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November 6, 2008

Gender equality and tipping

I was reading When Is a Gratuity Gratuitous?, an article on tipping in the WSJ and I had an odd thought. The article points out the low end servers are disproportionately female, and presumably upscale servers are disproportion ally male.

Once again, custom dictates that we tip as a percentage of the bill. That automatically makes it a far more lucrative system for servers who work in upscale restaurants. Servers at coffee shops and diners -- mainly women -- work very hard for relatively little money. You can argue there's a lot more skill involved in being a server in a fancy restaurant than at a coffee shop; the waiter may know quite a bit about wine to serve up that $100 bottle. But it still seems a bit out of whack.

Is this an example of the norm of tipping serving to perpetuate unequal treatment of the sexes?
If you look through Zagats or Chowhound, you'll see that you can dine at restaurants with nearly any combination of service quality and price. Nevertheless, the norm we have in America is to tip a fixed proportion of the bill, forcing the compensation for wait staff to be tied more to price than to quality. In general, more expensive restaurants have better service, so it isn't a horrible rule, but certainly the variation in service quality is extensive within nearly any price level. Therefore, I find it hard to believe that waiters receive their marginal product. If they were, then service would vary more uniformly with price, because restaurants with the most expensive checks would hire the most talented wait staff.

So given that we are recognizing that some people are not being paid their marginal product of labor, we can consider the social norm encouraging that economic disequilibrium. And this norm seems to encourages us to systematically underpay low-end servers and over pay the high-end ones. Which happens to raise male wages relative to female wages. So maybe the women's liberation activists should try to end the practice of gratuities.

Which leads me to a few questions. First of all, is relationship between the proportion of restaurant revenues (including tips) going to wait-staff compensation different in countries that lack the norm of tipping? Second, this disconnection between the marginal product of labor and wages should imply that turnover is higher in high service expensive restaurants than in low service expensive restaurants. Is that true?

Posted by OneEyedMan at November 6, 2008 2:38 PM

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