The Tipping Point
I was amused to see this YouTube clip of Mr. Pink’s thoughts on tipping from Reservoir Dogs. Via kottke.org.
It can be difficult to have this discussion with people, because emotions tend to run high. I’m not really complaining about the state of affairs. People tip bartenders and waiters in this country. But it is always interesting to me how discussions are suppressed - I’m a devil’s advocate kind of guy, and I believe everything ought to be open to discussion. If I wanted to change the entire model of how people in the service industry are paid, do you think that I could do it? I suspect not.
From an economic standpoint, it’s a fascinating issue. Employers are willing to abdicate some measure of performance evaluation to the customers. This trade-off should be worth real money to the employer. They still fire you if you drop a lot of trays full of expensive food, but they don’t have to analyze your customer service skills.
In the clip, Pink says “If if’s such a lousy job, they can quit.” I won’t say it that way, but it’s not so far off. What are the possibilities?
There are jobs in restaurants because people insist on going out to eat. The market provides competition in service, quality, and price. Every business is caught between the market for their product/service and the market for their raw materials (usually including labor, but not capital so much since it’s a fixed cost). Drastic changes in the supply of inputs or the demands of customers have an effect on the quality, service, and price. In some situations, new entrants will rush in, and in other situations, they’ll be dropping like flies. Workers, businesspeople, and customers will adjust - customers by adapting with subsitute goods, and workers and businesspeople by entering other markets. You don’t spend all your life in one market, a typical day is a blend of several.
But this process doesn’t flow so smoothly. People run restaurants because they identify themselves with that business. People work as waiters or bartenders or chefs for the same reason - and often because they actually enjoy it (even if I do get to hear endless complaints from my friends in that line of work). In other words, there is some friction or latency in adapting to changing markets. If you lay off an auto worker, they spend some time unsure of what to do next. And maybe they retrain for something else - which can take years. Most people are not ready to jump into the next career at a moment’s notice - or gradually one by one as the balance shifts.
Now specifically: To Tip or Not To Tip, what’s the difference?
If I go out to eat, and purchase a $100 meal, then tip $15, it is actually a $115 meal from my point of view. Meanwhile, the waitress is making less than minimum wage, as the government considers tip money to be real income - even though I might choose not to tip. There is no law that says I must tip the waitress, but there is a law regarding minimum wage. For some reason, a concerted effort to not tip the waitress can cause the restaurant break the spirit of the minimum wage laws. I never could figure out why the job doesn’t just pay more. And, reward good workers with pay raises. Isn’t that how it works everywhere else? Wage disparity is supposed to be an index of how valuable the worker is. (Not how hard they are working! - we didn’t say anything about that.) In a perverse situation, hard work might not be worth more to the employer. And, the effort might be misguided anyway - not exactly what the job called for.
I generally get upset over anything that distorts price. If it’s going to be the same money, then we need to have the same basis for valuing workers. I personally witness many instances where tip money makes the worker beholden to the customer in ways that do not exactly benefit the business. If you tip well, the bartender sometimes pours you free drinks. Apparently, this is so common that there is an allowance for it, and the bartenders are encouraged to report it - it builds an intangible good will with customers (but it’s sort of hard to measure - do they really spend any more money? Maybe the consistent ability of a bar to draw customers makes it a happening place… Nobody goes there anymore - it’s too crowded.)
Posted by Evan Bittner Wed, 11 Jun 2008 22:29:00 GMT
