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Corbyn's Tipping Tirade Lays Bare His Anti-Business Agenda

June 12, 2018 in Economics

By Ryan Bourne

Ryan Bourne

Jeremy Corbyn has had another brainwave.

The Labour leader wants to make it illegal for businesses to
“pocket” tips and optional service charges.

Some restaurants and hospitality firms currently collectivise
what we add to our bills or give to waiters and waitresses. They
might directly pool tips to redistribute them through a common fund
system or add them to general revenues.

For Corbyn, these actions amount to theft.

“It is not right that workers have their tips stolen by
bosses,” Corbyn said. The next Labour government will ensure
that “workers keep 100 per cent of their hard-earned
tips”.

Imposing strait-jacket
regulation across a variety of businesses is the order of the
day.

Let’s leave aside the fact that workers would keep far
from 100 per cent, given the high taxes likely under a Corbyn
administration.

Unfortunately, the Labour leader is not alone. He is making the
same mistakes as then business secretary Sajid Javid made when
discussing this subject: first, assuming that social expectations
about where tips go can harmlessly be enshrined in legislation;
second, failing to differentiate between the flow of cash and the
overall economic impact.

In fact, imposing a one-size-fits-all “tip must go to
worker” regulation could adversely affect businesses and
workers alike, given the different nature of restaurant models and
how managers use tipping to adjust total compensation.

Restaurant-specific tipping practices can be an important way to
deal with risk, manage staff morale, and ensure that customers get
a good service. Though less important generally in Britain than in
the US, basic tipping can play an important economic function.

Consider the set-up that Corbyn has in mind, in which, say, a
single waiter or waitress serves a set of tables exclusively.

The purpose of tips here is to be a form of risk-sharing for the
restaurant, particularly if it is not easy to observe the behaviour
and competence of wait-staff.

Tips lower the underlying hourly wage a restaurant might need to
offer to attract staff (lowering fixed costs), and total
remuneration for a worker becomes linked to customer satisfaction.
This averts the need for workplace performance assessments and
controversial wage negotiations for each and every staff
member.

However, even this simple example (to say nothing of larger,
more complicated restaurant set-ups) highlights reasons why it
might make sense to deal with tips differently.

In very small restaurants or established chains, where behaviour
is observed or customer expectations simple, it could make more
sense to adjust overall pay rates and put any tips into general
revenue toward that. If the work is relatively homogenous, staff
might resent a tipping “lottery”, where lucky workers
benefit from generous tippers and other wait-staff who work just …read more

Source: OP-EDS

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