minimum wage, many just plain don't. These companies take advantage of the situation, and while their corporate profits go up, employee pay does not.

Recently, Gap joined some other great companies like Costco, Whole Foods, and In-N-Out Burger in voluntarily raising wages for their employees. Unlike some other large retailers, these companies don't want their employees' wages subsidized by the government.

WAIT — WHAAAAT? Yeah, that's right, big companies that don't pay their employees a decent rate are essentially setting up those employees to rely on welfare to make up the difference. (McDonald's and Walmart employees are on welfare BIG TIME, BTW.)

Try thinking of it this way: When companies pay their employees more, they are unburdening our nation's debt. Following that logic, if all companies paid their employees a higher hourly rate, the United States would have less debt and happier people. You go, Gap.

If you're interested in why and how Gap raised their minimum wage, you can read up on that here and here, but I've summarized some of the best points below:

When the minimum wage is raised, it gives people more money to spend. That equals increased demand for goods, which equals more demand for jobs.
When the minimum wage is raised, companies (like Gap) can retain staff longer, which actually brings costs down. Training new people can get expensive when you have to do it a lot! Plus, they get to keep working with amazing people. Those amazing people get more job satisfaction.
When the minimum wage is raised, employees work harder and are happier. Everyone wins.
And who knows? Gap's story might inspire other companies to step up, too. If you're interested in what is considered a living wage in your town, you can find out here.

Here's a bit more about why Upworthy thinks this particular thing Gap is doing is really worth highlighting: CLICK HERE.

If you think it's a step in the right direction, there're little sharey guys right down there. It's up to you. I would be just as excited if you did a happy dance for fairer pay, too.