A little over two months ago, our college town brewery in southern Indiana made a pretty big change in the way that we operate and compensate our taproom staff. Since then I’ve been asked a few dozen times, “How’s it going? Are people liking the switch? Are you doing okay financially?” I love that folks are truly interested in what we are doing and that the no-tipping movement conversation is once again getting some attention. Spoiler alert: It’s going great!
If you haven’t heard, after researching our own payroll data and customer habits for over a year, we began to notice trends that closely matched data from large studies. The basic idea behind tipping is that service workers are getting rewarded for doing a good job, but the science and data simply doesn’t back this up. There’s decades’ worth of consumer-psychology research clearly demonstrating that tipping hardly improves service at all. In fact, study after study has shown that:
- Better service does not result in better tips.
- Better tips do not result in better service.
- Poor tips do not correct poor service.
Personally, I felt that the employer/employee relationship was pivoting, largely due to the SARS-CoV-2 pandemic. When stay-at-home orders swept the nation it wasn’t just the businesses that had to pivot and change their models to survive. Employees, especially those working in the hospitality and lodging industry, were laid off or told to stay home. According to a recent survey from the personal finance website Bankrate, more than half (51%) of Americans have less than three months’ worth of emergency savings. So now we’ve got a large group of people—who love being around and making conversation with complete strangers—sitting at home, during a pandemic, waiting on their unemployment checks with little to no savings.
Very quickly, it is clear to see that the employer was no longer the only one sitting at the table wondering what to do next. Sure, some came back to the hospitality and lodging industry, but what about the people that didn’t? Maybe they found a better-paying remote job. Maybe they went back to school. Maybe they decided that standing on their feet, walking tens of thousands of steps on hard concrete for long shifts, tolerating inappropriate and rude customers (yet depending on those same customers to supplement their take-home pay) just wasn’t worth the $2.13 per hour hourly rate anymore. Speaking of hourly rates, seven states do not have a lower tipped minimum wage (CA, OR, WA, MN, AK, NV & MN) yet they enjoy faster job growth, higher wage growth, higher sales per capita, and the same averages of tipping.
Enter the “Great Resignation”. A record-high 4.3 million workers in the United States quit their jobs in August 2021, according to the Job Openings and Labor Turnover Survey (JOLTS) report released by the U.S. Bureau of Labor Statistics, which represents the highest monthly total since the data series began in December 2000. Folks are quitting for a lot of reasons, but I have to believe in my heart of hearts that the hard-working people that are serving you and your family are doing so because they had the time to reconsider things in the middle of a pandemic.
I found myself not able to sleep at night. I knew in my gut that something had to change at Switchyard. That we had to offer something different, that we needed to break the cycle of harassment, burnout, misconduct, and wage discrimination. So at the beginning of August of this year, we made the decision to eliminate tips and pay a flat living wage based on a staff member’s experience level, seniority, performance and continuing education. We raised our prices by 25-30%. Pints of our beer went from $5 or $6 to $6 or $7. Our gourmet pizzas with housemade dough and sauces saw an increase too. We stopped offering weekly specials, but kept our annual Mug Club membership, offering discounts to our most loyal customers. A week later, after silently removing the tipping line from the credit card slips, the story broke. First on our local Foodies Facebook page, then to our local NBC, FOX and CBS affiliates in Indianapolis. Then, our official announcement mosaic went viral on Facebook, reaching over 2 million unique accounts from over 10,200 shares and 3,000 comments. The outpouring of support was seen not only from our followers here in Bloomington, Indiana but all over the country, from Las Vegas and Seattle to Boston, Chicago and Philly, to even across multiple continents around the world.
What happened next completely took me by surprise.
Call me naive, but I was sincerely shocked to see how many folks were truly and passionately pissed off about our company’s decision to eliminate tips and pay a living wage. Someone from Ohio proclaimed on Facebook, “You’ve lost a customer! I’m never going to your brewery! I hope your woke business shuts down!”
Another man called the taproom twenty minutes before we opened one Tuesday and proceeded to tell our Hospitality Director, Kiley, what he thought. Kiley did an amazing job handling the situation, trying to educate the customer and present our reasons, but he didn’t have any interest in listening. Her hands shaking in anger, ended up going silent, letting him vent for a few minutes before silently hanging up the thirty-minute phone “conversation”. The man called back. I answered the phone and introduced myself. He demanded to speak to Kiley again, and I, as calmly as I could, explained that she was unavailable and that he could speak to me directly. He again became rude, yelling expletives. I advised him that I would be hanging up and that he should not call back again. After I hung up the phone, it rang again. I answered and explained that if he called back ever again, or visited the taproom, that I would have to request a no trespass or harassment report with the police. He never called again.
This was the first of several calls that our staff has taken from folks all across the country. From the Facebook comments to the phone calls and the 1-star Yelp and Google reviews we received, we immediately recognized that this was a group of folks that were not remotely close to being stakeholders in our business; and, in all honesty, would probably never step foot in our brewery (but found the time in their day to make their feelings known).
Another surprising reaction that I didn’t expect was how many folks commented that $15/hour was not a liveable wage. True, in a lot of metro areas $15/hr is not a liveable wage. In mostly rural southern Indiana, however, it is. I am sure that at a Downtown Chicago steakhouse, a seasoned veteran server can make upwards to $100k/year, but that is just not realistic here in Bloomington, Indiana. We also saw comments from people that during their time bartending and serving that they would make way over $15/hr in a shift. That could certainly be true, but it is heavily dependent on so many variables. What day of the week was the shift? What section did they have? Do they have seniority? Did they work their way up from hostess to server to bartender? Were they paid that much when they were just out of training? How was the weather that shift? Folks in the hospitality industry have a sort of “gambler’s mentality” meaning they are stoked about the $300 in cash they took home on a Friday night, but forget the $50 they made earlier that week on a Tuesday.
Yes, Monroe County is a mostly-blue, liberal county in a sea of red that is the Hoosier state. But consider this— if we, a craft brewery in the bluest of Indiana counties, in a college town, that prides itself on inclusiveness, diversity and equality found that tipped-wage discrimination was very real and happening right under our noses, imagine what is happening in your neck of the woods?
This discrimination does not only apply to race, color, sexual orientation, gender identity or expression, relgion or nationality – it applies to everyone. At our establishment a young, white female was tipped 25% more than the middle-aged, white female. A young, Asian-American female was tipped 15% less than a young, white female. A study of over 2 million Uber trips found that women got tipped more than men; younger women the most and a $4/hour wage gap between white and black workers. I simply don’t believe in allowing my employees to work in an environment like that, which allows those discrepancies in pay to occur.
Tips say everything about the person tipping and nothing about the person receiving the tip.
If a customer had a bad experience, it’s my fault as the business owner. It’s my fault for not staffing appropriately on a busy night. It’s my fault for not providing effective training. It’s my fault for failing to lead. Does your company take a portion of your hourly wage away if you mess up? Of course not, they would violate at least ten different Department of Labor laws or regulations.
I guess what has really bothered me the most through the last month was the reaction from some of the other hospitality employees right here in our own town. We have been accused of gaslighting them. Our staff has been met with hostility, malice and inappropriate comments from others in the hospitality industry while enjoying a beer after work with their coworkers. I’ve been told that some see Switchyard as ‘accusing other businesses for being racist’ because those establishments still accept tips.
Let me be crystal clear here. Are you paying attention? We believe that we have made the right decision for our business. We are unapologetic supporters of the tip-free movement. History tells us that tipping is rooted in racism. Is the act racist? Well, to be frank, that entirely depends on the person tipping. And therein lies our problem. The customer should never have the ability to directly affect someone’s take home pay. Full stop.
Is this model right for every business? I don’t know. Can it be implemented into any business that currently accepts tips? Absolutely. Plenty of data and research currently exists to back up why we made this change for our business and we are happy to share how we did it with anyone who asks.
I’ve said it before and I’ll say it again, the 56 people I call coworkers are some of the best around. They have taken this negative energy and spun it into the positive energy that you feel when you walk into our taproom. We haven’t had a single person quit because of the new change. Revenue is up and transactions are faster. Unfairness, discrimination, harassment, and legal minefields have disappeared; my coworkers feel valued, protected and empowered to stop inappropriate customer behavor way before it ever becomes a problem (and not able to threaten their take-home pay). Our customer service and taproom experience hasn’t changed and coworkers no longer have to go to great lengths to try and work every Friday and Saturday night.
So, one month later, are we happy we made the change? If you made it this far, you know my answer. Absolutely. I know, at the end of the day, that we are doing everything that we can to take care of our people and in turn, they can take care of their families and in turn, come to work in a fun—albeit sometimes chaotic—environment and do what they do best: take care of you, our awesome customer.
Founder / President