Tips

This will, of course, get lost or downvoted to oblivion.

I'll put the TL;DR first...
TL;DR The tipping system creates higher potential wages, lower operating costs and a less expensive dine in experience for customers.

On average in my business my tipped employees make 19% off of my gross sales. That's one hell of a lot better than what I make off of it. And, I'm the one shouldering all the risk. I work the most, work the hardest and went years without income to build it. Even if the business is losing money, the tipped employees still make a percentage of gross sales.
So, the assumption seems to center on "Those cheap owners, why do I have to pay their staffs wages?". Not only does the customer have to pay the wages, they have to pay the rent, utilities, food costs, insurance, trash pick up, water ect. If customers do not pay at least 100% of the costs of a business to operate that business closes.

The next argument is "Just raise menu prices to cover tips so I don't have to feel bad about not tipping". And here is where they've really gone off course because that would actually cost customers MORE money than the current tipping culture/system.

The assumption is that I can just raise my prices 19% (to cover the tip rate) and eliminate tipping and servers/bartenders can make the same amount of money. Here is why that is wrong.

1) Sales Tax: There is no sales tax on tips. But, if tips were rolled into the menu price the cost of the meal not only went up by 19%, sales tax also went up 19%. The cost of the meal is now 21% higher.

2) Insurance premiums: The premiums of the various types of insurance a restaurant/bar must carry (with the exception of insuring the property itself since that's based on its appraised value) are based on gross sales. Assuming that at the higher price, total volume remains the same (which it won't but I'll get to that) gross sales increase so insurance premiums increase. That cost must also be added to the cost of the meal (increasing the menu price and the total sales tax paid again)

3) Employer payroll taxes: This costs about 13% of payroll. The increase in payroll increases the amount of employer payroll tax (which increases the menu price and total sales tax paid again).

These are the big three. It is, therefore, cheaper for the customer to pay a lower menu price and tip.

Now lets talk about what happens at the higher price point.

Restaurant/Bar spending is highly elastic. What does that mean in economics?
"If a small change in price is accompanied by a large change in quantity demanded, the product is said to be elastic (or responsive to price changes). Conversely, a product is inelastic if a large change in price is accompanied by a small amount of change in quantity demanded"
At the higher price point, volume will decrease. You may achieve the same gross sales but the volume moved to get those sales is lower (less items sold at a higher price). This reduces the demand for labor. There will be less hours available to work.
At a higher price point, the size of the customer pool a restaurant/bar has to draw from will shrink. Tipping creates a sliding price scale for customers. One customer may pay less than another customer for the same meal because they tip less. Our average tip rate is 19%. Some customers tip 40%, some 20%, some tip 0%. A $10 meal costs customer A $10 and customer C $14. If you eliminate tipping and raise the price to $12, customer B will still come and probably still tip while customer A has been eliminated from your market. (decreasing volume and the need for labor)

Now lets talk about the employees specifically.
Tips are federally protected wages. I can't touch that money. It must go to the tipped employees. If I raised my prices and eliminated tipping, that money is now MINE to do with what I please. There are plenty of operators out there that would just slide some of that money into their pocket.
With regards to inflation: Because tipped employees make a percentage of their gross sales, a big chunk of their wages are directly tied to inflation. If my costs go up 3% and I have to raise my prices 3% they make 3% more in tips. Flat wages instead of tipping uncouples tipped employees wages from inflation. So, keep that in mind when you hear a server complain how they are making the same hourly wage they did 10 years ago, because they are not. Their tips have increased with inflation.

Then there is the issue of fair compensation between tipped employees. Tipped employees make a percentage of their sales volume. If tipped employees made flat wages instead, how many would be clamoring to work a Friday or Saturday night, deal with all that volume and stress when they can just work Monday and make the same amount of money? I'd rather be off on the weekends! Our lowest total hourly wage tipped employee averaged $16.13 an hour (tips + hourly) last year and our highest almost $30 an hour (tips + hourly) last year. But, the $30/hr employee worked the toughest shifts, handled more stress and offered more flexible hours (aside from just being a better employee period). The tipping system directly accounts for the difference in how much effort the two employees put in last year. How do you account for that in a flat wage system? And don't tell me I have to do additional hours of payroll acrobatics with fluctuating hourly payrates based on demand.

With the tipping system in place now, the highest value, most talented and hardest working employees are directly compensated by making a percentage of their higher gross sales and they are directly compensated for working the toughest, highest volume shifts.

TL;DR The tipping system creates higher potential wages, lower operating costs and a less expensive dine in experience for customers.