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There is this weird counterintuitive and counterfactual meme being put forth by the anti-minimum wagers that argues that a lack of a “tip credit” could ironically end up hurting the incomes of tipped employees. For example, from an anonymous server writing in The Stranger (because that’s apparently their new journalism business model—anonymous people writing for free):
Tips are an important part of my income. As someone who makes a great living on tips, I don’t want the awesome culture and great jobs created by Seattle’s restaurant boom to disappear. I do not believe customers will keep tipping at the percentages they do now if they know my base wage has gone up 60 percent. And if that’s how customers respond, the end result will be a drastically lower income for those of us who work in restaurants and bars—gender aside.
Oh. Well. She is anonymous after all. So perhaps we should just defer to her “belief” and scrap this whole foolish $15 minimum wage endeavor entirely? Best intentions and all that, but my bad.
Oh please.
First, let’s be clear that this argument is not just totally speculative; it is also somewhat illogical. As an episode of Freakonomics Radio pointed out last year, tipping isn’t exactly a rational economic exercise. It’s a matter of custom. So most Americans tip out of a combination of habit and peer pressure—15 percent if you’re a cheapskate, 20 percent if you’re not, or double the sales tax rounded up here in Seattle if you’re lazy like me. In fact, Seattle’s tipping culture is so ingrained, that it’s hard to imagine a minimum wage hike impacting most consumers behavior with or without a tip credit. Indeed, if restaurant owners carry through on their threat to raise prices, then it is at least equally reasonable to speculate that tipped income will go up, as diners simply add their customary tip percent onto the new pricier bill.
Further undermining this anti-$15 speculation is the total absence of supporting facts. I mean, it’s not like we haven’t raised the minimum wage many times before—by a whopping 85 percent for tipped employees here in Washington state between 1988 and 1989—and with no tip credit! This isn’t ancient history. And yet there is zero evidence of mass restaurant closures, job losses, or a decline in tipping in the aftermath of this precipitous wage hike. The economic data is there. If there was even the flimsiest evidence to suggest a negative economic impact from that 1987 minimum wage initiative, you can be sure that the bullshit artists at the Washington Policy Center would be flinging it.
Finally, even if a $15 minimum wage with no tip credit might influence some diners to chintz on their tips (because you begrudge the server bringing you your $40 entree a $5/hour raise, or something), consumers would have to have this information in order to act on it. But most diners are low-information consumers, as well as creatures of habit. Ms. Anonymous acknowledges our “awesome” tip culture, despite the fact that Washington is one of only seven states without a tip credit. Do most diners understand that?
I do, and yet I tip the same percentage back East in Pennsylvania and New Jersey that I do here in Seattle, because habit! Except for one big difference: Back East, I almost never drop money in the tip jar for take out coffee or food, because I know the servers won’t get it! For example, New Jersey’s tip credit is an abusive $6.12 an hour. No Starbucks barista in New Jersey is making anything close to that in tips. So every dollar you stuff in a tip credit state’s tip jar is going straight toward lowering Starbucks’ labor costs.
Of course, Seattle baristas do better. We don’t currently have a tip credit. And yet according to a survey conducted by the coffee blog Sprudge, our tipping culture here is especially strong:
I was a little surprised that Seattle made only one appearance in the top 10 list for tips with $9.28/hr, despite tips in Seattle making up the highest average percent of income of any city at 35%. In my experience, the high-end of tips in Seattle may not be great, but tipping is obviously a cultural value: Seattle was #3 for average tips at $5.85/hr.
FYI, that $5.85 an hour average is almost exactly what our tip credit would be. You might as well just dump that tip jar directly into the employer’s pockets.
And that’s why if we pass a tip credit here in Seattle, I’ll stop tipping baristas here too. Because I’m not stupid.
The HuffPo’s business model, once upon a time, was named journalists writing more or less for free. Was that any better?
There’s also this:
Why are The Economist’s writers anonymous?
http://www.economist.com/blogs.....s-itself-1
When did it become fashionable on HA to dismiss the single working mother trying to protect what she has?
The inverse argument could be made: if there’s a tip credit (deduction, penalty, whatever the advocate or opponent wants to call it), then servers are simply guaranteed a base $15 wage, no more, no less. End of story. So why should the customer tip at a restaurant where it’s probable that the servers make only minimum wage? (Think your classic ‘Mom and Pop’ diner.) There is no incentive — other than the desire to be nice and say “good job.” Tipping then effectively becomes a subsidy for the restaurant owner/employer because it gets deducted from the amount they have to pay the employee.
So, yeah, that argument’s equally speculative and stupid, right? All of these prognostications assume that people will or won’t do certain things — i.e., that they will act rationally or self-interestedly or whatever and there will be some consequence that will throw a monkey wrench in the works. How about this? Pass a fucking $15 minimum wage, and let the market sort out the rest. If the restauranteur has to raise prices to try and retain her profit margin, then she’s welcome to do so. Ultimately the customer will decide if it’s too steep a price to pay, and accordingly, they will decide if they want to continue to tip servers knowing that they are guaranteed $15 an hour.
And one final thought: the price increase for labor is going to apply across the board to all restaurants. It’s not like your competitors will be able to pay a lower wage and pad their margin and have a competitive edge over you. People aren’t going to stop patronizing restaurants/bars just because some prices go up, let alone because your margin has gone down.
Hey Goldy, you are aware that the federal minimum wage rate was $3.35 when WA went to $3.80, right ?
So you want to raise the minimum wage to 14% above the federal rate based on that argument ?
http://www.taxpolicycenter.org.....n_wage.pdf
You’re going to have to provide some evidence that Starbucks takes advantage of tip credits elsewhere in the country, because, just going by what I know of Starbucks’ corporate culture, I find that a little hard to swallow. Starbucks prides itself on operating exactly the same way regardless of where it sets up shop, and it owns its own stores. Starbucks is not a franchise.
@3 Hey ChefJoe, you are aware that I’m neither a liar nor a fucking idiot, right? Initiative 518 raised the state minimum wage from $2.30 to $4.25 over two years. And $2.30 was the effective minimum wage for tipped employees in WA at the time I-518 was passed.
So good effort trolling, but no dice.
Will their be an inverse enforced 20% break on the price of a meal at serve-yourself restaurants? Should we tip Electronics Assemblers for making good solders?
It’s all so complicated.
But by 1991 both WA state and the feds had a minimum wage of $4.25 . Do you think that, maybe, these things tend to go in a step-wise fashion and it’s time for the feds to take their step up to $10 an hour to match WA ?
@ 6
It’s far less complicated, isn’t it, if we raise salaries of those assemblers such that their jobs go away and their work instead goes overseas.
Tipping quandary solved.
Of course, that will amplify the already vexing problem of what to do about all those unrepatriated overseas corporate profits.
It’s all so complicated.
Threadly reminder that any tip credit is equal to FREE LABOR for the employer
@4. good point. Here’s a whole thread of starbucks employees discussing tip distribution and there’s no mention of tip credit.
http://starbucksgossip.typepad.....est_a.html
Also, Boston Starbucks Rebel sounds like a real peach in that thread.
@5, the rules for the federal minimum wage (at least now) state that the tipped worker must be paid at least the fed minimum after tips. Hence, unless they changed the laws since 88 (possible), the tipped worker was taking home at least $3.35 via tip credit or more restaurant money.
I guess if you take the “tip penalty” view then you get your outcome, but I think it’s a bit unfair to call it a minimum wage when the feds wouldn’t allow that worker to take home less than $3.35 an hour..
Ok, read the spokesman review article… sounds correct. Then again, it was still coming from a position of lagging the feds by quite a bit and tipped workers in this state have it a lot better than many.
I’d like to see that chart of min wages converted to one of what % above/below the fed minimum each state was at and I think WA and the $15Now would be an extreme outlier.
re 8: “It’s far less complicated, isn’t it, if we raise salaries of those assemblers such that their jobs go away and their work instead goes overseas.”
Ever heard of tariffs?
But the reality is that a job that doesn’t pay a living wage ensures that eventually there will be no market for your product; AND, if working cheap were the answer, why do CEO salaries continue to increase. They could probably find some Pakistani trained business
WunderkindsWunderkindis to do the job at 10 cents on the dollar.And, if making their company as profitable as possible (as CEO’s will remind you is their solemn, holy, and legal duty), that is exactly what they’d do. The Pakistani Wunderkindis could also do double duty keeping an eye on the company’s phone rooms, thus saving money on an additional employee.
@ 13
So:
Force wage increases for employees even though the work they do may not be worth it, and regardless of the ability of the employer to remain in business with this substantially higher labor cost.
Prohibit employers from doing the obvious thing to lower labor costs by taxing the hell out of any product they might manufacture overseas and then attempt to import.
Meanwhile, in order to lower CEO labor costs you permit companies to outsource THAT type of labor, but not manufacturing labor.
Do you have to click heels of sparkly red shoes to get all that to happen?
Re 14: I notice you overlooked the issue of tariffs that I brought up. You act as if I probably know nothing about how they have worked in this country in the past or how they work in France and Germany in the present.
You are really reaching when you accuse me of being delusional about how to make the world a better place for all instead of for just a few billionaires.
If an American manufacturer can ship something overseas, have it built at slavery wages and then ship it back to the U.S.
If an American manufacturer can ship something overseas, have it built at slavery wages and then ship it back to the U.S. DUTY FREE, they are going to do that.
That’s why the jobs are going overseas — not because Americans won’t work cheap enough — but because manufacturers are exploiting people who live under dictatorial systems and used their money to corrupt our political system to force through detrimental changes in protective laws.
Travis Bickle was a homicidal and suicidal maniac. You are just a windbag.
@ 15
I absolutely included the issue of tariff. I defined the term as “taxing the hell out of any product they might manufacture overseas and then attempt to import.”
How do you define tariff?
And I never said raw product would be shipped overseas and then reimported once assembled. It’s most effective to do everything overseas, and import the finished product.
Pretty sure Apple, Cisco, and Oracle, IBM, and HP have made this world better for all, too.
“Meanwhile, in order to lower CEO labor costs you permit companies to outsource THAT type of labor, but not manufacturing labor.”
What’s good for the goose should be good for the gander. I am simply pointing out the dishonesty of CEO’s claims about outsourced labor and the humorless stupidity of you for supposing that I am actually advocating Pakistani CEO’s as being just as effective and cheaper by the dozen.
You’re such a thick-wit. Are you sure you’re not related to the English Royal Family.
I defined the term as “taxing the hell out of any product they might manufacture overseas and then attempt to import.”
They do not have to ‘tax the hell out of it’. They just need to make the prices fairly equivalent so a decision can be made on quality over price.
Plus, all this shipping of raw materials overseas (does shipping coal to China ring a bell) and then receiving the ‘cheap’ product of that ‘raw material’ does not take into account the environmental degradation affecting the entire world that these companies will foist upon us all to pay for.
Cause and effect is a long, long, chain of events, and your mastery of a few elemental links in that chain and your subsequent serene evaluation of yourself as ‘the man with the plan’ is ludicrous.
You could not pass a History 101 course with your vapid and sweatily strenuous style.
@19,20
You give me too much credit. I just think it’s not going to be nearly as lovely a result if a huge wage increase goes through as you might prefer to believe.
Not much money in history degrees these days. STEM’s where it’s at.
“You give me too much credit.”
I wasn’t giving you any credit at all; but you seem to have relented, realizing that I argue as if I were a wolverine tearing down the roof of a mountain cabin in the middle of a hundred year snow storm.
Most people just give up after a little while realizing that I just like to argue.
Have a great day.
@ 22
You as well.
Her proposition is theoretically testable; after all, we currently have minimum wages across the country ranging from $2.13 to $9.32 (I think Washington is still the highest). I strongly suspect there would be very little correlation.
I can report on my own behavior. I live mostly in Ohio (3.98) and spend considerable time in Seattle. I tip the same everywhere, 20-25%. Before this current discussion came up it never occurred to me to consider the minimum wage. I strongly suspect I’m pretty normal like that.
But the burden is on the people pushing that claim. The states provide a natural experiment. You’ve got a hypothesis. Don’t speculate, gather data.
Goldy-you mention I-518 & the minimum wage increase in 88′ & 89″, but you leave out the effects. Of the 100,000 people who received the wage increase, 11,700 jobs were lost as a result. After a couple years about 1/2 of these positions were refilled, but by more experienced workers, meaning less opportunity for unskilled workers, minorities, and women, but meanwhile these almost 12,00 people who lost their jobs as a result are screwed and finding a new job isn’t exactly easy for unskilled workers. In addition Seattle experienced a 3 year inflation rate of 17.9% which is almost a full 5% higher that the country over that same period. Funny how you cherry pick, but leave out the consequences. These facts are from a study by PHD Economist & State Treasurer Jim McIntire, who is a democrat in support of raising the minimum wage, but at least he is honest about the fact it comes with a cost. Hell even the non-partisan CBO in Obama’s Administration says raising the minimum wage costs jobs. If it goes to $9 it is 100,000 jobs lost, and if it goes to $10.10 that 500,000 jobs would be lost. Please notice the relationship between raising the minimum wage and job loss is not direct but exponential.
http://blogs.seattletimes.com/.....e-seattle/
@25 One of the takeaways from that is a minimum wage that’s too low results in throwaway employees. There’s no incentive to recruit and train quality employees when it’s cheaper to just hire-and-fire. That serves no one’s interests except the employers. Workers don’t get training or stable employment, and customers don’t get quality service from competent and well-trained employees.
@26, that’s not the takeaway I get, but my point was that Goldy in this article references the 88′ & 89′ wage increases and says there weren’t any consequences, when there definitely were.
Wow, healess nailed the darling of DUMMOCRETINS everywhere… Apple Computer! Then the Apple Computer head honchos run around kissing the ring finger of Obummer!
BTW Puddy previously posted the commentary of Warren Buffett and Bill Gates (libtards) on raising the minimum wage and the affects and effects!
See ya!
Google, Facebook, Intel, & Silicon Valley with Russian investments? Hmmm…? And they voted how?
Nuff SAID Suckas!