MIchigan changes Tipped worker laws.. the end of tipping?

Lavender Room
1

Well, the Rep. tried and now failed, a Citizens passed bill changed the tipping laws, the Rep, enacted then amended it, they did this on several Citizen passed issues. Well the Mich Sup. court, has been over ruling that, and the Tipping one just got overturned.

TIpped workers now must be paid minimium wage. The funniest part to me has been reading the articles, it seems everyone losses.

Resteraunts say people will stop eating out cause they will have to raise prices to pay workers, Workers say they wont make as much money. Consumers say it will cost them more.

THis sounds like one of those dumb math questions… where is the missing money.

Somehow everyone loses… of course the math doesn’t math. But it will be fun to watch this play out over the next few years as it phases in.

2

If consumers know that staff are getting higher wages, then consumers might try to offset that with lower tips. That’s the theory anyhow. In practice, consumers are probably not very good at estimating how much to reduce the tip to get the offset equalized.

3

I’ll go one better, consumers can/will/might assume like every other job they are paid appropriately and simply not tip at all.

But there is no missing money, either the Consumer the restaurant or the worker has the money, Its just funny to read the articles where the workers say they will get less money, the restaurants say they will get less money and have to close,

It will be sometihng interesting to watch how it unfolds over the next few years. The phase in will also make it a bit less noticeable. Not sure what the phase in plan is.

4

I think it is the classic all of those groups are looking at the change in isolation and ignoring what the other groups may or may not do. On top of that, they are assuming closer to the worst case scenario than the more likely case scenario. So, yeah, every group assumes this will be bad for them when in reality it will likely even itself out if not improve the bottom line of the business (as they tend to win in the end in this sort of scenario) as they will raise prices to make a profit or go out of business.

5

California requires minimum wage for tipped positions. Yet guilt tip culture still exists… so staff getting paid nearly as well as skilled labor

6

I tip for a good service, how much or how little the worker is payed is irrelevant.

7

If you listed the services for which you do, and don’t tip, I suspect that the wages/pay of the service provider does play a role in whether you tip. I’m not saying you’d stopping tipping wait staff altogether merely because they are getting minimum wage. But, over time, I think it would alter the tipping culture somewhat.

The standard economic theory would be that the consumer looks to the total price of the product/service, including the base rate, any tips, surcharges, taxes, etc. Having a minimum wage likely means the restaurant raises prices, as the restaurant’s labor costs go up. Unless the meal suddenly becomes more valuable to customers — which is unlikely, as it’s the same meal — the customers are going to alter their purchase, either by going to a cheaper place or tipping less. At least I think that would be the theory.

8

If someone wanted to be creative, they might be able to construct a hypothetical in which all 3 groups are worse off. That could occur if, again hypothetically, you assume that tip income is under-reported for income tax purposes. If that were true, then the restaurant could lose because of high labor costs, the customer loses because of higher meal+tip costs, and the server loses because even though their total pay is higher, their after-tax pay is lower.

ETA: also, there is no sales tax on tips. So, if the restaurant raises meal prices by x% (due to higher labor costs) and even if the customer reduces the tip by a fully offsetting amount, the customer still pays more because of the higher sales tax on the meal price. That extra money goes out of your circle of owner-server-customer. So, the customer could be worse off, without creating a benefit to owner or server.

9

I think most people tip roughly a regular percentage, rather than tipping more or less based on meal price. I.e. they are generally a 15% tipper or a 25% tipper, or whatever. Maybe they would change from a 25% tipper to a 20% tipper based on the restaurant being expensive, but that doesn’t seem to be how people generally approach this sort of thing. It seems more likely they’d either suck up the extra cost and still tip their normal percentage, or just not go to that expensive restaurant as often or at all because the total cost becomes unaffordable.

10

In the short run, that seems right. Tipping habits change, but not immediately. But, tipping habits (either in terms of whom we tip or the amount) are not immutable. They arise out of a culture which itself is changing. I tip people whom my parents would not have tipped, I even tipped people whom I would not have tipped years ago. Exactly why that culture has changed is an interesting question, but it has changed. So, my expectation would be that tipping of servers would gradually undergo a shift if it became widely understood that servers were getting a meaningfully higher base pay, which is reflected in higher meal prices.

Relatedly, a local eatery we frequent just went to a no-tip policy, saying that they are paying higher wages. At some point, some restaurants might think that a European (and other) type policy makes more sense. If wages are high enough, at some point they might decide that it’s a better business model to go to no-tips, and use that as a marketing angle.

11

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Two restaurants in Vancouver area did this. None of them lasted, they reverted to tips.

12

Do you know the cause: was it an inability to attract good servers? Bad reaction from customers?

13

From what I remember reading in the papers, the staff was the same as before. But the staff has to make the same money so the restaurant increased the prices. This apparently put the customers off even if the total amount of money going out of their pockets is essentially the same. Some apparently felt uncomfortable not to tip so it was even more expensive. When you have thousands of restaurants using one system and then one or two use another, people are going for the familiar things.

14

So the restaurant has to pay the poor bastards a whopping 7.25 an hour now, and they cannot stay in business because of this???Something is really wrong here, and lets start with that federal minimum wage that is one step above slavery…

15

Which post are you referring to? The OP is talking about Michigan and a $12.50 per hour minimum wage.

16

With the addition of Michigan, I believe there are now 8 states where tips can’t be credited against the minimum wage. As noted above, California is one. We may be able to look to those states to see if tipping culture is significantly different than in those that allow a credit to give some idea as to whether customers will now respond differently in Michigan.

Since the credit is being phased out in Michigan over a four year period, I suspect people will not suddenly change their behavior.

Let’s assume a $12 per hour minimum wage. Say the state allows a 50% tip credit, so the employee is paid by the restaurant $6 per hour, provided the employee makes at least $6 per hour in tips.

Let’s also assume the server is responsible for four tables, each service is for 1 hour, the cost of each bill is $100, and the average tip is $15. (And let’s ignore tip sharing or splitting.)

If a tip credit is allowed, the server will make in that one hour $51 ($45 in tips + $6 in hourly wages.) The variable cost to the restaurant for that server’s labor is $6 (plus payroll taxes, but those payroll taxes also should based on the tipped portion too). That labor cost is split among 4 tables, so each table pays $1.50 of that employee’s labor (or $16.50 total).

With out the tip credit, the employee’s houry wage and the employer’s variable labor cost is now $12 per hour. Suppose the employer passes 100% of the increased cost to the customer, each table’s portion of the employee’s hourly is now $3, and the total tab less tip for each table is $101.50.

Is the customer who is now paying $1.50 more less tips now going to reduce the amount of the tip so that the server still makes $51 per hour. Instead of a $15 tip, it’s a $13 tip? In that case, the customer’s total would actually be $.50 less than before. Or is the customer going to just continue to pay 15% of the total tab?

I know I’ve ignored sales tax, on the bill but not on tips, which will increase the restaurant’s cost a bit more as well as the tab. I also get that if you change the numbers, the tables per serve, length of a stay, amount of the tip, and total bill, the outcome changes.

I know I’m overthinking this, but I suspect you are too.

17

RIght damn liberals have jacked our minimum wage way the hell up. Killing businesses.

Oh and your hard pressed to find a job around here paying minimum wage, I think Mcdonalds starts at $15.

18

No one ever suspected I was overthinking something. They all know I am .

19

The waiters in my city are paid at least $18.75 per hour.

I always tip at least 35%.

20

First of all, I absolutely hate the concept of tipping and I do believe servers should get a wage. If they have to raise their prices, I’m already paying more to tip to begin with. But reality is they’ll just phase them out. Look at what they started to do at many fast food locations, implementing computers instead of cashiers. I’m honestly not beyond ordering from a counter and having someone scream my name to come get my food, but I do understand it puts jobs in jeopardy. I’ve been to places where robots bring you your food. The way technology is these days, Im sure they’ll come up with some way to get more work for less money. The market is always smart enough to protect itself, or it knows it will fold in on itself. They raised wages around here and they just hire fewer people, making those poor people in the back have to do twice the work for 1.25x the pay.