eli5 How did the US service industry become so reliant on consumer tips to function?
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Tipping at restaurants was already a thing, but part of the story of how the industry became reliant on it was that when the federal minimum wage was proposed, there was stiff resistance from Southern states that balked at the idea of paying equal wages to both black and white workers. To get the votes in Congress to get a minimum wage passed, it involved carving out exemptions for a list of professions which were then associated largely with black workers.
Domestic workers (maids and childcare), farm labor, and restaurant workers were exempted in large part because at the time a disproportionately large number of black workers were in these professions in the South.
Because they could legally pay under minimum wage, those industries kept paying under the minimum wage. They baked it into their business plans, so here they still are. It became difficult for one restaurant to raise their wages and thus menu prices because their competition might not do the same and then they could go out of business.
Everyone, including the restaurant owners, would arguably have been better off if the industry had never been exempted in the first place and then base wages could have risen across the board (reducing the expensive high staff turnover common in the industry) without fear of any one business being at a disadvantage to others.
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