Comment by bena | Hacker News Reader

Comment by bena | Hacker News Reader

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Be aware that you can't entirely trust his perception of the situation. He has a vested interest in under-paying his workforce.

He is going to doom and gloom any situation that results in him potentially losing money. And him losing out on profit to pay his staff probably doesn't enter his mind. If he made $X of profit last year, he wants to make $X+ this year. So he figures if he has to pay people Y more, he will have to charge Y more so he can still profit what he wants to.

To your opinion on what he should do regarding "extra" employees, I'm going to refer you to the book, Slack. While those employees are technically standing around being extra, they're needed to accommodate the bursts of activity that happens in a restaurant. Restaurants aren't busy all day long, they're busy in spurts. When you need people, you need them now.

And I think that may a major issue. The tipped minimum wage makes things feel like they're running efficiently, when it's really just shifting the money around in a way that is not optimal for the customer and causes them to overpay.

So you are saying that the employer is under charging(by proxy of labor cost) and the customer is over paying at the same time?

Not quite. You're trying to shift what I'm talking about to ignore the issue.

The owner is under paying for the labor and the customer, in turn, is over paying for the labor.

This is due to information asymmetry.

The employer is only paying the legal minimum, in the case of tipped wages in the U.S., $2.13. The employee is expected to make up the rest of the federal/state minimum wage in tips. But that's what they're incentivized to do. If you've got a short sighted view of finances, you may think that if you manage to cut costs, that always translates to extra profit. And if you're paying a dime more than minimum wage, you can cut that cost. (Also, this is why a lot of restaurants fail, most people who run them shouldn't be running a business)

The customer is obligated by social pressure and what not to tip for the service provided. However, people in the service industry are cagey about how much they pull in, actual effort required, etc. in order to get people to tip more and more. Originally, tipping was around 10% and now we see people trying to promote the idea that a baseline tip is closer to 25%.

So the customer has no clue as to how to price the labor that's been provided to them and it is in the servers' best interest to exaggerate as much as possible to get the most tip possible. That's what they're incentivized to do.

And inbetween it all, you have the servers. Who don't want to let go of the tipping model because they can manage to get paid better than what the actual service would be worth in a fairer market.

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