The Economics of Tipping
Alternatives: Service-Inclusive Pricing
Some restaurants abolished tipping and raised menu prices to pay staff fixed, higher wages, with mixed success.
Can we do without tips?
Experiments
Danny Meyer’s restaurants in New York tried a ‘hospitality included’ model in 2015.
Benefits
More stable pay and fairer distribution between kitchen and floor staff.
Problems
Higher menu prices, some customer resistance and staff turnover among top earners.
Outcome
Many restaurants returned to tipping, while others keep pooled or inclusive models.
A menu change
A restaurant raises prices by 20 per cent and abolishes tipping.
Assuming abolishing tips is simple
It changes how staff are paid.
Key takeaways
- Some restaurants abolished tips.
- Pay becomes more stable.
- Customers may object.
- Many reverted.
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