eli5 How did the US service industry become so reliant on consumer tips to function?
In: 5994
So, I’ve seen a lot of profoundly incorrect answers here derived from commonly repeated myths on Reddit. As someone who has worked in public history, I’m not surprised but I hope I can help shine some light on this interesting feature of American life.
The actual explanation can be found quite easily on the Wikipedia page concerning the [history of gratuity](https://en.m.wikipedia.org/wiki/Gratuity). In summation, gratuity was often frowned upon in the US because it was perceived as a way of ‘bribing’ the wait staff. In fact, tipping was outlawed in a number of US states (eg: Washington and Mississippi). The perception being that the staff would over serve a patron if they knew that they were being tipped. In a sense it was seen as a form of corruption. This norm changed following prohibition because the restaurant industry was losing huge revenue due to the lack of alcohol sales. So as a way of keeping wait staff employed restaurants began allowing servers to be paid a gratuity by customers. The practice became the norm even after prohibition ended and became the largest portion of a servers income.
People will disagree with this but the reason is that the people getting tipped believe they are making more money than if they moved it to a standard wage per hour.
This is certainly the case for waiters in restaurant, who in the majority of situations make more per hour than the cooks in the back of the house. Everybody loves to bitch about tipping, but a lot of those jobs are actually good for the people in those positions so doing away with them would only really benefit the consumers, and not the low wage earners.
Although I worked as a cook so maybe I’m biased.
I have no idea where some of these other explanations are coming from but the truth is that during the Great Depression, Congress carved out certain service industries, like the restaurant industry, from minimum wage laws in order to mitigate massive unemployment. Restaurants didn’t have to pay wait staff as much and customers were encouraged to tip for good service, essentially morphing the wage structure from fixed to variable (if restaurant gets more customers, employees do better. Not ideal but better than the alternative of the restaurant shutting down or laying off half its staff.
From there, it mutated into a life of its own, but that’s where it permanently became the norm in the service industry.
It’s not the service industry, it’s restaurants.
And the actual answer is the Great Depression and Prohibition.
The owners couldn’t afford to pay their staff enough so they became dependent on tipping. Tipping had been seen as unamerican (it originated amongst European gentry) but became a sign of generosity and being able to have enough money to do it.
After the Great Depression ended, it had become established practice.
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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.
It lowers the sticker price of a meal just like not showing the price including tax. Restaurants run on notoriously tight margins so anything to make a meal more enticing and they will do it. Look at how the airline industry, also notoriously running on tight margins, has so many extra fees.
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I’ve always thought it was a simple case of the employer passing on some of the risk of running the business directly to the employee.
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