Waiters and waitresses are generally paid very low hourly wages and receive most of their compensation from customer tips.
a. As the owner of a restaurant, what do you want from your wait staff?
b. Which element of a waiter’s or waitress’s compensation—the hourly wage or the tips—represent a method of “tying pay to performance”?
c. Which element of a waiter’s or waitress’s compensation—the hourly wage or the tips—plays the role of “insurance” that the restaurant owner provides for the wait staff? Against what are the waiters and waitresses being insured?
d. Theoretically, a restaurant owner could pay workers a higher wage, raise menu prices, and make the restaurant strictly tip-free. Or, the owner could eliminate the wage, reduce menu prices, and encourage greater tipping by alerting customers to the fact that the wait staff does not earn an hourly wage. What are the potential pros and cons (from the point of view of the restaurant owner) of each system?