In four earlier blogs (this is the 4th blog) I discussed the problem of raising the minimum wage by 40% in San Francisco. This is going to happen over a 3 to 4 year period. I discussed the enormous damage this will do to the city. We will become a sad declining city; we will be using Detroit style self immolation.
In the restaurant businesses, that I know, a 40% increase in the wages for the service staff will require at least a 20% increase in the retail price of meals and beverages. I expect most high-end restaurants with employees, who aren't family members, to close as the restaurant business moves to Oakland, a nearby city with very good restaurants.
Recently, I did see a possible solution for San Francisco restaurants.
The wait staff is paid primarily in tips. The average tip being somewhere around 18% of the bill before sales-tax. The wait staff earns two thirds of its revenue from tips.
If there were a way to get customers to pay 20 or 25% more for their food and not leave any tip, the net to the customer would be approximately the same as it is before the rise in the minimum wage. The wait staff could be given a small percentage of the increase. (But they would still have jobs… their wages might suffer a net decline.)
Customers, in the dozens of cases that I have observed, will always leave a tip regardless of what instructions they are given. This is not a problem with Europeans who are happy to avoid a tip. They seem to understand that tipping is a residual practice left over from the days of servants and slaves. Tips were meant to encourage servants and slaves to do a more enthusiastic job.
Ordinary Americans will leave a tip no matter how much effort is made to discourage them.
The geniuses at Uber, the online taxi service, have figured out a way to keep Americans from giving their drivers tips. The entire bill is charged to the credit card and with the invoice on the smartphone comes a questionnaire to rate the driver and car from 1 to 5. That rating function seems to replace the need to tip the driver.
I can see in a restaurant where the tip line, on the bill, would be eliminated but a rating system for the customer to rate the service would be on every bill.
This might be the way to raise prices more than 20% without increasing the cost to the customer.
Commerce is always a source of ingenuity.