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David Jones, the owner of Vancouver Island restaurant Smoke ‘N Water, sits in his restaurant on Feb. 17, 2018.CHAD HIPOLITO

David Jones opened his Vancouver Island restaurant Smoke 'N Water in 2014 with what he calls a "big, smart idea" that raised eyebrows from customers and restaurateurs: a no-tip policy. Mr. Jones increased menu prices by 15 per cent while paying servers between $20 and $24 an hour. The intent was to even-out wage differences between front- and back-of-house staff and offer servers a reliable paycheque.

The experiment only survived two months. Smoke 'N Water, located in the small community of Parksville, near Nanaimo, scrapped the policy after customers complained and Mr. Jones struggled to pay his staff higher wages while still keeping up with food costs. He cut wages for his workers, including some who now earn minimum wage, plus tips.

"It stunk," Mr. Jones said. "But we would've been out of business in a month."

That was almost four years ago. Now, with British Columbia's NDP government preparing to increase the minimum wage to $15 over the next three years, Mr. Jones thinks the no-tip model may make a comeback as restaurateurs are forced to adjust their budgets in innovative ways. Mr. Jones says he has spoken with other restaurateurs considering an increase in menu prices to help offset the wage increase.

B.C.'s New Democrats campaigned on a $15 minimum wage in last year's provincial election and earlier this month announced a plan to get there, with gradual increases until the rate hits $15.20 in 2021. The current rate is $11.35. The change followed similar hikes in Alberta and Ontario.

The announcement did not cover several categories of workers who currently earn less than the minimum wage, including those who serve alcohol. Liquor servers in B.C. are paid $10.10 an hour, with gratuities on top. The province says it's still reviewing what should happen to those wages and will make a decision this spring.

Mark von Schellwitz of Restaurants Canada said the uncertainty surrounding the minimum wage for liquor servers is a big question for the industry.

Mr. von Schellwitz argued the lower wage for liquor servers gives employers wiggle room to pay skilled kitchen workers higher wages. Losing the server wage might make the labour shortage facing the restaurant industry worse if skilled cooks walk out on employers that can't pay them what they're worth.

"Our guys feel frustrated when they're trying to use these sparse labour dollars to pay the back of the house more," he said.

Mr. von Schellwitz said he thinks the restaurant industry's approach to labour is overdue for a makeover, but customers, employers and workers may not be ready to let go of tipping culture as an integral part of the dining experience.

"Some have been very courageous, I really commend those forward-thinking restaurateurs that have tried the no-tipping model," he said. "But it just won't work right now."

Since Smoke 'N Water reversed its no-tip policy, other Canadian restaurants have tried and failed to implement it. Earls 67 in Calgary tried the model in 2016, only to drop it after six months. Ritual in downtown Vancouver lasted three months before reinstating tipping.

Michael von Massow, a food economics researcher at the University of Guelph, recently conducted a study looking at the Yelp and TripAdvisor reviews of restaurants before and after changing their tipping policy. The average score stayed the same.

"The argument that service is going to go down the toilet doesn't hold water," Mr. von Massow said.

Looking at the wage increase and the potential impact on tipping policies, Mr. von Massow expects that some restaurants will change their tipping policies, some will adjust prices and others will close. But the industry will bounce back as it always does, he said.

At the very least, Mr. von Massow said, an increased minimum wage in B.C. could have a positive impact on the labour shortage. Areas with the most demand for workers are semi-skilled kitchen positions – people who don't make tips, in cities where the cost of living is high, such as Vancouver and Victoria. More money might entice them to stay in demanding kitchen jobs.

"If we were to pay these people more, it might ease that shortage in the kitchen," he said.

Advocates for a living wage say B.C.'s planned increase could offer restaurant owners the chance to pay employees enough money to actually support themselves, while still keeping up with competitors.

The Living Wage for Families Campaign pegs the living wage for the Vancouver region at $20.62 an hour, factoring in basic family needs for a two-parent, two-child household.

Deanna Ogle of the Living Wage for Families Campaign signed some big employers onto the initiative in 2017. The City of Vancouver was certified as a living-wage employer in June.

But Ms. Ogle said the campaign has not successfully certified a restaurant as a living-wage employer in B.C., and tipping culture is a part of the challenge.

"It can be hard for an employer who is paying their staff the living wage that is $20.62 an hour to compete with their neighbour who is paying the [liquor server] minimum wage of $10.10 an hour," Ms. Ogle said. "That's half. So in order for small businesses to compete, we need to have a really good wage floor."

Ms. Ogle said one restaurant came close to certification, but ultimately had to withdraw because of financial strain.

"I talk to small businesses every day who are trying to do the right thing, so I know there are small businesses out there who are genuinely interested in how their workers are making ends meet," she said. "But they're also struggling at the end of the day to keep their doors open and have a viable business."

Back in Parksville, Mr. Jones says he knows what he'd do differently if a second opportunity to amend his tipping policy emerged. He only increased menu prices by 15 per cent, but in successful North American no-tip ventures, such as Jay Porter's The Linkery in San Diego, menu prices were increased by closer to 20 per cent. Mr. Jones also thinks he opened Smoke 'N Water with too many employees, and couldn't keep up with their salaries.

He still holds out hope, however, that restaurant owners can come together around the "tipping point," if owners and customers alike can get used to the idea of higher menu prices.

"It takes a while to get used to any new idea," Mr. Jones said. "When they were first making the Model A [automobile], people said, 'What do I need that for when I got a good horse?' I think you will see no tipping become a little more common. It has to take someone to price it right before it catches on."

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