
California Restaurants Are Dying Due to High Labor Costs - jseliger
http://www.sandiegomagazine.com/Blogs/SD-Food-News/Winter-2019/Restaurants-Are-Dying-Heres-the-Solution/
======
Simulacra
Tipping is an anachronism from slavery and should be banned.

I think tipping is a sham that businesses use to keep labor costs down at the
expense of the worker. Banning it is the only way we're going to get rid of
it, and force restaurants and other businesses to pay a fair wage.

As for what that fair wage is, I don't know, because that depends really on
the area; i.e. $10/hr is great for Elizabethtown Kentucky but would be poverty
for San Diego.

Tipping is the issue here, not minimum wage, and that's what we should really
be targeting.

~~~
Amezarak
As someone who worked in a restaurant for six years, I strongly disagree.

Working for tips is great. Taking away tips will mean a net reduction in
wages. Your "fair wage" will almost always be less than I would have made in
tips, even at a cheap buffet-type joint. Whether or not tipping is an
'anachronism from slavery' or not, it doesn't feel that way. It feels like I'm
actually getting paid for my work.

That said, losing restaurants is perfectly fine with me. People are too
obsessed with eating out. More people need to prepare their own food more
often.

~~~
justin66
> Taking away tips will mean a net reduction in wages. Your "fair wage" will
> almost always be less than I would have made in tips, even at a cheap
> buffet-type joint.

What evidence is there that this is true? The truth of it seems to depend
entirely on what the hypothetical minimum wage for those workers is set at.

~~~
nate_meurer
Michael Lynn, a professor of food and beverage management at Cornell, looked
at this recently [1], and the study's conclusions seem to support @Amezarak's
comment. Here's a quote:

 _.[...]tipping is a form of price-partitioning that reduces perceptions of
expensiveness even when it does not affect the actual total costs of eating
out, so replacing tipping with service inclusive pricing may decrease
consumers’ perceptions of value. "_

Some pretty big names in the business have tried banning tips in the past few
years, and it's been largely unsuccessful -- in some cases disastrous -- and
the restaurants have almost all had to return to tipping to save their
businesses. A few brave souls persist, but it's safe to say the anti-tipping
movement in the U.S. has kind of petered out for now [2].

I suspect that if an entire city were to ban tipping, it would be much more
successful since individual restaurants would not be at a comparative
disadvantage due to whacky price perception.

I personally hate trying to figure out tips. I cope by just adding 20% by
default in every case, unless the service is truly awful.

1 - [https://static.secure.website/wscfus/5261551/7004898/ijhm-
ti...](https://static.secure.website/wscfus/5261551/7004898/ijhm-tip-policy-
effects-final.pdf)

2 - [https://www.newyorker.com/culture/annals-of-
gastronomy/the-l...](https://www.newyorker.com/culture/annals-of-
gastronomy/the-limitations-of-american-restaurants-no-tipping-experiment)

------
idDriven
I recently read this article and was surprised that services like Grubhub and
Seamless are not only charging the user a service fee, and using tips to pay
less of a guaranteed hourly wage to workers, but also charging a 10% -30% fee
to the restaurant owners for result placement. This article compares this to
mafia tactics. Also considering most restaurants don't have that high a margin
traditionally even 10% is often all of the profits. source:
[https://newfoodeconomy.org/restaurants-eaters-please-love-
go...](https://newfoodeconomy.org/restaurants-eaters-please-love-god-stop-
using-seamless/)

Just blaming a living wage seems like a gross oversimplification. Also
landlords and exploding rents were not factored into this article.

------
eesmith
How is it that countries with both high restaurant wages and no tipping (eg,
$20/hour for McD's in Denmark) still have restaurants?

Given that, I can't help but think there's something wrong with the analysis.
I have no domain expertise to tell what it might be.

~~~
PhoenixReborn
They have socialized health care and better support systems in the form of
basic income/welfare. Also, value added taxes exist in many EU nations which
fund these programs. The cost of goods is also higher, which generally funds
the wages of the employees.

But in this case, the author is complaining about the tax law associated with
tipping and not with the minimum wage hike in itself. Doing away with tipping
will be great on a societal level but reforming the tax law will do a lot to
keep restaurants from shutting down in the short term.

~~~
eesmith
But aren't there a large set of interdependent factors?

Like, if everyone knows that the wait staff gets paid $15/hour then wouldn't
there be less pressure to tip, say, 20% on meals? If all wait staff received
at least $40/hour then I'm sure that most people simply wouldn't tip.

And how would this change, to include tips as part of wages, help the "near-
poverty cooks and dishwashers"? Are the businesses on the knife-edge of
solvency that they simply can't afford to pay the back-end staff more? It
seems more likely that the savings will go to the restaurant owners?

You mentioned socialized health care. Doesn't that also affect the labor
costs? That is, the US government already pays more per capital on health care
than just about every other country - then there are private health care plans
on top of that blowing the costs sky-high. By switching to socialized health
care, it should lower the overall healthcare costs, so make it cheaper to
employ people ... unless of course the restaurants currently don't provide
reasonable healthcare coverage to their employees.

------
Mikeb85
Restaurateurs need to think harder. All restaurateurs in a single city and
state are faced with the same labour laws, minimum wage and all restaurateurs
in a single area are faced with the same cost of real estate and living for
their employees. It's a fair playing field. If they can't find employees, they
need to pay more. And if they pay them more, they raise prices. And consumers
will have to pay them if they want to eat out. And they do. It just takes some
actual balls to raise prices. When you hear all the complaining, it's always
shit restaurateurs that can't compete on quality or service, so they screw
over as many people as they can to attempt to compete on price. At the end of
the day, it's a competitive industry and people will find a way to make money.

------
zimpenfish
> one of his servers made $70,000 four years ago, working 30 hours a week.
> That is $44.87/hour. Come 2022, that server would be making nearly $50/hour.

According to [http://www.in2013dollars.com/2015-dollars-
in-2018?amount=700...](http://www.in2013dollars.com/2015-dollars-
in-2018?amount=70000), that 2015 $70k ($44.87/h) would become 2018 $74k
($47.54/h). If he's getting $50/h in 2022, wouldn't that be a net drop in his
wages anyway?

Edit: barring a deflationary period, I suppose.

~~~
foxyv
My economics professor called it grandma inflation. Grandma hears that the
busboy is making $70000 and freaks not realizing that it's close to $30000 in
1985 dollars. She still thinks that $70000 is a lot of money...

------
drugme
The title says "because higher wages", which of course touches all kinds of
buttons. But if you read a couple of lines down, it's because of the broken
taxation system:

 _There are many reasons restaurants close. But one reason comes up again and
again—California is raising minimum wage without letting restaurant owners
count tips as wages, and yet still taxing restaurateurs on those tips. It’s a
financial double-whammy they can’t recover from._

~~~
yongjik
If this leads Californian restaurants to declare "We don't take tips because
we pay our staff livable wages (and also we pay less tax that way)", then I am
one hundred percent behind this particular taxation system.

------
navane
The server should pay tax on the tip.

If I understand correctly, tips now go to the server, but the restaurant owes
tax on the tip. So the more the server makes in tips, the more the restaurant
owes in tax. Therefore the server should deduct the tax from the tip before
they take it home, and leave that deduction to the restaurant, who can then
give it to the tax authority.

~~~
kayfox
Uh, the server pays income tax and social security withholding on the tip, as
long as tips are reported properly.

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dmode
I don't get it. Why not just stop accepting tips and pay the fair wage ?
That's what the rest of the world does

------
jgowdy
For rough comparisons in these threads:

The tax rate for someone making $20 USD per hour in the United States is:

Gross pay: $41,600 Tax due: $6,157 Net pay: $35,083

The same wage through Denmark's tax rates:

Gross pay: $41,600 Tax due: $23,212 Net pay: $18,388

Now in the United States, add unreported tips to that already colossal
difference in net pay. Add reported tips to the gross pay side of the
equation.

That gives the American $20/hr wage earner an additional $16,695 plus tips to
attempt to secure health care coverage compared to an equivalently paid Danish
citizen.

Effectively $1,391 a month to pay for health care coverage.

You're also able to be on your parents health care plan until age 26.

------
aestetix
This "solution" will result in tip money being taken from servers who work
hard and being given the servers who don't work as hard, which in turn will
reduce incentive to work hard across the board, and lead to a worse dining
experience for customers.

~~~
llampx
You can still fire the waiters who aren't up to your standards. I believe that
the restaurant management culture is responsible for good service. I've had
bad service at tipping restaurants and good service at non-tipping
restaurants. To me it's not an indicator either way.

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bookmarkacc
I feel like the restaurant where a server makes $44 ans these struggling
restaurants are not the same. Feels unfair to make it seem like the greedy
server is gouging the poor mom and pop when they already made $44.

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who-knows95
"THE SOLUTION: Let restaurant owners and employees agree on a fair, livable
wage. Ensure they make that wage, every single shift. Just count tips as part
of that."

where in logic does counting tips as wage make any sense? pay your workers a
living wage, tips are a gift of good service, not a vital part of someones
living wage."

i guess this comes from a UK perspective, but being paid a salary, and then
earning tips with good service. made those tips even sweeter.

------
chrisbennet
A study of San Fransico restaurant found the opposite.

[https://www.sfchronicle.com/business/article/Bay-Area-
minimu...](https://www.sfchronicle.com/business/article/Bay-Area-minimum-wage-
rise-hasn-t-meant-13210666.php)

