Frustrations over tipping and concerns about fair wages for tipped workers have increased calls for changing this longstanding system. However, it may come at the cost of higher menu prices or service charges as restaurants have to cover increased labor costs.
Some states have already eliminated the tipped wage, and governments, trade groups and advocacy organizations increasingly push to end the practice. For example, the Chicago Sun-Times reported that a recently proposed Chicago ordinance would end the tipped wage by 2025 forcing employers to pay at least the municipal minimum wage. Customers would still be able to leave tips, however, business owners would be allowed to distribute the money as desired.
Some restaurants have also voluntarily eliminated tipping and increased dining costs to make up for higher wages. The Wall Street Journal mentioned that Daisies in Chicago added a 25% service charge to diners’ bills while the Thattu restaurant raised its menu prices above those of competitors. Although such changes provide pricing transparency, they could push away customers struggling with tight budgets.
Not all restaurant workers may support changing the system either. While worker equity and earnings stability could increase, some employees could end up worse off.
A June 2023 study by the Employment Policies Institute found that most tipped workers preferred the current system and that the national average hourly wage for tipped workers was $15.51. That amount exceeded both the $7.25 federal minimum wage and most states’ minimum wages.
As the fight over wages and tipping continues, restaurants will have to consider the impact of higher labor costs and potential worker dissatisfaction and the risks of higher prices and fees. Facing potentially higher dining-out costs, you should also consider cost-cutting strategies. In addition to eating at home, you can try seeking restaurant coupons and discounts, sharing meals, buying smaller portions and skipping non-essential items.
