Tipping in America

Last Monday at lunch in a Spanish restaurant in New York City, server #228 earned $12. Tuesday at lunch, $14. Thursday night and Friday night: $480 total. On Saturday morning at lunch, she made $75. Last summer, in August, the slowest restaurant month of the year (except in vacation towns), she made less than $500 -- and didn't make rent.

Thanks to tipping, restaurant service is one of the most erratically paid professions in the United States. In some states, tips comprise 100 percent of a server's income, and all but seven have separate, decreased minimum wages for tipped employees. On the federal level, the minimum hourly wage for tipped employees is $2.15. In Kansas, it's $1.59.

With a wage this low, most or all of it is diverted to payroll taxes, leaving servers and often table bussers and food runners to survive on the whims of their wining and dining guests.

So how do servers survive? As it turns out, many of them don't -- servers have a greater turnover rate than virtually any other profession. Tipping is part of the problem, according to Michael Lynn, associate professor of Consumer Behavior at Cornell University's Hotel School and an expert on tipping norms and practices, "Part of it has to do with tipping itself. It's an unsure source of income. If you are a professional server making money on tips, it is difficult to establish credit ratings and to buy a house."

Lynn highlights the effect that high turnover rates have on the profession. "Because there is a high turnover, the practice becomes less efficient," she says. "The service can suffer when an employer says, 'I don't want to invest money in training servers who are not going to be around in a few months.' In this country, we have a generally more poorly trained workforce because of that turnover."

Currently, servers in this country are young, transient and a dime a dozen. In 2004, the U.S. Department of Labor reported a server workforce of 2.25 million. Around one-quarter of all food- and beverage-related workers are 16 to 19 years old -- about six times the proportion of all workers. The job of a server was rated as one of the top five private sector occupations with the highest number of job vacancies, indicating an extremely high turnover.

Anatomy of a tip

So what is average for a tip? The expected rate used to be 15 percent of the total bill, but these days, especially in urban areas, tips are much closer to 20 percent. According to Zagat Survey's 2006 Top Restaurant Survey, the average restaurant tip in the United States is 18.7 percent.

And where do the tips go? Servers invariably have to "tip out" -- pool together and share -- their nightly income with other service staff such as bartenders, bussers and runners, and often a coffee guy and bar back as well. A tip-out can be as much as 40 percent or as little as 10 percent. Each restaurant develops a unique method of division. Generally, but by no means without exception, bartenders are paid the most, then servers and runners, and then everyone else.

A server's income varies to an incredible degree. One server I interviewed said he makes around $45 a night. If that server worked five nights a week and took a month off a year, his annual income before taxes would be $10,800. On the other side of the spectrum, senior servers at top restaurants in New York City can make $100,000 a year -- or more.

Tipping for good weather forecasts and good looks

What is surprising is that, among the factors that determine how much money a server makes, quality of service is fairly insignificant. The Center for Hospitality Research at Cornell University, where Lynn works, found in a 20-year study that level of service explained only a miniscule two percent of the variation between tips. "Literally how sunny it is outside has the same impact on a tip as good service does," says Lynn. "The relationship between tips and service is weak enough that you have to really question the incentive for servers to give good service."