The practice of tipping services a bunch of business purposes:
* It creates a spectrum of competition for server spots; service staff at fine dining restaurants make significant amounts of money but must hustle to secure those jobs; service staff at diners make reliable but low amounts of money and can easily find work.
* It functions as a commission system; servers who sell higher-priced products get superior returns from those tables, which suits the aims of the restaurant itself. Servers who can move wine make significantly more than servers who can't, and in good restaurants, wine is where the restaurant makes its money.
* It obviously helps ensure that servers are polite and helpful, which, restaurants being in the hospitality industry, is obviously a core part of the value proposition.
* More importantly, it incentivizes servers to increase table turnover.
These are all functions that could be managed at varying levels of effectiveness by other compensation schemes, but those other schemes don't actually improve outcomes for consumers; they raise prices and reduce transparency.
Funny. Universally, I've found the dining experience better in places where people don't tip... servers not pushing upgrades, no chasing people away to make room for new customers, knowing exactly how much you'll pay, plates not being snatched away before you can set the fork down, etc. Then again, I grew up in a culture where dinner is the main event, rather than the lead up to it.
My only restaurant experiences outside the US are in Europe, and my experiences are that service is perfectly friendly but much slower.
This doesn't impact me much (nothing wrong with a leisurely dinner), but it is murder on the small business owners of restaurants; below $50USD/table or so, success or failure in food service is all about turnover.
I'm not convinced those purposes really pan out, though.
Some alternative takes:
* A spectrum of competition can also be created the way it's done in any other industry: Expect a higher level of professionalism and competence from holders of higher-paying jobs, and attract more qualified employees by paying them more.
* A commission system can be handled the way it's done in any other industry: The employer sets the commission, and builds it into their price structure. This would be more transparent, since it means the consumer is being directly told how much the item will cost rather than being expected to do mental math to acquire its true price.
* Studies have shown there's not really a lot of correlation between the server's quality of service and the tip they get. It has a lot more to do with the temperament of the tipper, etc. It's not an incentive if it doesn't incentivize. And a basic demand for professionalism and courtesy works anywhere else. There's something fundamentally broken about a customer service philosophy that assumes your customer-facing employees need financial incentives to be nice to people. For one, it implies a poor opinion of the people who are doing the job.
* An straightforward commission would also encourage increased table turnover. Again, with more price transparency for the consumer, and more respect afforded to the server.
How does a backend commission that customers play no part in improve transparency for customers? What's more transparent than "I can actually select the commission my servers gets, from 15-20%"?
Help me understand how tipping is customer-unfriendly, and jacked up menu prices and backend commissions aren't. I'm just not getting it. Is it just the requirement to do math?
It's partially the requirement to do math. Folks just aren't necessarily thinking about the eventual gratuity at order time, and can end up spending more than they intended when the time comes to calculate the tip. Meaning that, in essence, there's a sort of minor dishonesty built into the pricing scheme that encourages people to spend more.
Perhaps we're talking past each other on the wording of things. I'm drawing a distinction between "transparent pricing" and "flexible pricing".
Buy a bottle of wine at a restaurant and you are almost certainly paying 1.5x to 2x more than the bottle costs in the store right down the street. Bring your own bottle to a restaurant that serves wine and, because the restaurant expects to make much of its ROI on wine, they'll charge you a corkage fee. That's opaque pricing.
You can rail against wine markups too, I suppose. Of course, since most restaurants work on razor thin margins and most fail, there's not much point; they're charging what they need to succeed in their market.
We also have to think of the tax that will be applied. You got out to eat and order a $7.95 burger/fries and a $1.50 soda[1]... most people already know that it'll be more than $10. It is not so hard to do the math. Since tax around here is in the 8.5-9.5% range, most of the time it can be safe to just double the tax on the receipt to get roughly 17-19% tip... round up if you want to show extra thanks... down if not. Many places will also print on the receipt the various percentages of tip so you don't even really have to do much at all but some multi-digit addition. So unless one has a hard time with "carry the 1" the math isn't that bad. I tend to over tip so I can get my grand total to a nice round number. And it is not uncommon for me to add an extra buck or two if my kids have made a huge mess of the place.
[1]But don't get me started on the extortion of $1.50 for a fountain drink.
Of all these functions you list, why does the customer need to be involved? These could all be abstracted away from the user.
If servers were paid more (and tipping were no longer required), people could still tip on top of that. This still creates your "spectrum of competition."
If the restaurants were trying to encourage up-selling (your wine example), then they can give bonuses correlated to how much wine each waiter sells.
If tipping is mandatory, it doesn't ensure servers are polite and helpful! This is common sense. If tips are considered a guarantee, then the incentive to work harder is removed. Additionally, waiters are often rude when they feel they have been tipped poorly. So, again, tipping only when you've received exceptional service, makes more sense.
As for "transparency," I think the most transparent scheme would be customers are expected to pay the list price. No tacit agreements about tipping or service fees. If it's not a listed charge on the menu, it's not required and it is purely optional. How much more transparent and simple can you get?
Exactly what is transparent about the "list price" on the menu? It can mean anything at all. It may reflect the cost of ingredients or track the laboriousness of prepping a dish, or it may instead track the popularity of the offering and have nothing whatsoever to do with expenses; in some cases, the list price on the menu may not even fully account for expenses and instead function as a loss leader.
The tip is the only transparent part about the price of a meal; in addition to its obvious surface meaning, understanding the subtext behind tipping also gives you an idea of what the restaurant wants you to do (eat faster, buy wine, &c) and adjust your behavior accordingly (towards or against the restaurant's interests).
Who cares? When you order from a menu, are you concerned about what percentages went to labor vs. food costs? I usually just pick that which seems healthy and delicious and which costs less a certain price I set for the meal. The only value I need is the total price I will be expected to pay.
In other words, the value of service is a function of the cost of the items. The supposed transparency of tipping is tainted by the opaqueness of everything else...
>>But tips are the most transparent part of restaurant pricing.
How and why are tips considered a part of 'pricing'?
Here in my country(India) I don't tip anybody, unless service delivered is exceptional. That is very important, because for an incentive to remain an incentive, it must be paid only when good work is done. Else it looses its value. Mandatory tips don't motivate servers, it just makes them complacent that they can do job as usual while they will be tipped anyway.
If tips are compulsory, they should make it a part of the bill. Something like 'Added 15% tip' and ask us to pay it as a part of the bill.
In such cases fast food restaurants will flourish, because no one wants to pay somebody a reward just for doing their job, like everybody does their job.
And please don't tell me how difficult servers are having it. Because every person who is working to make a living is having it difficult a way or the other. I work many hours in a month fire fighting, attending calls, working on late night issues, and sprinting towards deadlines. But I'm assumed to be OK with all that without being paid. I don't go around asking for tips.
Tip is not longer a tip when its mandatory, its more like service charges. I am OK with that, And will try to avoid such restaurants because I see no point in paying a service charge, when I can carry my food to the table.
You are welcome to call US "tips" something other than "tips" because you object to the strained definition. What you're not welcome to do is dine in a US restaurant where tipping is expected and not pay the tip because of that semantic argument. Your last sentence expresses the correct tactic for handling this problem: don't dine out in the US.
US tips are not simply an incentive to provide extraordinary service, full stop.
Not every part of the market for restaurant service is arranged for the benefit of the customer. Some of them are arranged to improve the viability of new restaurants. That's obviously an indirect benefit to customers, not a direct one.
* It creates a spectrum of competition for server spots; service staff at fine dining restaurants make significant amounts of money but must hustle to secure those jobs; service staff at diners make reliable but low amounts of money and can easily find work.
* It functions as a commission system; servers who sell higher-priced products get superior returns from those tables, which suits the aims of the restaurant itself. Servers who can move wine make significantly more than servers who can't, and in good restaurants, wine is where the restaurant makes its money.
* It obviously helps ensure that servers are polite and helpful, which, restaurants being in the hospitality industry, is obviously a core part of the value proposition.
* More importantly, it incentivizes servers to increase table turnover.
These are all functions that could be managed at varying levels of effectiveness by other compensation schemes, but those other schemes don't actually improve outcomes for consumers; they raise prices and reduce transparency.