Tipping – Is It Time to Reform the Practice?

Commentary COVID-19 History Lifestyle Impacts

Tipping. It has been a bane of American commerce since it was introduced following the Civil War. How much should I tip? Is there a minimum requirement or is it voluntary? What is the purpose of tipping? Why should I tip at all?

American social norms have long indicated that a 15% tip is appropriate for servers in restaurants. Recently, that ‘acceptable’ amount crept up to 18% and even 20%.

Even within the food industry, why do we tip a server in a full-service restaurant, but not the person who delivers our food to a table in a fast-food place?

And what about other services? We tip cab drivers and hotel attendants. Should we tip the hairdresser, the butcher, the grocery bagger?

Tipping – A Social Norm

tipping
Photo Illustration by Author

Tipping, particularly in the restaurant industry, is ingrained in American culture. In the early 20th century, William Scott started a movement to eliminate the practice. In his 1916 book, The Itching Palm – A Study of the Habit of Tipping in America, Scott said, “The vast majority of Americans who give tips do so under duress. At heart, they loathe the custom. They feel that it is tribute exacted as arbitrarily and unrighteously as the tribute paid to the Barbary pirates.”

Yet, tipping has taken on the aura of a social norm. We are concerned about what others will think of us if we don’t tip. But unlike many social norms, this gratuity can come at a considerable cost. It costs nothing to open a door for someone, or to remove one’s hat upon entering a building. But leaving the ‘usual’ 15-20% can add hundreds of dollars or more to our annual budget. A 2017 estimate put the total amount of restaurant tips paid in the U.S. that year at $36.4 billion.

Even if service is subpar, people will generally shell out the gratuity, especially if they are with others. One website suggests that a tip of 10% is “appropriate for poor service.” It is better to reward mediocrity than to be thought a “skinflint”.

Why Do We Really Tip?

What then motivates us to pay that extra 15-20% or more? Israeli economist Ofer Azar’s research showed that only about 13 percent of Americans say they tip to influence future service. Conversely, 60 percent of Americans say they tip out of guilt. Sixty-eight percent say they do so out of gratitude. For 85 percent, it’s the social norm. And shockingly, four percent say they tip “to avoid being yelled at.”1

This is borne out in actual practice. If we were to presume that a customer tips to influence future service, would it not be reasonable to assume that a customer who will never visit that business again – a tourist for example – would not leave any tip? Yet most people tip in a restaurant, regardless of whether they will ever patronize the business again.

With some other service providers, the connection with future service is more likely – with a hairdresser or butcher for example. There is a fear, rational or not, that the service might not be as good next time if an insufficient – in the mind of the service provider – tip is left. Certainly, our relationship with our hairdresser is more direct than that with restaurant servers, unless we are truly regular customers of the restaurant.

Voluntary Giving?

The practice is also unique in the world of voluntary giving. Tipping, as with monetary gifts and donations to charity, consists of offering money we are not legally obligated to pay to others. However, monetary gifts are most often given to relatives or close friends. Donations to charitable causes may come from a sense of belief in the charitable mission. But they may also be bolstered by a level of public recognition, one’s name appearing on a list of donors – with donation amounts listed or at least grouped. In the case of gifts and donations, there are often emotional connections as well as monetary ones2. Even bounty paid to the Barbary pirates came with an expectation of safety in return.

To leave a tip, however, is to give money to a stranger for a fleeting service, with little or no emotion attached. The food doesn’t taste better if we tip more – although we might decrease a tip if the food is bad. Ironically, that factor is likely out of the hands of the person being slighted on the tip.

Subsidizing Wages

At its heart, the practice is all about subsidizing subpar wages. The hospitality industry, in particular, can get away with paying wages far below the minimum wage because there is an expectation that consumers will make up the difference with tips.

In fact, this is how tipping became popular in America. Following the Civil War, the Pullman Company hired newly freed African American men as porters in their sleeping cars on trains. Rather than paying the former slaves a real wage, Pullman provided the Black porters with a bare subsistence wage, forcing them to rely on tips from the mostly-white train passengers for most of their pay.

Tipping was further entrenched in service jobs – often low paying jobs held by ethnic minorities – in which “workers must please both customer and employer to have any chance at a livable wage”3.

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Attempts at Change

In the early 1900s, several states tried to end the practice, but the restaurant industry, happy with a system of having customers subsidize their operating costs, fought back. So powerful was the restaurant lobby that the 1938 federal minimum wage act only applied to about one-fifth of hourly workers in America. The rest, mostly tipped workers in service industries, were excluded from the provisions of the bill.

It took until 1966 for Congress to address a minimum wage for tipped service workers. Even then, the wage was set at 50% of the minimum wage for non-tipped workers – $2.13 per hour. It is a testament to lobbying power that even today, 54 years later, the minimum wage for tipped workers in many states remains at $2.13, even as Congress entertains legislation to set the overall minimum wage at $15 per hour.

Help with your Tip

Many people will say that they tip to reward individual workers for good or excellent service. Yet few will withhold a tip, even if the service is subpar. A sense of guilt, knowing how much the service worker relies on tips to make ends meet, takes over.

In recent years, many restaurants began ‘helping’ customers determine their ‘voluntary’ tip by adding suggested tip amounts to the printed receipt. Tip amounts calculated at 15%, 18%, and 20% of the total bill4 are printed on the bottom of the check. Some people found these ‘suggestions’ helpful. However, it was revealed that some businesses were padding the calculations on the receipts. So the amount listed as “15%” might actually be 18% or more. Few people bothered to actually check the math.

Point of Sale Terminals

Still, many people calculated their own tip, or completely ignored the ‘suggestion’ and tipped nothing.

POS service screen
The Datio Point-of-Sale tip screen. This example is better than many I’ve seen because the None button is placed with the other tip amounts. I’ve seen some examples where the tip amounts are large and colorful while the None button was small, light gray, and in a lower corner of the display. However, note that the screen even suggests a 50% gratuity.
Photo Credit: Datio Systems

About two years ago, I went into what was essentially a fast-food restaurant for a sandwich and drink. The clerk took my order on an iPad, and then spun the device around to me to ‘confirm’ my order. It was less a ‘confirmation’ of the order than an overt request to pay a tip in advance.

The screen had buttons to add 18%, 22%, or 25% to my order. I didn’t even see a button to decline a tip at first. When I noticed it, I saw that it was a small light gray button in the lower corner of the screen – in contrast to the larger colored buttons in the center of the screen for my ‘voluntary’ tip.

Since the business had tables, I decided to go along. Still, the concept of leaving a tip before any service had even been rendered seemed strange. The clerk gave me a receipt with a number on it, which didn’t seem unusual. Many places give you a number to put on your table to help the server locate you.

Service?

But in this case, I was more than taken aback when a clerk called my number. I learned that I was supposed to come to the same counter where I originally ordered. As I walked up, a clerk literally threw a paper bag containing my sandwich onto the counter. When I asked about my drink, I was told, “Cups are by the machines. Only take one.” 

Not exactly the level of service that I would normally pay an 18% tip for.

They’re Everywhere

Since that time, I’ve encountered similar point-of-sale systems several times. My favorite breakfast restaurant – a true, full-service restaurant – uses them. Even though I know that they have servers who bring food to your table and (usually) check back at least once to see that the orders are properly prepared, I still decline to add a tip at the order station. I will leave a good tip at the table if the server is friendly and at least shows a level of concern that my party’s food is correct.

But I’ve also had a few instances of less than great service in that same restaurant. In those cases, I would have been quite unhappy with myself for bowing to the tip-as-you-order system.

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Is This an American Thing?

The practice of tipping actually came to America in the 19th century. It originated in feudal Europe and was popularized in America as a way for people to seem more sophisticated. It also provided a convenient way, as we saw with the Pullman Company, for employers to avoid paying reasonable wages to formerly enslaved workers.

In Europe today, tipping is customary although the recommended amounts are much lower. In many countries, a 5% tip is considered generous. Italy is alone in discouraging the practice, although restaurants may add a 10-15% service charge. This surcharge is also common in other countries. One should check the bill to see if such a charge has been added before leaving a gratuity.

A friend told me about an interesting, although informal, custom in Czechia, particularly in Prague. If you greet a server in the Czech language, even if you are a tourist, they will not expect a tip. However, if they are greeted in English, they expect the American norm of 15%5.

Of course, no one will likely turn down money. However, travel guides recommend handing a cash tip – in local currency – directly to the server. Tips added to a credit card may never go further than the business’s till.

Now is the Time for Reform

As illustrated by the fact that reformers have been trying without success to eliminate the tipping culture for more than 100 years, reform will not be easy.

We can initially address the issue by demanding that service industries, particularly the restaurant industry, pay an adequate wage. Likely, this would start with Congressional action to eliminate the current loophole in the minimum wage laws.

But it will also require a change in the social norm that we all have been raised on. Since relatively few people have a true idea of how much a particular restaurant server makes in wages, even a significant increase in that wage would not like change the perception that leaving a gratuity is ‘necessary.’

Such a change will not be easy. But at its core, elimination of the need for tips to bolster wages would go a long way to reinforcing the idea that each and every person has value.

Equality

In his 2009 book, Tipping – An American Social History of Gratuities, Kerry Segrave quoted journalist John Speed in 1902: “Negroes take tips, of course; one expects that of them – it is a token of their inferiority. But to give money to a white man was embarrassing to me. Indeed, I do not now comprehend how any native-born American could consent to take a tip. Tips go with servility, and no man who is a voter in this country by birthright is in the least justified in being in service.”6

Speed’s racial bias glosses over the fact that most African-Americans of the early 20th century were born in the United States and were afforded the right to vote, at least under the Constitution’s 15th amendment.

Certainly, in 2020, we have moved beyond this attitude. Recent events and the dedication of countless Americans to the cause of eliminating racism is a crystal clear statement of that. 

But the tipping culture views service workers, regardless of race, as an inferior class unworthy of the same level of wage protection as the rest of society. It is time for us to relegate the practice where it belongs – the ash heap of history.

What are your thoughts about tipping? Let us know in the comments section below.

NOTES

  1. Azar, Ofer H., Why Pay Extra? Tipping and the Importance of Social Norms and Feelings in Economic Theory. Journal of Socio-Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=681143.  Downloaded October 22, 2020.
  2. Ibid
  3. Barber III, William J, et al. The Racist History of Tipping. POLITICO Magazine, 17 July 2019, www.politico.com/magazine/story/2019/07/17/william-barber-tipping-racist-past-227361. Accessed October 26, 2020.
  4. Another strange part of our culture is that we are expected to calculate a tip on the total bill, which includes government sales or use taxes, rather than just on the food portion of the bill. This practice exposes the obvious conclusion that tipping is really more about subsidizing the business’s overhead than just rewarding the worker for good service
  5. I didn’t personally see this when I was in Prague, but I was also with a group where all arrangements were handled by a local. So I never actually dealt with servers.
  6. Segrave, Kerry. Tipping: an American Social History of Gratuities. McFarland, 2009. pp: 10-11.
Mike Worley

Mike is retired and lives in Louisville, KY USA. He writes about lifestyle issues. He also enjoys photography and works part-time as a college volleyball official.