> If they didn't allow tipping, restaurants would charge more to make up the difference (margins in service work are almost always very low).

Neither good nor bad.

> In a tipping system, when things are going well, everyone tips; if things aren't going so well, not so much. There's some wiggle room between the list price and the actual price, which might offset price stickiness.

That's terrible! Instead of the burden being spread around, the restaurant still makes money and the employee doesn't!

The restaurant doesn't still make money—the under-tipped employees quit to seek better employment, and at the going wage the employer is offering, there is no further demand for that job to replace the employees who have quit. So fewer employees have to take on the slack of "doing more", and thus each one ends up making roughly as much in tips as before (at equilibrium, if they manage to take up that slack); or they don't manage to take up the slack, demand isn't matched to supply, and the business's total revenue decreases.

The market is efficient... eventually.

>The restaurant doesn't still make money—the under-tipped employees quit to seek better employment, and at the going wage the employer is offering, there is no further demand for that job to replace the employees who have quit.

Is this not true with every company in every industry? Pay is a major reason why people leave a job for another. If an employer is struggling to find labor at a low ball price, they will raise their offer.

> at the going wage the employer is offering, there is no further demand for that job to replace the employees who have quit

That assertion comes out of nowhere...