Farsala said:
Raistline said:
A few quick thoughts on the Tipping conundrum within the US.
1) Wages made from tipping do not get claimed for taxes, the govt requires 8% of the employee's total receipts added to your W-2 (reported wages for you Non-US people). With the average tip in the US being closer to 12% of total receipts. This allows the individual to have that extra 4% to not be claimed on their W2. Legally the individual needs to claim all tips but they just don't, and the govt does not force them to. For example a person tends bar and sells exactly $100 worth of drinks. They get tipped 15% so they make $15. The company has to report $108 of wages on the W-2. The bartender walks away with $7 on non-taxed income.
2) If you remove tips and increase wages the same bar will increase the price of alcohol. Let's say they only increase it by 8%, the amount they must add to a W-2. So a $10 drink now costs $10.80. This increase in price will reduce total sales. The bar loses money, but the people buying alcohol are actually paying less money because they no longer tip. Where they would normally tip 12% and the drink would cost them $11.20 they are no saving 40 cents per drink. But the average person will not see this and will only see higher prices and choose not to buy as much.
3) following the last example, price go up only enough to cover government required W-2 submissions. The increase in price lowers sales. Now add on the increase of money for wages to the bartender, which will be far in the 20-30% increase so that the pay increase at least covers what the employee is missing in tips, and now we have a company that is losing money very fast. Even if they do brilliant marketing and increase business they will still likely lose money, go out of businesses and the bartender now has no job.
As much as it sucks, changing the tipping structure in a drastic fashion will not work. We are basically stuck with it, it is its own trap. If we change the model businesses that rely on it will die. If we don't change it people will continue to get screwed.
My sister is a long time bartender and and very liberal. However, she is not in favor of changing the tipping model, nor is she in favor of minimum wage increase in her field. Changing either the minimum wage or the tipping model of business will effect her negatively. In fact, our area has had minimum wage increases and the increase has caused drink prices to go up, and as a result her tips, and thus wages, have lowered since people are ordering less to drink. |
Seriously, I made 7.25 starting off and eventually got to $11 in a restaurant. In a single night I would work 6-8 hours and still make less then the waitresses who worked 4-5 hours. They get paid an hourly wage, and still get to take home >$100 untaxed income a night. Minimum wage is only needed for slow or stingy places.
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If you are not a server, or bartender in the restaurant industry and don't get tips you do get screwed with the tipping system, not denying that.
However, even if a bar is very busy and has lots of customers the wages of the bartenders and waitresses are almost always less than standard minimum wage and instead set at the government allowed tip industry minimum wage.
So as a quick case study to show the ripple effect raising minimum wage has at a restaurant lets use this example. Bar X is paying a waitress $4.25 an hour while the minimum wage for tipping jobs is $3.25. The the local government increases that minimum to $5.25. This is now a net cost for the business that they have to pay each and every waitress and bartender. The waitress making $4.25 will demand a wage increase to $6.25 to account for existing wage increases and seniority to carry over. The company is forced to comply so as to not lose their employees loyalty to the company. So now each empolyee is suddenly making the extra $2 an hour. If this is a small but successfull restaurant they will have around 15 employees that get this $2 an hour raise. The average for employee work hours is 30 a week. This is now a $900 pure loss of income. If this place was even mildly successful and had an medium cost of $15 a plate they would need 60 additional customers a week to not lose money. That obviosuly is not going to happen overnight. Their only choice to not lose money would be to increase cost of food and hope they don't increase it so much that they start to lose business.
Minimum wage is not about being stingy, or being a horrible company. It has a far broader reach than that.
