Does the end of Ontario’s liquor server wage mean lower tips for restaurant workers?

Miguel Muñoz, the general manager for the Motorino Enoteca restaurant group in Toronto, expects tips to decrease once guests are aware servers are making a higher hourly wage.

Because servers rely on tips to boost their pay, Muñoz is concerned that some of them will leave the industry for greener pastures.

“We’re going to lose career servers,” he said.

This could mean a potential drop in service standards, plus higher labour and hiring costs for employers, he said.

But Muñoz is hopeful the effect won’t be too dramatic.

“It’s going to be a transition period,” said Muñoz. “We need to see.”

However, some experts don’t think customers will even be aware of the wage increase.

“I don’t believe it’s going to have much of an impact (on tipping),” said Sylvain Charlebois, a professor in food distribution and policy at Dalhousie University.

James Rilett, vice-president for Central Canada for industry group Restaurants Canada, said restaurants have reported higher tips from customers since the pandemic began, perhaps reflecting an increased appreciation for workers and business owners.

A study published in June by the Dalhousie University Agri-Analytics Lab confirmed this, with one in five respondents saying they plan to tip more in the wake of COVID-19. Almost half of respondents said they think social pressure to tip well has increased compared to pre-pandemic.

However, though the end of the server wage may not directly cause most customers to tip less, there could be an indirect effect through higher menu prices, said Charlebois.

Rising food costs and labour costs have already pushed restaurants to raise their menu prices.

In past years, whenever the minimum wage increased, so did menu prices, said Rilett. So eliminating the server wage will likely contribute to even higher menu prices, he said.

And that, in turn, could cause people to tip less or just go out less often, said Joseph Marchand, an economics professor at the University of Alberta, who led a panel for the Alberta government examining the impact of eliminating its own liquor server wage in 2016.

The real question is how employers will adjust to the higher wage for servers, said Marchand. Higher menu prices, or fewer hours for servers causing a lower standard of service, could both result in lower tips, he said.

But Muñoz thinks wage hikes will have a bigger impact on customers’ tipping decisions than higher menu prices — though he agrees prices will have to go up to accommodate the rising costs of labour.

Servers could also see lower tips not from customers, but in the percentage of tips they get to take home.

If servers’ wages go up, restaurant owners will be under more pressure to give a higher percentage of tips to other workers, such as cooks and dishwashers, said Rilett.

Marchand agreed.

When the liquor server minimum wage was eliminated in Alberta, tipout percentages to back-of-house workers went up, from an average of five per cent to around seven per cent, he said.

But it’s not so easy in Ontario for employers to change tipout structures, Marchand said. Here, restaurant owners have less control over tipouts, which are the percentages of tips given to non-serving workers.

During the pandemic, some restaurants have already attempted to ease the wage gap between front-of-house workers, such as servers, and back-of-house workers like cooks and dishwashers, a gap created by tips.

Owners have two options in Ontario if they want to try and make tipouts more equitable between workers, said Rilett. They can rely on the staff to agree on tipout percentages, or they can turn to a controlled-tip system, where tips become part of the paycheque.

The first option is difficult to manoeuvre, and the second means higher costs for both employers and staff in the form of taxes and premiums.

Either way, most restaurant employers will be forced to at least consider these options, said Rilett.

Rebecca Gordon, a spokesperson for the Canadian Restaurant Workers’ Coalition, said servers have differing opinions on the elimination of server wages. Many, such as those who don’t get a lot of tips, welcome it, she said. But others are worried that employers will make up for the higher labour cost by adjusting tipouts, taking away perks, or scheduling fewer hours.

Such changes are more worrisome to workers than how much customers will tip, she said.

However, if menu prices go up to balance out labour costs, Gordon said customers could tip less or just choose to go out less often. Both would negatively impact workers, she said.

Many servers are women, people or colour, or otherwise marginalized, said Gordo. They experience high rates of harassment and many put up with this behaviour because they rely on tips. But $15 an hour won’t fix this, she said. In many cities, “it’s not enough.”