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Top New York restaurateur says no more tipping

New York's highly touted Gramercy Tavern is joining a small group of restaurants in the city and across the country in hiking costs and doing away with tips.

"You will no longer find a tip line on your check, and there will be no need to leave additional cash at the table, the coat check, or the bar," Danny Meyer, chief executive at Union Square Hospitality Group, or USHG, wrote Wednesday in an open letter posted on his company's site.

The Gramercy Tavern and the Union Square Cafe -- two of 13 restaurants run by USHG that collectively employ 1,800 -- will dispose of gratuities by the end of 2016. The first adopter will be the Modern, an expensive dining room inside the Museum of Modern Art, which will hike its prices and eliminate tips starting next month.

"Danny Meyer's decision strikes me as being a very risky move because raising your prices by 30-to-35 percent risks losing a lot of customers," said William Michael Lynn, a professor of consumer behavior and marketing at the Cornell University of Hotel Administration. "Consumers are generally price sensitive, and that's a pretty substantial price increase."

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"There are a handful of restaurants trying it," said Lynn, who said the question of whether or not to eliminate tipping seems to be tied into "minimum-wage issues."

In Meyer's case, the move comes ahead of a state-mandated increase in the minimum wage for those who work for tips in New York City to $7.50 an hour. The pay hike, which goes into effect at the end of the year, consolidates three groups of tipped workers -- whose base hourly pay runs from $4.90 to $5.65 -- into one.

Meyer's decision will help to "mitigate the problematic system that is inherent in the tipping model," Saru Jayaraman, co-director and co-founder of Restaurant Opportunities Centers United, said in a statement. "Nationally, tipped workers -- whom are more than two-thirds women -- use food stamps at double the rate of the rest of the workforce and are three times as likely to live in poverty."

Meyer's decision was also applauded by Amanda Cohen, a chef and earlier adopter, who reopened her vegetarian restaurant, Dirt Candy, on the Lower East Side of Manhattan with a no-tipping policy in February. Hosts at Cohen's restaurant start off making $15 an hour, while starting servers earn an hourly rate of $25.

Cohen says she'll eventually increase prices on the menu, as Meyer plans to do, but began by adding a 20 percent administrative fee to the tab, clearly stating that the extra charge is not going directly to employees.

"It was already scary enough," she said of her decision to do away with tips. "Let's see a big restaurant raise their prices 20 percent before we do."

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Cooks in New York City tend to get paid far less than servers, said Cohen, who like Meyer voiced support for leveling the playing field among a staff that includes also includes hosts, dishwashers and bussers.

"The move towards a non-tipped environment is a new and somewhat small concept with only a handful of restaurants testing it nationwide," Christin Fernandez, a spokesperson for the National Restaurant Association, said in an email. "We've found the practice of tipping has traditionally attracted millions of employees to our industry and still has strong support from American diners."

That strong support is not shared by Cohen, however. "Tipping is a completely unfair system, it can be sexist and racist," said Cohen, a reference to research that has shown minorities are often tipped at a lower rate and that tipping can be used as a form of sexual harassment.

The system of tipping is also one in which people might show up to work and not get paid, Cohen said: "If it's raining and your dining room is empty, why am I punishing my servers?"

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