Tips, Service Charges, and Class Barriers

Ideas and Issues

tipsNew Orleans  Every once in a while the contradictions in the way people see things from the bottom versus the way they see things from the top of the money pile are soooo different that it is almost unconscionable not to comment.

            There was a piece the other day in the New York Times, where the “tale of two cities” between rich and poor is becoming a political lightning rod.  One of the paper’s food critics waxed at length about the mischief of tips with the heart of his argument being that tips did not guarantee better service and to the degree a customer tried to use a reduced tip to admonish someone for poor service, you needed to be careful that you weren’t also punishing the sommelier or in English, your wine waiter.  Yes, you’re right, that’s not a problem when you are getting ready to settle up for the Grand Slam at Denny’s.  What the critic tried to make a case for was a fixed service charge, and he cited some spectacularly expensive restaurants as perhaps leading a charge in that direction.

            Meanwhile in the Wall Street Journal at almost the same time there’s an article about a new rule from the IRS that, correctly, advises restaurants and hotels that a “service charge” that is mandatorily added to the bill and then distributed to workers needs to be treated as income with the proper withholding paid by the employer for Social Security, unemployment, and so forth.  And of course this is as it should be, because these are vital benefits for workers, but of course most of the businesses, including the giant Darden Restaurants group, indicated that they will be dropping these service charges like hot potatoes, because they don’t want to either pay a higher wage than the tip credited next to nothing for their wait staff nor of course do they want to pay any benefits.   Does that sound like service charges are going to become a movement of some kind away from tips?  I don’t think so!

            Meanwhile where the critic proves he is completely from Planet Billionaire is in not understanding that as long as eating establishments can get away with paying only two bucks and change per hour their whole business model is based on having service paid for by the customer, like it or leave it.   Compared to thirty years ago when the IRS first enforced a mandatory 8% tip credit on employers to stop the codependency predatory scamming that bound boss and worker in a tax hustle so the workers could afford to eat when not at the restaurant, more tips are now mandatorily taxed.   Nonetheless as countless interviews with wait staff indicate those gazillion places still paying in cash at the end of every week are the mainstays of the service industry.   In the real class struggle at the bottom, workers at McDonald’s  and Burger King making $7.25 and praying for more, would kill to get a gig making $15 or $20 an hour with tips that with a wink and a nod they might use to dodge the tax man.

            So on millionaire’s row they can have intellectual debates about the few and far between haute cuisine, high end places and the elite wait staff that work there, but as long as we pretend we can keep food prices low by forcing workers to subsidize the cost and customers to contribute to the business model, at the bottom where millions of workers are trapped in the service industry exploitation can continue reign supreme.