Take your basic non super fancy restaurant, dinner for two with appetizers, entrees, desserts, a two rounds of drinks will probably be $100ish. And that table of two will be there for an hour. Assuming server gets 20% tip average, that’s $20 for the table. An average server will have four tables in their sections. That means if the restaurant is full, they are making $80 an hour in tips. They will get to keep 60% to 80% of that, the rest going in a tip pool that benefits kitchen staff, bussers, barbacks, etc. But they’ll still be making pretty good money.
Of course if the restaurant is empty or they only have one or two tables with people seated, they are making less.
The problem comes that if you get rid of this system, there’s a lot of financial risk for the restaurant owner. Currently they don’t have to pay the server or the staff very much, most of their compensation comes from tips, meaning there is less risk to them keeping the restaurant fully staffed if it’s not going to be busy. If you pay all these people are constant hourly, now there is risk on the restaurant owner in terms of staffing. Bring on too many staff when it’s quiet and they will lose a bundle. Don’t bring on enough staff when it’s busy and those people don’t have a financial incentive to bust their ass. It also becomes solely their job to ensure quality, because the server that spends half the time on their phone in the back room is making the same money as the server who is attentive to their tables. It also means less risk for hiring an inexperienced server, because if the server does a bad job they just won’t make good tips.
All that said, I agree something has to change. I think perhaps one answer would be a law requiring that each restaurant put 15% of gross receipts into a virtual tip pool. That way they aren’t paying through the nose to staff and empty restaurant, there would be a line item on the check like ‘automatic gratuity paid the staff $whatever on this check, further tipping is optional’.