The Perils of the Restaurant Sector

There are approximately 15 million restaurant workers in the U.S. In Madison we see an artificial picture of this sector. You know what I mean: lithesome 20-year olds (Hi, I am Amy – or Josh—I will be your server this evening). These college students are happy with their periodic work in the “gig” economy. In economics we have a whole theory of the “permanent income.” These kids are pretty sure they will not be a waiter the rest of their life.

Go to a restaurant outside of a college town and you see broken down women (and a few men) still working because they cannot afford to quit. The average Social Security check in America is 2 about $1,500 a month. A career spent as a restaurant worker means a life spent living on tips— for which there is no payroll tax paid, and hence no credit for SS.

In Europe, restaurant work is a career path and it pays accordingly. Eating out in America is artificially cheap because we are shifting the financial burden on to restaurant workers. Resistance to salaried work in America’s restaurants is severe because it would raise the price point of meals by 10-15 percent. We are beguiled by the posted menu price, forgetting that we
must then add in a tip and tax at the end. The tip can be easily minimized. If we were faced with the full social costs of eating out, we would do it less. But the restaurants that survived would be properly priced and the workers would be treated as important parts of the business.

Once the crisis has passed, do not be surprised to see many restaurants reconfigured to bring employees into the wage/salary economy with fringe benefits. Eating out will become more expensive, and waiters will not try to charm us with their cute names

Dr. Daniel Bromley can be contact at

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