> the actual prices of restaurant food items are just undermarked by 15-20% of their actual cost.

Right, and it's undermarked because you are expected to tip.

But you said that you get the "benefit" of lower prices - but I just don't see that benefit if it's mandatory to then tip 15%. Whatever reduction in price you're getting you'll pay in tips, so as a customer you're getting shafted either way. No?

You're not getting shafted. If you tip, you're paying the same amount as if there weren't tips and the prices were raised to account for it. There's nothing "shafted" about "paying the same amount".

The only differences are - You can choose to pay less if things aren't good, or pay more if things are great. - If you're someone that is heavily impacted by other people's opinions, then you may feel bad tipping less. But all that means is that you don't get one of the benefits.

You get the "benefit" of lower prices... and you're expected to tip to balance the scales.

Usually the income isn’t being reported by the tip-earner/takers, and you’re not paying sales tax on the service received.

The former is only going to be true if you pay them in cash; I don't believe credit tips are so easy to hide. The latter is inconsequential.

Despite the paper trail, local details of audits I know of, indicated that workers still underreport.

https://www.google.com/url?sa=i&source=web&cd=&ved=2ahUKEwjA...

Anecdotally, it remains true.

Tips don’t go on the official pay reports that go to the Canadian government since it isn’t actually employment income paid by the employer.

Why would sales taxes be inconsequential?

I guess because you're only not paying sales tax on the tip portion of the payment - so if the sales tax is say 10%, your bill was a $100 and you left a $10 tip, you're only saving $1 on the sales tax.

And if that mere dollar would influence you on whether or not you were going to go to the restaurant, you probably shouldn't have ever been going to the restaurant.

It still means an industry is paying ~85% of the sales taxes it should.

Overall, businesses will charge what they can. And if they don’t have to pay taxes, they can keep that $ for themselves.