Tips likely to stay up even when servers get full minimum wage


IT WAS ALWAYS A LAME EXCUSE: paying workers less because they got tips. Those days will be over in Ontario come January 1. This could reduce take home pay, say some. But not necessarily.

Bar and restaurant servers in Ontario were discriminated against for years. Their minimum wage was always legally lower than the minimum wage set for all other workers. The excuse used to allow this was that the servers topped up their wages with tips.

The new minimum wage laws will free servers from this low wage ghetto. They will become entitled to the full new minimum wage of $14.35 an hour. This will give them a pay raise of $2.45 an hour.

Should be good news

This should be good news. But, restaurant industry pundits, and servers themselves, are not so certain. The worry is diners will tip less when they know servers are making more—and so the total take home pay might be lower.

However, some observers don’t think customers will even be aware of the wage increase.

“I don’t believe it’s going to have much of an impact (on tipping),” said Sylvain Charlebois, a professor in food distribution and policy at Dalhousie University.

James Rilett, vice-president for Central Canada for industry group Restaurants Canada, said restaurants have reported higher tips from customers since the pandemic began, perhaps reflecting an increased appreciation for workers and business owners.

Plan to tip more

A study published in June by the Dalhousie University Agri-Analytics Lab confirmed this, with one in five respondents saying they plan to tip more in the wake of COVID-19. Almost half of respondents said they think social pressure to tip well has increased compared to pre-pandemic.

However, though the end of the server wage may not directly cause most customers to tip less, there could be an indirect effect through higher menu prices, said Charlebois.

And that, in turn, could cause people to tip less or just go out less often, said Joseph Marchand, an economics professor at the University of Alberta.

Higher menu prices, or fewer hours for servers causing a lower standard of service, could both result in lower tips, said Marchand.

Who gets how much

Servers could also see lower tips not from customers, but in the percentage of tips they get to take home.

If servers’ wages go up, restaurant owners will be under more pressure to give a higher percentage of tips to other workers, such as cooks and dishwashers, said Rilett.

When the liquor server minimum wage was eliminated in Alberta, tipout percentages to back-of-house workers went up, from an average of five per cent to around seven per cent.

Restaurant owners have two options in Ontario if they want to try and make tipouts more equitable between workers, said Rilett. They can rely on the staff to agree on tipout percentages, or they can turn to a controlled-tip system, where tips become part of the paycheque.

The first option is difficult to manoeuvre, and the second means higher costs for both employers and staff in the form of taxes and premiums.

Either way, most restaurant employers will be forced to at least consider these options, said Rilett.

More at stake than tips

Rebecca Gordon, a spokesperson for the Canadian Restaurant Workers’ Coalition, said servers have differing opinions on the elimination of the lower minimum wage for servers. Those who don’t get a lot of tips, welcome it, she said. But others are worried that employers will make up for the higher labour cost by adjusting tipouts, taking away perks, or scheduling fewer hours.

Such changes are more worrisome to workers than how much customers will tip, she said.

Many servers are women, people of colour, or otherwise marginalized, said Gordon. They experience high rates of harassment and many put up with this behaviour because they rely on tips. But $15 an hour won’t fix this, she said. In many cities, “it’s not enough.”

61% ready to tip more

However, there are signs the law change will be nothing but good news for servers. A recent poll done by the Toronto Star newspaper found just over 61% of people eating out were ready to tip their servers as much as ever—or more—even when servers get their raise to the full minimum wage.

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