At the start of the new year, bartenders, waiters and other tipped service employees in New York got a raise. The minimum wage for these workers went up 50 percent from $5 to $7.50. And it might change dining out as we know it, at least in America.
In many parts of the world, restaurant staff salaries are simply factored into the prices on the menu and tipping is not necessarily expected. But in countries such as the United States, adding a gratuity is completely common, with 15 to 20 percent the norm.
Some top restaurants in New York are now changing this custom to jibe with the new economics of minimum wage. At its most basic, the overall cost of business just went up. Restaurants are now paying their servers 50 percent more than before. Full stop.
But another part of the issue is the ever-growing pay disparity between front of house and back of house, which is to say between the servers and the kitchen staff. In New York, a server is now making $7.50 an hour, plus tips. A cook in the back also got a (very slight) minimum wage increase from $8.75 to $9 an hour, but that employee doesn't receive any gratuities.
Advantage: Servers.
This disparity isn't new. Servers have always made the money. But now they are making even more just from their base salary. And if you've ever worked in a restaurant, you know that one thing you don't need is added tension between the front and back of house.
For these reasons and more, some top New York restaurateurs such as Danny Meyer are eliminating tipping. In going "all-inclusive," they're raising their menu prices 20 to 30 percent. So, for example, a $10 hamburger would now cost between $12 and $13.
New York Gov. Andrew Cuomo is pushing for a general minimum wage increase to $15. And while this might help out fast-food workers and the kitchen staff of higher-end restaurants, it could further push more restaurant owners to be more European about tipping policies and menu pricing.
Watch the video to see how three restaurateurs, the hosts of "Restaurant Startup," feel about the future of tipping.
Tune in to "Restaurant Startup," Wednesdays at 10 p.m. ET/PT on CNBC, to watch entrepreneurs compete for the backing of the show's celebrity restaurateurs.