Economic Development News & Insight


No tipping allowed: Restaurant pays a living wage

/ November 1, 2015

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No tipping allowed: Restaurant pays a living wage

A new restaurant opened recently in the small, rural town of Owen Sound (population 22,000) which is located in southwestern Ontario, Canada, and no tipping is allowed. Some diners have, though, tipped anyway. The owner of the Avalon Jazz Lounge & Patio, Gary Murphy, pays an hourly wage of almost $15.00, higher than the Province of Ontario’s general minimum wage of $11.25, although for employees who directly serve alcohol in licenced establishments, as is the case with the Avalon, the minimum is $9.80.

Murphy decided to pay a “living wage”, also known as a “fair wage” because “it’s the right thing to do”, according to the Owen Sound Sun Times newspaper. According to, a “living wage sets a higher test – a living wage reflects what earners in a family need to bring home based on the actual costs of living in a specific community.” This means it is community-specific, so that the same job being done in a large urban community where housing costs are higher, for example Toronto, could be paid a higher living wage.

A living wage is calculated as the “hourly rate at which a household can meet its basic needs, once government transfers have been added to the family’s income and deductions have been subtracted.” This wage, then, is meant to help lift a family out of poverty and provide a “basic level of economic security”, according Living Wage Canada’s website.

A living wage, according to Living Wage Canada, will enable families to cover reasonable costs, support health child development, reduce family financial stress, and reduce poverty. Without more employers adopting a living wage policy, many may still have low incomes, especially if part-time jobs are all they can get, even with some fair wage income.

He said it will stabilise employees’ incomes which is not necessarily possible with the fluctuations of tips. Some shifts throughout the week are busier and generate more tips, while the reverse is true for other shifts. The Sun Times article indicated only one person refused to work there because of the living wage.

Those working in minimum wage, non-tipping type jobs such as clerks, shelf-stockers, convenience stores, and fast food restaurants, for example, certainly would welcome a living wage. But will it be enough to attract and keep servers working in non-fast food restaurants?

Tips need only to amount to $5.00 over one hour of work to equal the living wage. For sake of discussion, let us assume a server can handle four tables in an hour. Further, four diners with a bill of $20.00 each (meal and beverage) is a total of $320 total for these sixteen diners. With an average tip of about 15%, our hypothetical server will earn $48.00 plus the minimum wage for an alcohol server of $9.80, for a total of $57.80. The difference, or short-fall, is $42.80 for one hour.

According to a 2012 Canadian Broadcasting Corporation report (CBC), an audit by the Canada Revenue Agency, found that servers actual make anywhere from 100% to 200% in tips over base wages. The audit targeted 145 servers working in four restaurants and found an average of $12,000 per person in unreported tips. It seems unlikely that a living wage will catch on in some service sectors.

Owen Sound is located in a primarily rural and agricultural area which has seen a significant loss of industry and associated jobs. Many jobs are minimum wage and part-time. The city itself has an unemployment rate which was (2006) higher than the provincial rate, 7.4 compared to 5.2 for the province (Statistics Canada, 2006 census data). The percentage of all individuals with low incomes was 15.8 compared to 14.7, and those under 18 years of age, 22.3 and 18.0. With a high unemployed population, there is competition for jobs, even though many posted on job sites for the area are minimum wage. For this reason employers do not need to pay a living wage to attract employees, a living wage is unlikely to become common place. And, the city of Owen Sound council turned down a request in May 2015 by the Peace & Justice Grey Bruce, a social advocacy organisation, to pay its part-time and seasonal workers a living wage, nor to endorse the concept. The local Chamber of Commerce stated that more study is required to see what the impact will be on employers.

The economic argument for a living wage is that more money will be spent in the community. That will be true for most minimum wage jobs but the argument does not hold true for people working in jobs which typically receive tips as a matter of course. This includes servers, hair cutters/barbers, and cab drivers – a living wage means they would have less money to spend in the community.

The Avalon has certainly made a locally-important statement regarding the living wage; so have the employees who have chosen to work there.

Oh, and those tips that are received are placed in a jar and donated to a local charity each month. The charity is chosen by the staff.

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