With many big cities upping the minimum wage, restaurant owners have to contend with higher labor costs—which has led some to abandon the practice of tipping in favor of raising menu prices or adding a mandatory service fee. At Dirt Candy, a Manhattan eatery, a 20% administrative fee is added to the bill in lieu of tipping—and servers are paid $25 per hour. (New York will require tipped workers be paid at least $7.50 starting at the end of this year.) "I think that restaurants will have to do this," the owner tells the New York Times. "How else do you compensate for this extra money you’ll have to pay?” Plus, while tips are not shared with those who work in the kitchen, the revenue from higher prices and fees can often be shared with all employees.
"We saw there was a fundamental inequity in our restaurants where the people who worked in the kitchen were paid about half as much as the people who worked with customers in front of the house," explains the co-owner of Ivar's, a Seattle restaurant that raised prices 21% and eliminated tipping after the first stage of the city's $15 minimum wage took effect. Though some restaurateurs worry that servers will be put off by the idea of no tips, a server at a San Francisco restaurant that also pays $25 per hour says she earns as much as she always did at her new rate of pay—but now she earns the same amount per shift even if a night is particularly slow. Another concern is that diners simply aren't ready for the change. At Ivar's, credit card slips now include this line: "If you INSIST on leaving a tip, write it here." Earlier this month, the AP reported that Ivar's no-tipping experiment has been a success, with some staff wages as much as 60% higher than before. (Read more tipping stories.)