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So essentially subsidizing the profit of the employer and subsidizing the cost of the goods that people who aren't adhering to the implied price structure are paying (non-tippers)!

I wonder how this came about? Like was this something a clever businessperson invented at some point? It sounds like the US is the only place with a tipping culture like ours.

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I don't think "subsidizing profit" is an effect of the tipping system; what the restaurant gains in lower wages, it loses in higher effective food prices.

In fact, I think, ignoring the tax evasion effect, the tipping system reduces profitability, because it scares away business by that "compensate-for-unpredictability" tax, which takes from what could be restaurant revenue.

One other side effect which is generally not discussed because it's contentious, is that a number of people who receive tips will underreport their tips. Especially those who receive cash tips. So the state and federal governments are partially subsidizing their wages too.

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