Thoughts on Tipping Practices
Market-based economies have bestowed innumerable benefits on humanity throughout our history by enforcing a dynamism in the ways we produce and distribute goods and services. From ancient bazaars to the New York Stock Exchange, markets have flourished under a wide variety of rules. Today we see market economies operating in the context of communism, capitalism, social democracy and other variants. And rules under each of these socio-political overlays have evolved dramatically over time. Market economies have flourished in each of these contexts, with the various rules imposed influencing the direction of the fruits of the market's dynamism. So in a sense, there is a "meta market" in which different market contexts compete with each other to test their advantages and force continued evolution. At the Public Option, we hope to participate in this.
One established "rule" or norm in restaurants is the practice of tipping. When I eat out, I normally leave 25%. I know that the servers can't live on their base pay. And I assume that they will share some of their tip income with other staff. But let's take a look at what these assumptions rests on. If I see that an establishment lists the price of a beer as $6, I know that the actual price is 20% higher, or $7.20. Further, I assume that the staff at the establishment is not being paid a living wage and that it is up to me as a customer to step in with a subsidy.
The tipping system has worked pretty well in restaurants for many years. But it has it's flaws. Although staff at some restaurants make a very solid living on tips, at other places tip-based income can be unpredictable. Additionally, gender, age and racial biases can skew outcomes for individuals. And the dynamic is complicated, with servers relying on their employment at an establishment to give them access to their wages, but relying on individual customers for those wages. We believe it's time to try some alternatives.
The Public Option pays a starting wage of $15/hour. We ask customers not to leave tips as we believe our prices can provide for living wages for all employees.
Can this work? Will this model accrue a competitive advantage to The Public Option? Will we play a part in displacing a flawed incumbent system with something better? Or will we just crash and burn? Who knows? But as a wise fellow once said: "What's the worst that can happen....?"