Don’t tip
Last week I went to bar on St-Hubert street here in Montreal with three of my friends. The place was packed and there was clearly not enough employees to serve all the customers. The waitress took more than 40 minutes to bring us our four beers and since I wasn’t satisfied with the service, I told my friends I wouldn’t tip. All three of them looked at me in dismay, as if I had said the worst atrocity ever. According to them, the waitress didn’t have to pay the price of being overloaded. It was my turn to be appalled, since when does the client has to care about why he’s receiving a bad service?
Whatever the case is and wether I want it or not, today it feels mandatory to pay 15% in tip here in Montreal. If this is the case, why not include it in the bill?
Here, I will try to convince you that we should get rid of the tipping practice. This initiative is part of a set of many ideas that will help simplify our lives, make government more efficient, improve our society, and hopefully increase our collective happiness.
Tips in Quebec and the rest of Canada
For those who don’t know, Montreal is in the Province of Quebec and here is how tipping works in Quebec: waiters, bus-boys and barmans receive a salary that is generally lower that the province’s minimum salary: 10.45$/hr versus 13.10$/hr for the rest of the population. On the other side, they receive additional compensation in the form of tips from their customer. In Quebec, the recommended tip percentage is 15% of the total bill cost. In appearance, this system seems advantageous for everybody: the employer minimises his salary expenses, the employee receives an overall salary well above the minimum wage and the client pays a price that he judges fair and proportional to the quality of the received service.
According to the Quebec Restaurant Association, the medium salary is 26.59$/hr for waiters and 24.47$/h for barmans, including tip of course.
For the rest of Canada, the story is typically more simple as most provinces don’t have a different minimum wage for “tip workers”. Only Quebec and Ontario currently hold this practice and British Colombia recently got rid of it.
A supplement for service
Waiters and barmans offer a service. Bus drivers, nurses, hydro linemans and carpenters also offer a service. Why don’t we tip them? Because we deem it normal for them to do their job correctly, we don’t expect anything less from them. Then why not use the same logic for the restaurant industry? Isn’t it normal for a barman to do his job correctly? Of course it is. It is expected for the barman to be cordial, polite and to serve his clients in a timely manner. However here in Quebec, this very typical and expected service costs an extra 15% on top of the initial bill cost. My opinion is that the customer shouldn’t have to pay an extra for a normal service and that tips should be included in the bill.
We tend to think that tips help to protect customers in the case of a bad service. It is true in theory. However, it is not the case in practice since it is very bad regarded to give low (or no) tip and I’d even argue that this is not what we want. Do we really want to keep hostage the employee’s salary just in case he was to badly do his job? It seems pretty pessimistic to me. If the customer is not satisfied of the service, he has other recourses. He can contact the restaurant management and complain or even give a bad review on Yelp. The vast majority of the time I go at a bar or a restaurant, I receive either good or great service. This widespread practice of tipping seems to be made only for the once in a bluemoon situation where you receive bad service.
Another pessimistic opinion is that without tips, the waiters would haveno incentive to provide a good service. This is ridiculous. Even though I can’t prove this, I strongly believe that good waiters and barmans aren’t “faking” good service just for tips. Also, if the customer doesn’t like his service, he probably won’t ever come back and he might also give the restaurant a bad review. It’s both the restaurant and the waiters that are loosing here, it really is in their best interest to provide good service.
Good faith
There is an obvious problem with the actual application of paying tip using modern terminals. You might have noticed it yourself when you had to pay by debit/credit. The amount that you see on the terminal is very often calculated after taxes and the buttons for the different tip percentages are calculated on top of this amount. This means that you are tipping for the taxes. The tipping rate is and should obviously be calculated on top of the before-tax price as this corresponds to the service received. As a customer, I pay tip in exchange of a service, not in exchange of taxes. You might wonder if this makes a difference. It does. By paying tip on top of taxes, the customer ends up paying 17.25% in tips instead of 15%. How many customers do you think click on the “15%” button knowing that they are actually paying 17.25%? I’d argue very few. As for customers that are aware of this silly trick, to them it is an additional irritation at the time of paying the addition.
Another problem linked with tipping is tax evasion. Since a good percentage of tips are payed by cash (even though I must concede it is becoming less and less common), it is extremely easy for waiters and barmans to declare less to Government that what they actually received. Revenu Quebec and Canada Revenu Agency are aware of the problem, but what can they do about it? Not much. They can’t really contredict waiters since there is often no proof of the tip amounts when customers pay cash. Even if it is hard to estimate the amount evaded from taxes, Statistics Canada conducted a report on clandestine economy from 1992 to 2011. At the time, they estimated that the sum of non-declared tips was around 1.7 Billion dollars per year, which is around 4.20% (nice) of the clandestine economy in Canada. A more recent study from them showed the following:
Of the $61.2 billion in unreported income in 2018, the largest share went to employees (42.4%) in the form of labour compensation. Wages that are not accounted for in payroll records and tips on undeclared transactions were $26.0 billion, equivalent to 2.3% of official compensation of employees. The remaining portion of underground income went to unincorporated business owners (28.6%) and incorporated business owners (26.1%).
That’s a lot of money.
What should we do about it?
What I’m proposing here is ridiculously simple: Restaurants should be obligated to include tips in the bill. By doing this, the employer would also have the legal obligation to give back the 15% of the bill to its employees.
The customer wouldn’t have the social oblication to tip in excahnge of a typical service. If he jusdges that the service was outstandingly good, he obviously can give more but it wouldn’t be expected. In this case he would make a decision made out of a real choice, not as a social burden.
The waiter won’t ever have to be concerned about clients tip anymore. It will remove some insecurity in the industry, especially when facing bad faith customers. This seems to me like a very optimistic solution since we are now making the assumption that the waiter is doing a good job. If the customer isn’t happy about the service, he still can take action (but not paying is not one of the options), just like for any other service in any other industry.
As for tax evasion, the application of this solution would force employees to declare the total amount of money they received as tipping would be part of their official pay stub. The only possible tax evasion is for the rare cases where the customer decides to give more than 15%.
In the restaurant industry, tipping is an annoyance for customers, a worry for employees and a tax burden for the rest of society. Everybody wins when we include tips to the bill.
References
- Retail Council of Canada, Minimum Wage by Province, https://www.retailcouncil.org/resources/quick-facts/minimum-wage-by-province/
- ARQ, Portrait de l’industrie, https://restauration.org/portrait-de-lindustrie (2020)
- Statistics Canada, The underground economy in Canada, 1992 to 2011 (2011), http://www.statcan.gc.ca/pub/13-604-m/13-604-m2014073-eng.pdf
- Statistics Canada, Residential construction remained the top contributor to underground activity in 2018 (2018), https://www150.statcan.gc.ca/n1/daily-quotidien/201023/dq201023a-eng.htm
