Last week, the San Francisco Chronicle reported that five Bay Area restaurants plan to eliminate tipping in favor of a set 20 percent service charge on the menu.
Further south, some Los Angeles restaurants, like Hollywood’s Petit Trois and Glendale’s Brand 158, have dumped tipping in favor of surcharges ranging from 15 to 18 percent.
This trend has less to do with changing customer preferences than it does with the increasingly difficult labor cost environment in the Golden State.
California’s minimum wage rose to $9 an hour this summer, and it will rise again to $10 an hour at the beginning of 2016. But even these statewide increases aren’t enough for some of the state’s left-leaning cities: San Francisco will vote on a $15 wage floor soon, and Oakland will vote on a $12.25 city minimum. Meanwhile, Los Angeles mayor Eric Garcetti is seeking a citywide boost to $13.25.
These increases are uniquely burdensome for the state’s full-service restaurants, because California is one of seven states that prohibit employers from paying a lower base wage to employees who earn tip income. (In most states, tipped employees still earn at least the full minimum wage, but tip income counts toward a portion of that wage.) This legal deficiency forces full-service restaurants in California to raise the pay of employees who may already earn $25-$30 an hour in tips alone.
As the San Francisco Chronicle has reported, it also means less money left over to give raises to the rest of the staff. One San Francisco restaurant owner stated that, at a $15 minimum wage, he’d never be able to give a pay bump to employees who cook the food because most of the money is being directed to the people serving it – people who are already taking home more than twice the minimum rate.
Restaurants have trimmed staffing levels to help offset the cost, opting for larger table sections and lower staffing levels that require servers to bus their own tables. They’ve also raised prices, particularly in higher-cost markets where customers won’t flinch at a $9 or $10 deli sandwich.
But there’s a limit to how high prices can go – even in San Francisco – without discouraging customers from dining out in the first place. That’s why full-service employers are getting creative and opting for service charges instead of tips. Unlike tips, as the Chronicle explains, “a service charge becomes part of the restaurant’s overall revenue, helping owners to pay higher wages.”
That’s good news for back-of-the-house staff, but it’s less than ideal for waiters and waitresses accustomed to keeping all of the 20 percent tip from a four-top of big spenders.
Not surprisingly, polling data from Google shows that most tipped employees aren’t keen on the no-tipping approach: In a survey of 5,000 people who reported tip income, nearly 70 percent rejected even a $15 base wage if it upset the tipping status quo.
A separate survey of restaurant customers found even greater opposition to a change in tipping culture, with over 80 percent rejecting a new status quo where meals are more expensive but you’re not expected to tip.
If the employers’ hand is being forced to make a change that neither employees nor customers support, it raises an important question: Why pass laws that cause these consequences in the first place?
It’s a good question that California voters might ask themselves as food prices rise higher, full-service jobs become scarcer, and signs that say “no tipping allowed” proliferate in the Golden State.