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 Originally Posted by boost
In places where tipping is not customary, servers get paid much much more. This heightened cost for front of the house pay roll is reflected in the cost of the food. So as more people believe as you do, the less servers will get tipped, and the higher menu prices will climb.
You dont have anywhere enough experience in the economy to make this claim, nor justify it.
If you want though, the inexperienced thinker that i am will attempt to counter, and likely fail since i too dont have enough experience in the economy. I dont really want to, but since this is the 2nd (3rd?) time the point was raised i guess it needs shutting down.
Basically the argument fails on several points for me. The first is that diners are not an inelastic good. The second that there are several competing establishments, all within an obese man's walking distance. Thirdly, we arent even arguing over some imaginary law that forces the wage of all server's to increase, so we cant even compare this to another countries economy like Austrailias.
Im going to establish two places atm. We have a IHOP and a Dennys, partly because they're fairly American and partly because i would really love some strawberry banana pancakes right now. With that, i go to the first point.
Diners are elastic goods, meaning that an increase in food cost does not necessarily increase the profit of a business since an increase in their cost is going to directly impact the demand.
To prove this, lets say that both places decided that because the waiters werent being tipped well enough, that they had to increase their pay and they had to increase menu prices as well to compensate...and they both did these at the same time for the same amount. This will never be the case in the absence of a law however, and leads to points 2 and 3...but i digress. Let the cost of my beloved strawberry banana pancakes currently stand at $10. Lets say that the establishments have 3 options. Increasing the cost to $30, increasing them to $20, and increasing them to $13. It should be obvious that an excessive cost of $30 is completely absurd, and as much as i love my IHOP strawberry banana pancakes, i would much rather fuck a cat than pay $30 for them when i can equivalently spend about $10 at the grocery store for everything id need to make them multiple times (depending on how many strawberries and bananas i used as pancake batter is fairly inexpensive...but again i digress). At the same time, an increase of double the cost is also unreasonable for the same reasons as above but to a lesser extent. Im sure you could find some people in Afaterca that would gladly pay $20 for these pancakes, but at the same time it probably wouldnt be a common place occurance nor would it be something all americans would do. So lets move on to the price that seems most likely, the $13 which is basicaly the last price plus a 30% tip. While this is a small increase indeed compared to the other increases, we accept again that diner food is an elastic good. There are some people that would react to such an increase and not even notice, since these people are going to IHOP/Dennys because they like being waited on/are too lazy to cook/enjoy the experience of eating at a diner with friends/family. These people would be unaffected by the increase. However there is another group that shouldnt be underestimated as these people are the target consumers of these places anyway. This group is the massive working class that doesnt make a bunch. Surely some of these people would look at the increase and refuse to come, or at least come less often.
However lets look at another good provided by the same places. Lets now look at a senior citizen breakfast that costs like $5, or equivalently some smaller breakfast consisting of eggs and toast or something that not only seniors would buy. We run into the same problems with the pancakes when we try tripling or even doubling this diner as before...or at least i hope no one would pay $15 for 2 eggs and some pieces of toast anyway. However with this good, the places could not justify getting away with an increase in a %30 tip, because this time the increase doesnt cover up as much of the hurt put on by the waitresses. If they increaesd it to $6.5, that 1.5 isnt really gonna cover the $4 they lost by increasing pay for the waitress. So ihop and dennys probably lose money whenever someone would buy this type of meal. The repercussion of course is that we now have two goods, both good, but the cost of one increased by a larger amount than the other. The difference in price between the two goods increased from $5 to $6.5, surely this moves people over to buying the cheaper food and away from IHOP's moneymaking strawberry banana pancakes.
Some assumptions made: IHOP was consistent in price increases, across all foods, and they made most off foods that were more expensive. The second seems justified since IHOP needs to make $4 more per waitress per hour in order to maintain profit and an increase from 15 to 19.5 for a steak doesnt seem too unreasonable meanwhile an increase for smaller priced goods at a comparative rate isnt enough to justify that $4/waiter/hr. For the first point, if things increased by different rates then demand would naturally shift one way or another anyway.
Cliffs part 1: A diner couldnt increase food cost by much, nor could they increase it unfairly...and the increases themselves would result in people switching to the cheaper goods on the menu as well as less customers in general so it doesnt really mean IHOP is gonna make the same amount after an increase occurred.
Competition
This one is a little less complicated to see and hopefully wont take too long. Basically if IHOP decides they want to sell my adored strawberry banana pancakes for $13 in order to cover their new cost to waiters…then Denny’s can turn around and keep their identical pancakes at $10. The result is that IHOP would make even less from their price increases and would have to cover the cost of less consumers combined with a higher staff cost meanwhile Dennys would enjoy the benefit of all of IHOPs lost consumers which is much more likely to solve Denny’s cash problem.
This can also solve a problem with point one, where an item that would become a losing good for IHOP even after a price increase (that senior citizen breakfast or what have you) they may just drop it to cut the cost all together. The response of course, is that Denny’s is now going to maintain selling this good, and again steal many of IHOP’s customers and profiting.
This feels like a good spot to recap so here it is. We had two cases assuming a universal increase in server wages: case one was that both places increased costs in the same fashion, and case two where they differed. In both of these cases, increases in menu prices where shown to be the failed structure, or at the very least, not be enough to necessarily justify the loss in income from the increase in server’s wages. This leads directly to point three.
There is currently not a law that universally increases server’s wages, and it takes time to do so.
So now we accept that for some reason bad tipping resulted in establishments having a problem in that servers aren’t being paid enough. What happens next immediately in a real life scenario? Its not a law, I’ll tell you that much. Laws take a bunch of time to implement, even those that aren’t controversial. So first we’d have this problem, it would take time for people to recognize the problem, it would take more time for enough people to agree that there was a problem and that this law would solve the problem, and then it would be passed. The problem is, IHOP and Dennys have this issue NOW, and cant wait for a law, and they also arent likely to respond in the same fashion, so we cant exactly compare the aftermath to that of Austrailia. They are currently closed because they don’t have waiting staff willing to work for $2 an hour and crummy tips…so what do they do? Some shut down, unable to increase the wages of servers and transfer their business to other diners. Others however experiment with how much money a waiter needs. Testing the limits of people, some will likely offer a small raise to someone who is quitting to try and solve that problem that way. Offering someone $4 instead of their $2 might be enough to make someone tough out a bad time for tips. Others experiment with a mandatory gratuity. Ultimately the one that increases costs the least and increases menu prices the least wins the battle as they start getting the most customers while maintaining servers. Naturally, the menu prices would have to be below the ceilings mentioned in part one, that 30% increase. Waitresses are still getting tipped somewhat in this scenario, but now they’re being paid slightly more with slightly increased menu prices that don’t really affect the average consumer that much, since covering the cost of increasing a waiters wage from 2 to 4 is easier to conceal than from 2 to 7.
This point is kind of blurred as im getting sleepy and tired of writing. But what im saying here is that we still have competing, elastic goods here so neither one can really change drastically, nor would they all change the same. One of the likely solutions to waiters not being paid enough through tips, being increasing their pay a little bit, doesn’t really affect us that much.
Although, to further the issue with my final driving point, we might not even see an increase in server pay to begin with. Suppose Denny’s is famous for having exceptional staff (LMFAO, but work with it). This exceptional staff leads to less accidents that servers cant control. For instance, if denny’s is known for having really fast chefs, where their only difference from other chefs is speed, then there is a smaller chance a guest would have a slow served meal that wasn’t the servers fault and thus an increase in their tip (if ppl followed the proposed ‘you get what you deserve’ line). Maybe some third diner, D3, exists and is known for having excellent communication between staff, so that you actually have everyone looking out for everyone or something so that you’re always aware when your table needs coffee or their food is ready or their check is needed or something. Then again we’d see an increase in tip for D3. The end result here is that waiters go “hey did you know the average tip at xxx is more than here?” and soon we have a higher demand for working at these places…and better customer satisfaction to boot so higher consumer sales as well ( better experience, more likely to come again). Now we see a need for diners to provide friendlier, better staff to survive. There are ways to do this, contests, benefits for employee of the month/week/w.e, mandatory flair (lol office space). This results in no menu increases, no crisis, a small cost to the diner, and better service for guests resulting in better tips for servers.
Cliff notes part 3: A decrease in tips for shitty service would naturally result in places giving a bigger damn about the service they give, and would provide incentives for all staff to be a better worker…decreasing just cause for tipping like an asshole.
Finale Cliff Cliff notes
At the bare minimum, ive shown that tipping based on performance is not necessarily going to increase menu prices…and at best ive shown that they actually wouldn’t increase by much, if at all. You're welcome to counter but like i said before, neither one of us has enough experience to really say something along these lines that absolutely shows what will happen. At the least though, i feel this is enough to put serious doubt in notion itself, which leads me back to my initial question. “Why the fuck cant I tip 0% for shitty service?”
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