Can I give you a tip? We shouldn’t follow America down the low-wage route to poverty

IF Australia’s tourism industry is not globally competitive it will shrink.

As the debate rages here over penalty rates, privatisation and a greater focus on outsourcing, I spent time in the US service industry researching whether tipping, instead of our penalty payments, would make our tourism industry more competitive by boosting tourism numbers from the US.

Would Australia be better off with the US system? It comes down to jobs versus pay.

For restaurant staff who receive tips of $US30 or more a month, the US government has set a minimum hourly rate of $US2.13.

If their wages and tips together do not equal the federal minimum wage of $US7.25 an hour, their employer is required to increase their wages to compensate.

In 2012, American restaurant staff received on average $US11.82 an hour.

Overtime is paid at a rate of 1½ times the employee’s regular rate of pay for each hour worked over 40 hours a week.

Compared with the Australian adult minimum wage of $16.37 an hour, plus allowances and penalty rates, our US cousins are paid a modest $US472.80 for a 40-hour week.

Tipping is deeply ingrained in American culture but, unlike Australian employees, US restaurant staff rely heavily on tips just to make a living.

As a result, President Barack Obama is urging Americans to pressure Republicans in congress “to give America a raise” by lifting the minimum wage to $US10.10 an hour. Nationally, about 5 per cent of workers earn the minimum wage.

The non-partisan Congress­ional Budget Office has estimated that Obama’s plan would cost 500,000 jobs but increase wages for 16.5 million Americans.

In March, Obama started using Labour Department regulations to force US businesses to pay overtime to fast-food managers, who were classified as “executive or professional”.

Late last year, the people of SeaTac, Washington state, voted in the highest minimum wage in the US, of $US15 an hour, for 6500 city workers. While the Washington Restaurant Association launched a court challenge, a campaign by union supporters is pressing to spread this payment across the US with public rallies in many cities. The May Day march in New York focused on the $US15-an-hour campaign.

So is tipping the best way to pay workers, and how does it work?

Most Americans never tip less than 15 per cent of the bill, even for ordinary service. If the service is good, they tip 20 per cent.

They don’t tip in fast-food restaurants or places that do not have table service. Some coffee shops and bakeries have tip jars on the counter and it is usual to tip coins or $US1 at most.

At bars, the tip is 15 per cent to 20 per cent, with a minimum of $US1 a drink. Attendants in the restroom are tipped US50c for keeping the room clean and providing hand towels.

In winter, attendants are tipped $US1 to hang coats on the way in to dinner and at least $US2 for valet parking on the way out.

Cabbies are tipped between 10 per cent and 15 per cent of the metered fare and an additional $US1 for each piece of luggage. Hairdressers are tipped 15 per cent to 20 per cent of the bill and the pizza delivery person is tipped 10 per cent.

American tipping is a cumbersome, clumsy system. Tourists need to carry a pocket calculator just to eat out. This is becoming increasingly necessary, as many restaurants are now printing suggested tips in dollars on the bill to encourage tipping.

Most restaurants have a notice in the menu saying they will automatically add a tip of 18 per cent to the bill for tables of six or more.

In New Orleans recently, it was 20 per cent.

Keeping abreast of the correct tipping protocol can be difficult. For visitors, the question is whether the suggested tips are calculated on the total food and drink bill before or after sales tax is added. Most Americans calculate the tip on the pre-tax total but there is no universal agreement.

The Cafe Luxembourg in New York recommends tips from 18 per cent to 22 per cent, calculated on the amount before tax is added.

I found most restaur­ants do the calculation on pre-tax amounts. Nevertheless, respected restaurants at Union Square and Long Island City recommend tips calculated on the after-tax amount and the practice is increasing.

What would happen if the US adopted Australia’s penalty rates for restaurant staff and our minimum wage? Prices in US restaurants would rise; usually eating out is cheaper in the US, even with the tip included.

Customers benefit as staff work hard, providing excellent service to encourage generous tips. Rest­aurants win as they can charge less for food and leave the customer to determine the amount of the tip.

However, as tips determine how much staff take home, the losers in the US system are the restaurant workers. Our unions would never accept the US system.