The coronavirus is changing tipping as you know it
The coronavirus has forced many restaurants to overhaul how they do business, and America's best-known restaurateur is no exception. Danny Meyer, CEO of the upscale Union Square Restaurant Group, announced this week that his restaurants would be moving away from a five-year-long no-tipping policy when they reopen this week.
The company, which owns Gramercy Tavern and Union Square Cafe, laid off more than 2,000 workers after New York ordered restaurants to close this spring. Concerns that workers wouldn't return without the lure of gratuities were a big factor in the decision to reinstate tipping, Meyer said on LinkedIn in announcing the decision.
"[W]ill restaurant professionals — already roiled by months of layoffs — decide it's worth returning to an industry that has already proven its instability in the face of the pandemic?" he wrote.
Previously, workers in Meyer's restaurants received an hourly wage plus a bonus depending on the eateries' sales. Now, front-of-house workers will be able to accept tips, and kitchen staff would receive a bonus based on sales, which Meyer said would boost their pay by about 25% on average.
Mixed results
Meyer was the last holdout of a group of upscale restaurants that announced a move away from tips before bringing them back. But others have made the experiment work — establishments like Dirt Candy in Manhattan and Haymarket Café in Northampton, Massachusetts, have been tip-free for more than five years.
Tips, inherently unpredictable even in the best of times, have become even more so during the pandemic. Restaurants nationwide, including Colleen's Kitchen in Texas and Trident Booksellers and Cafe in Boston, have raised tipped workers' hourly wages to make up for lower sales, Marketplace reported. Brooklyn Bar Hunky Dory eliminated tipping permanently this month, mindful that it might be dealing with much lower sales — and that workers might not be willing to risk their health for just a few dollars an hour plus whatever gratuities they were lucky enough to get each shift.
"We've been approached by literally hundreds of restaurants to transition to one fair wage," said Saru Jayaraman, cofounder of an advocacy group called just that, One Fair Wage, and director of the Food and Labor Research Center at the University of California at Berkeley. "I do think there's less willingness to be entirely reliant on tips than there was before [the pandemic]," she said.
Emmanuel Munoz, a 16-year veteran of the food service industry, has seen this firsthand. The Brooklyn restaurant where he works reopened about a month ago, and although the business is doing better than some of its neighbors, Munoz's tips have dropped by about 70%, he said.
"A few will give more than 20%, and then some people don't tip at all," he said. "The traffic that we have now is definitely way less than before." (Munoz asked that his employer not be named because he feared retaliation for speaking publicly.)
He added, "Right now I'm working five days [a week]. That helps a lot, but I'm still months behind my rent. It's not exactly encouraging. Especially trying to foresee the future — you don't really see that things are going to change."
New York employers interviewed by One Fair Wage have seen tipping drop by three-quarters compared to a year ago. Not only is restaurant traffic down, but many more people are taking their orders to go, where it's customary to tip less.
Pay disparities
Since the no-tipping movement started, four western states have eliminated the practice of paying sub-minimum wages to tipped workers. New York in December nixed the tipped minimum wage for everyone except food-service workers, the biggest group of tipped staff. They are paid between $7.85 and $10 per hour, depending on their employer's size and location in the state — well below the state minimum of $15.
When Meyer initially banned tipping in 2015, he objected to the disparities it created between customer-facing staff and kitchen staff. Because servers, bussers and bartenders are tipped based on how much food they sell, they can earn far more than the cooks who prepare the food.
Tipping foes also point out that, because tipped workers can legally be paid less than minimum wage, gratuities allow restaurants to essentially offload their payroll expenses onto diners.
Meyer had some success narrowing the gap, but his and other upscale restaurants faced a revolt from formerly high-paid waiters, many of whom saw their wages fall. Many servers left because they could make more money elsewhere, Grub Street reported. Some saw their pay drop $100 a week, while one worker saw her yearly income fall from $60,000 to $50,000.
However, servers like this represent just an elite sliver of the industry. Nationally, three-quarters of waiters and waitresses earn less than $29,000 a year, according to data from the Bureau of Labor Statistics. Most tipped workers are women working at moderately priced chain restaurants in states where they can be paid less than $5 an hour. Their low hourly wage, combined with their employers' moderate menu prices, means those workers will rarely break $10 per hour.
"No matter how good they are, in the IHOPs and Denny's and diners, they don't make that much in tips," Jayaraman said.
What's more, ample research has shown there's no correlation between tipping and quality of service. Tipping varies based on customers' feelings and even what color clothing the server is wearing. Tips also vary a great deal based on the worker's race and sex: White men earn up to $8 more per hour in tipped occupations than women of color, according to a recent One Fair Wage report.
Jayaman believes that a reckoning is coming, as coronavirus cases explode and restaurant traffic drops. Munoz, the waiter, shares her concern. Even if the outbreak remains contained and New York restaurants are allowed to open their dining rooms, he's worried about what will happen if the economy slows again or people start losing unemployment benefits.
Said Munoz, "If you were getting unemployment and now you're not getting it, you're not going to say, 'Let's go out to eat.' You have to pay the rent first."