Sometime ago there was a big argument about raising the minimum wage for restaurant workers. One of the anti-arguments was that some servers earn $100,000 a year with tips. That is a rather short-sighted view.
For sake of easy arithmetic, let's assume $100,000 a year in tips, as if many servers should be so fortunate. Why did the server earn so much in tips? If you assume all diners tipped at 20% (lucky server), then that means the restaurant had $500,000 gross income a year. So, if the waiter was earning a base pay of $10/hour with 40 hours per week, the cost to the restaurant would have been $20,800 per year, not a bad investment to have a return of $500,000. Gosh, members of boards of directors often get $100,000 per year or more for six meetings a year, don't get sore legs, and they often have other full time jobs.
If the restaurant had more tight-fisted customers and the average tip was only 10%, then the server would have been bringing in $1,000,000 gross income for the restaurant. For that amount of income, shouldn't an employer treat a server as an asset instead of a cost? As Adam Smith wrote, when the profits go up and the wages go down, that is a sure road to ruin.
