In this calendar year, several restaurants within California have announced their intention to ban tipping from their restaurants in favor of paying all employees a "living wage." To do so requires that menu prices be adjusted to make up the difference between what would have been left as a tip, and what the restaurant will now be paying to its employees. The annual income that has been touted by this move is somewhere in the $25,000 to $35,000/year range, not including benefits such as paid health care.
Seems simple, right? It hasn't been as easy as imagined.
First, how much should a restaurant increase their menu prices? Standard tipping practices are 15%, but can range anywhere from zero to more than 50%. The menu increase has given sticker shock to some patrons of the restaurants that have gone "tipless," as many still feel compelled to tip. It's becomes important for the restaurant employees, who used to rely on tips, to push the "we do not accept tips" policy that these restaurants pledge. Otherwise, years of societal norms that require tipping will take over, and the restaurants may ultimately drive away customers as patrons will have paid for the tip as part of the meal price, as well as adding an extra tip out of custom and practice.
Next, employees no longer receive that cold, hard cash that is so coveted in the restaurant industry. This can actually make the employees feel that they are earning less, rather than more. Again, this goes back to how much the restaurant is able to increase their menu prices. Skilled wait staff often receive more than the standard tips because of the level of service they provide. How much of an increase in menu price will make up for this?
Abolishing tipping may, in the long run, provide a more stabilized income to restaurant workers by providing a true living wage. However, in its early stages, it may be a hard sell both to customers and sometimes to employees. If it means providing stable living wages, it's not such a bad idea.