A while ago I asked Why Do We Tip So Much? I'd been puzzled why we used to tip only 10-15% but now the norm is 20%.
Just now a thought occurred to me... maybe the reason the standard expected % rate for tips has gone up is that food costs didn't go up as fast as wages? Its a possibility. I mean if a burger cost $1 in 1980 and is now $2 then a 15% tip in 1980 would be 30¢ and 60¢ today. Just about doubling. But what if wages tripled in that period? Tips wouldn't have kept pace with inflation so it would make more sense to have a higher % tip.
In 1984 the 15% tip was typical (noted previously). Today we expect 20% tips.
What has the cost of restaurant food done in that same period?
For that lets look too data chart from the Fed. :
Consumer food prices (away fro home ) were up ~155% from 1980 to today.
Now compare that to income. From the census
In 1984 median income was $10,417 and by 2014 it went up to $28,757.
From the early 80's to today, restaurant food prices went up ~150% and wages went up ~180%.
In 1984 the minimum was $3.35 with a 50% tip credit. So workers would have gotten $1.67 per hour in tips. (minimum wage history) Minimum wage for tipped employers (with the tip credit) has been stuck at $2.13 per hour since 1991 where it is today.
Median hours worked for waiters and waitresses is around 35 hours a week.
Nationally today waiters and waitresses average $10.40 an hour. (BLS data) With a $2.13 minimum they're getting $8.27 in tips on average.
From an old Occupational Outlook Handbook said that "In 1984, median annual earnings (excluding tips) of full-time waiters and waitresses were $9,400."
If I start with annual wage of $9,400 in 1984 and then work forwards then it goes as follows:
$9,400 in total wages in 1984 would have been a combination of minimum wage and tips. Assuming a weekly work week of 35 hours that works out to $5.16 per hour. Minimum wage in 1984 would be $1.67 so they would have made $3.49 per hour in tips. Thats then $6351 in tips and $3039 in wages. Assuming a 15% tip rate then the food served would have to be about $42,340 a year to get to that $6351 tip total.
$42,340 in food in 1984 would then grow to $107,967 per year in 2015.
For the $9,400 in 1984 to grow the same as wages in general that would have to hit $26,320 today.
Minimum wage on 35 hours a week would give just $3913 so they'd have to make $22,407 in tips.
$22,407 in tips a year on $107,967 of food equates to just about ... drum roll.... 20% tip rate today.
So theres my answer :
Due to slower increases in minimum wage pay for tipped employees and slower increases in food costs tips would have to go from 15% to 20% in the past 30 years in order for tipped workers to retain the same relative incomes.
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