When Did Paying the Waiter Become the Customer’s Responsibility?

Why restaurant employees deserve to be paid by their employers—and why a tip should be a reward, not an obligation.

Tipping has become such an ingrained part of American restaurant culture that most of us rarely stop to ask why the system works the way it does.

I have no problem tipping someone who provides good service. What I question is the idea that customers should be expected to supplement a restaurant employee's basic wages after already paying the restaurant for their meals.

This isn't an argument against waiters and waitresses. In fact, I understand why servers have come to depend on tips.

My problem is with a system that places customers and servers in this position in the first place.

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When a Tip Stopped Being Something Extra

There was a time when a tip was exactly what the word implied: something extra. It was a voluntary reward given to someone who provided particularly good service.

Somewhere along the way, however, tipping in the United States evolved (or devolved) into something very different. Instead of being an optional reward for good service, it has increasingly become an expectation—and, more importantly, a way for restaurants to shift part of the responsibility for paying their employees directly onto their customers. 

That raises a simple question:

When did paying the waiter's wages become the customer's responsibility?

How Did We Get Here?

Tipping has existed in America since the 1800s, but the modern tipped-wage system developed much later.

The federal minimum wage was established under the Fair Labor Standards Act in 1938. In 1966, federal law formally introduced a system allowing employers to count a portion of an employee's tips toward satisfying the minimum-wage requirement—what we now commonly call the tip credit.

Today, the federal minimum wage remains $7.25 an hour, where it has been since July 24, 2009.

For employees covered by the federal tip-credit system, however, an employer may pay a direct cash wage as low as $2.13 an hour, provided the employee's wages and tips together reach at least the applicable minimum wage. If they don't, the employer is legally responsible for making up the difference.

The $2.13 federal tipped cash wage has been frozen even longer than the regular federal minimum wage—since 1991.

Think about that for a moment.

The regular federal minimum wage hasn't increased since 2009, and the federal tipped cash wage hasn't increased since 1991.

Yet the cost of practically everything else has risen considerably. That's a product of fiat currency but that's a topic for another time. 

A Tip Should Be Earned, Not Expected

I don't oppose tipping.

If a waiter or waitress provides excellent service, there is absolutely nothing wrong with rewarding that person with a generous tip. That's what tipping should be about.

But a tip should be earned, not automatically expected.

The customer shouldn't walk into a restaurant already carrying an unwritten obligation to supplement the employee's wages simply because the employer is permitted to pay that employee a lower direct cash wage.

At the same time, I understand why many servers feel that tips are owed to them.

When someone's employer may be paying only $2.13 an hour directly and the employee depends heavily on tips to make a living, it's understandable that the employee begins to view tipping differently. What was theoretically supposed to be an extra reward has effectively become an essential part of that person's compensation.

So I don't blame the waiter or waitress for expecting tips.

The problem is the system itself.

We've created a situation in which the employee depends upon the customer's generosity while the customer is increasingly made to feel guilty for not voluntarily paying additional money on top of the advertised price of the meal.

That puts the customer and the employee against each other when the real question should be:

Why isn't the employer simply responsible for paying the employee?

The Price of the Meal Should Include the Cost of Labor

When I buy a meal at a restaurant, I'm already paying the restaurant for a product and a service.

The price of that meal shouldn't represent only the ingredients sitting on the plate. It should include the legitimate costs involved in operating the restaurant—electricity, rent, equipment, food and, yes, the employees who prepare and serve it.

The price being charged for the meal should be sufficient to allow a restaurant to pay its servers at least the full applicable minimum wage directly, rather than relying upon customers to make up a significant portion of their compensation through tips.

And that shouldn't require reducing the quality of the food or shrinking the portions customers receive. It also shouldn't cause the price to skyrocket either.

Employee compensation is a basic cost of doing business. Restaurants shouldn't treat their servers' wages as though they are somehow separate from the product and service they're selling.

When you buy groceries, you aren't expected to separately tip the cashier enough to complete the cashier's wages.

When you buy clothing, you aren't expected to calculate how much additional money the salesperson needs to earn a reasonable hourly wage.

The employer pays those employees, and the cost of labor is incorporated into the economics of the business.

Why should a restaurant be fundamentally different?

Customers Shouldn't Be the Restaurant's Payroll Department

There is something backwards about advertising a meal at one price and then creating a social expectation that the customer should voluntarily add another 15, 20, 25 percent—or more—partly because the employee serving the meal depends upon that additional money.

If labor costs need to be reflected in restaurant prices, then reflect them honestly.

I'd rather see the true cost of providing the meal incorporated transparently into the price than have part of the employee's compensation disguised as an unofficial obligation placed on the customer at the end of the meal.

That doesn't mean tipping has to disappear.

Quite the opposite.

Once employees are being paid appropriately by their employers, tipping can return to what it should have been all along:

an optional reward for exceptional service.

If the service is outstanding and I want to leave something extra, wonderful.

If the service is average, poor, or I simply choose not to leave an additional gratuity, I shouldn't be treated as though I failed to pay someone's wages.

I already paid the restaurant.

Paying its employees is the restaurant's responsibility.

Stop Blaming Customers and Servers for a Broken System

The tipping debate too often turns into an argument between customers and restaurant employees.

Servers say customers who don't tip are cheap.

Customers respond that servers shouldn't expect additional money simply for doing their jobs.

But both sides are being distracted from the underlying issue.

A server shouldn't have to wonder whether the next table will leave enough money for them to make a decent wage.

And a customer shouldn't have to wonder whether ordering a $20 meal really means agreeing to pay $24 or $25 because otherwise the person serving it won't be adequately compensated.

The employer-employee relationship should handle wages.

The customer-business relationship should handle the purchase.

A voluntary tip can exist on top of that relationship, but it shouldn't be what holds the entire arrangement together.

After all, we don't call it a mandatory service payment.

We call it a tip.

And if a tip is going to mean anything at all, it needs to remain something given voluntarily in appreciation for good service—not an unofficial payroll tax imposed on the customer.

Restaurants employ the servers.

Restaurants determine the menu prices.

Restaurants collect the revenue.

And ultimately, restaurants should be responsible for paying their employees.

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What Do You Think?

Should restaurants be required to pay servers the full applicable minimum wage directly, with tips becoming genuinely optional?

Or do you think the existing American tipping system works better for restaurants, employees and customers? 

I'm interested in hearing both sides. If you disagree with me, that's fine too—just explain why. A good discussion is more interesting when people can disagree without attacking one another.

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Sources & Further Reading:

For readers interested in learning more about the federal minimum wage, tipped employees, and the history of these laws, the following resources provide additional information:

U.S. Department of Labor — Minimum Wage Questions and Answers

Explains the current federal minimum wage of $7.25 per hour, effective since July 24, 2009, as well as federal requirements governing tipped employees.

U.S. Department of Labor — Fact Sheet #15: Tipped Employees Under the Fair Labor Standards Act

Explains the federal tip-credit system, including the $2.13 minimum direct cash wage, the $5.12 maximum tip credit, and the employer's responsibility to make up the difference when an employee's wages and tips don't reach the required federal minimum wage.

U.S. Department of Labor — Minimum Wages for Tipped Employees

Provides current and historical information about federal and state tipped-wage requirements. State laws vary considerably, and some states require employers to pay tipped employees the full state minimum wage before tips.

U.S. Department of Labor — History of Changes to the Minimum Wage Law

Provides a history of amendments to the Fair Labor Standards Act and changes to federal minimum-wage and tip-credit provisions.

Congressional Research Service — The Tip Credit Provisions of the Fair Labor Standards Act (FLSA): In Brief

Provides a detailed history of the federal tip credit. Its historical data show the tipped minimum cash wage reaching $2.13 in 1991 and remaining at that level as subsequent increases in the regular federal minimum wage increased the size of the tip credit.