Don't nicer restaurants also pay higher wages since they want to attract more qualified people?
Since the tips are higher in nicer restaurants, you'd net much more at the same server wage + tips than at a chain restaurant. I'm not sure they pay more, or if the promise of more tips is sufficient. There's probably is an increase as you go from $10 pp to $100pp meals, but I don't know if at the top end you're making the normal minimum wage yet.
Source: friend who works as a waiter at the most decadent restaurant in town.
Good head chefs are scarce. In a high-class restaurant, their pay should be comfortable with or without tips. The rest of the kitchen staff might rely on tips (though I'm not sure if it's legal to pay them less than minimum wage like waiters), but relative to the waiter they each have little interaction with the customer and hence comparatively little ability to influence the tip.
I agree tipping is a strange practice. If you tip too little you're stingy, if you tip nothing you're making a point. I've stopped tipping for some things that are just kind of ridiculous (I went and picked up a call ahead order the other day, no I'm not tipping you). The percentage makes sense in this context: In a nicer restaurant, you expect better service as a baseline. So at the $100 steak restaurant, the waiter is pulling your chair out for you, etc. But at the $10 steak place, it's not quite the same level of service. You're tipping off the total experience rather than the individual dishes if that makes sense.