I don't think the original poster was disputing anything you're saying. The central point (I believe) is that the actual physical employer is only paying about 40% of what is "minimum wage". I'm sure as a server, the poster (and pretty much anyone else that waits tables) makes that and thensome, even at a place like Waffle House.
Much like with wages themselves, it really does depend on the local market. I live in Seattle, and there's a neighborhood diner/bar I frequent. After the 15$ minimum wage law passed, they made a 20% tip mandatory on all checks (with the option to leave an additional tip on top of that) to cover for it. I can say, without hesitation, they have not lost any business at all. It's still as busy as it ever was and I don't go any less because of that. I was tipping over 20% every time anyway. I can't say something similar would happen in the Appalachian area where OP lives, but there's a decent chance that folks would pay more. Places increase prices all the time and don't see a downturn in business enough to not offset the price differences.
The much larger risk is if the cost of employing real labor goes that far up, more investment in automation happens, and then jobs get eliminated in large numbers because it's cheaper to just buy and maintain machines rather than pay a workforce. Although that's not isolated to food service - that's anywhere and everywhere.
Making the 20% tip mandatory is a good way to avoid the problem of raising prices, but understand this, that might mean the restaurant will be capturing 20% but then paying out much less than 20% to the servers.
Like I said above, by earning 20% on average a server might make $25/hour cash. FWIW, at my restaurant that number is closer to $35/hour. What stops an employer from capturing that 20% charge (in my case $35/hour) and paying out $15 or $20/hour while pocketing the rest? Why wouldn't I have every incentive to pay new servers the minimum ($15)but pay experienced servers more, but still less than the full 20%? Since the current transparency afforded by direct tip will be gone, how will servers be able to know? Frankly, if the servers are content with $20 and hour, I'd be a fool to pay them the extra $15. That money could go to pay the cooks more, improve my equipment, or buy myself a nice trip to Paris. Also, not for nothing, the income of servers will then be 100% taxable. Which means that 30% or so of their wages will now go to Uncle Sam. Remind me again how this is supposed to be helping the service industry workers?
Pretending that there is no price sensitivity for a 20% or more increase on the cost of a good is just silly. If that was true, why can't I just charge whatever I want right now? Believe me, I'd love to. Yes, businesses raise prices all the time, but only according to the demand for a good and the cost of a good. If I thought I could raise my prices 20% and suffer no loss in business I would already have done it. I don't keep my prices as low as I can to screw my staff. I do it because why would a person eat my $18 hamburger when they can eat my competitors equally delicious $15 hamburger?
Your point about automation is 100% valid. If I could automate, I would in a heartbeat. If someone brought me a product that could cut my labor cost by 20% I'd be a fool not to take advantage of it.
Right. I'm not assuming the full 20% tip goes to the servers (it's not even listed as "gratuity" on the bill, it's "local living wage adjustment" or something of that ilk). Effectively, they're charging the extra 20% just to get to the $15/hour. I don't know the specifics of the dispersal of profits at this place (nor do I care to ask) but judging solely on the lack of turnover in the wait staff there, I'd say they're probably not getting screwed.
Again, it's more local than anything, and isolating it just to food service is a little tunneled. Anyone who works within a 10 mile radius of a city like Seattle or San Francisco literally cannot survive on (I'd say) less than a $12/hour paycheck between the cost of housing, food, goods, basic utilities, local taxes, etc. It doesn't work the same in, say, Kansas or Arkansas. For what it's worth, I'm not in favor of a federal minimum wage increase, but I think it's crucial to have it set pretty high in some markets where it's needed, and the local labor force is being exploited.
I'm not "pretending there is no price sensitivity". I have a masters degree in economics and have at least a rudimentary understanding of this sort of thing. I'm simply saying it's incorrect to go full-tilt the other way and say if IHOP increased the price of pancakes by $0.50 they'd go tits-up in a week. Remember the gnashing of teeth over Papa John's jacking up their prices for pizza and blaming it on Obamacare? Their stock price on NASDAQ has gone from $18 to $87 in four years. Doesn't look like a whole bunch of folks decided to switch to Domino's in protest. Personally, I think you're giving far too much credit to price sensitivity. Would people balk at a $18 hamburger if they could get one for $15? A few might. I don't think most folks would. Prices get raised all the time for a variety of reasons. It's not an automatic causation scenario that businesses, small or large, tank instantly when this happens.
Much like with wages themselves, it really does depend on the local market. I live in Seattle, and there's a neighborhood diner/bar I frequent. After the 15$ minimum wage law passed, they made a 20% tip mandatory on all checks (with the option to leave an additional tip on top of that) to cover for it. I can say, without hesitation, they have not lost any business at all. It's still as busy as it ever was and I don't go any less because of that. I was tipping over 20% every time anyway. I can't say something similar would happen in the Appalachian area where OP lives, but there's a decent chance that folks would pay more. Places increase prices all the time and don't see a downturn in business enough to not offset the price differences.
The much larger risk is if the cost of employing real labor goes that far up, more investment in automation happens, and then jobs get eliminated in large numbers because it's cheaper to just buy and maintain machines rather than pay a workforce. Although that's not isolated to food service - that's anywhere and everywhere.
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Like I said above, by earning 20% on average a server might make $25/hour cash. FWIW, at my restaurant that number is closer to $35/hour. What stops an employer from capturing that 20% charge (in my case $35/hour) and paying out $15 or $20/hour while pocketing the rest? Why wouldn't I have every incentive to pay new servers the minimum ($15)but pay experienced servers more, but still less than the full 20%? Since the current transparency afforded by direct tip will be gone, how will servers be able to know? Frankly, if the servers are content with $20 and hour, I'd be a fool to pay them the extra $15. That money could go to pay the cooks more, improve my equipment, or buy myself a nice trip to Paris. Also, not for nothing, the income of servers will then be 100% taxable. Which means that 30% or so of their wages will now go to Uncle Sam. Remind me again how this is supposed to be helping the service industry workers?
Pretending that there is no price sensitivity for a 20% or more increase on the cost of a good is just silly. If that was true, why can't I just charge whatever I want right now? Believe me, I'd love to. Yes, businesses raise prices all the time, but only according to the demand for a good and the cost of a good. If I thought I could raise my prices 20% and suffer no loss in business I would already have done it. I don't keep my prices as low as I can to screw my staff. I do it because why would a person eat my $18 hamburger when they can eat my competitors equally delicious $15 hamburger?
Your point about automation is 100% valid. If I could automate, I would in a heartbeat. If someone brought me a product that could cut my labor cost by 20% I'd be a fool not to take advantage of it.
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Again, it's more local than anything, and isolating it just to food service is a little tunneled. Anyone who works within a 10 mile radius of a city like Seattle or San Francisco literally cannot survive on (I'd say) less than a $12/hour paycheck between the cost of housing, food, goods, basic utilities, local taxes, etc. It doesn't work the same in, say, Kansas or Arkansas. For what it's worth, I'm not in favor of a federal minimum wage increase, but I think it's crucial to have it set pretty high in some markets where it's needed, and the local labor force is being exploited.
I'm not "pretending there is no price sensitivity". I have a masters degree in economics and have at least a rudimentary understanding of this sort of thing. I'm simply saying it's incorrect to go full-tilt the other way and say if IHOP increased the price of pancakes by $0.50 they'd go tits-up in a week. Remember the gnashing of teeth over Papa John's jacking up their prices for pizza and blaming it on Obamacare? Their stock price on NASDAQ has gone from $18 to $87 in four years. Doesn't look like a whole bunch of folks decided to switch to Domino's in protest. Personally, I think you're giving far too much credit to price sensitivity. Would people balk at a $18 hamburger if they could get one for $15? A few might. I don't think most folks would. Prices get raised all the time for a variety of reasons. It's not an automatic causation scenario that businesses, small or large, tank instantly when this happens.
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