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🍟 Let's Talk About Tipping
A curse? Or the cure for economic inequality?
When was the last time you purchased something and WEREN’T asked for a tip? You hear the stories all the time:
Some reservation websites require a tip of 10%.
More than half the customers at Subway Sandwich stores leave a tip (and some resentment).
Automatic car washes? TIP. Botox treatments? TIP. Smoothie-making robots? TIP!
There is no doubt that tipping has exploded in the U.S. and worldwide (by over 17% year on year since the start of the pandemic). But delve a little deeper and park your resentment for a bit and you’ll find that “tipflation” is really just the … tip of the iceberg of a larger problem.
T.I.P. (to ensure promptness)
There was no tipping in the United States as an economic phenomenon prior to 1840. It began after the Civil War, as a racist response to the emancipation of Black slaves. Restaurants and other service industries of the time began hiring newly emancipated former slaves, not out of some moral sense of righteousness, but to save money. They paid these Black workers nothing, thereby forcing them to ask for and rely solely on gratuities from patrons.
Tipping was introduced as a way to exploit the labor of former Black slaves
Tipping soon took its place effectively as a wage subsidy, placing the onus for a person’s livelihood partially, and in some cases solely, on the shoulders of the customer rather than the employer.
Today, tipped workers of color, the elderly, and single mothers - among other constituencies, continue to experience the consequences of the unfair legacy of tipping. Nearly 40% of workers who rely primarily on tips for income are single mothers, and over 27% are Black (who receive less tips compared to others).
But wait, you say - there’s the minimum wage, tips are just extra right? Wrong. Minimum wages for tipped workers are different, and far lower at both the state and local government levels. For instance, while the federal minimum wage is an already obscenely low $7.25 per hour, for tipped workers it is only $2.13 (an amount set by Congress in 1991!) - as long tips bring the hourly total up to $7.25. The employer only has to make up the difference between between the minimum wage and the tipped minimum wage if tips do not cover the gap.
The United States is the only country that exempts tipped workers from its standard minimum wage
This history and legacy of tipping make it clear that deciding not to tip at all is a pretty horrible choice. Without any structural reforms, the workers of today rely directly on tips to make even the terribly low minimum wage of $7.25 an hour.
The real question then is not whether one should or should not tip, but how much one should tip.
Tipflation. Is a gross term.
During the 1950’s a common tip was 10%. During the 70’s and 80’s, 15% was more common. Today the average tip is 21%. The pandemic has accelerated the amount we tip, not just here in the United States, but worldwide. I was in Portugal last week and learned that prior to the 2000’s tipping wasn’t common, but today the customary tip is anywhere from 5-10%. During the pandemic, businesses that lost a lot of revenue started relying on asking for tips to make up the shortfall - but even as the pandemic has gone away, the ask has not.
One other new phenomenon of the past half-decade: asking customers to tip prior to the service. This is the tip you give to an Instacart shopper before the service, or a barista before the espresso is even poured. For some, it feels more like a bribe than a tip.
And lastly, the dreaded kiosk. Steve Jobs was prescient, but even he couldn't have foreseen the outsize impact iPads would have on the billions of dollars they generate in yearly tips. You’ve seen them twirl towards you with those three options - none of which start at anything lower than 15%. Merchant kiosks set the normative range for tipping - the boundaries that give a consumer guidance on what to tip, and the more you expand those boundaries, the more people tip.
Tipflation is frustrating, but most everyone who resents it tends to take their anger or frustration out on the server or worker who gets the tip, the one suffering under a statutory minimum wage set in 1991, and not the employer, who has abdicated responsibility for paying a decent wage entirely to the customer by engaging in the aforementioned tricks (called “dark patterns”) like asking for tips prior to service and building kiosks with higher tip minimums.
A rise in tipping is generally better for workers, but it perpetuates and accelerates a system with a troubled past in which employers can pay workers unfair wages and ask customers to make up the difference.
Tipping and tipflation is a symptom of an underlying disease: economic inequality and wage stagnation.
Despite recent raises, wages have not gone up as much as the cost of goods since 1978. To make up the difference women have entered the workforce (1970-80s), families have borrowed on their homes (1990-2000s), partners have taken up second jobs or gig work (2010s), and now since employees have run out of time to make more money (heck most are working 2+ jobs) and employers are still unwilling to raise wages, it is now the customer who is on the hook for supporting America’s wage-starved worker.
So what can we do?
Support service businesses that trying to be fair to workers without extractive tipping policies. Many restaurants now tack on a reasonable (15-18%) service fee that goes equivalently to all workers, compensating those with tipped minimum wages first, with the excess going to line cooks and others who never see tipped income (even though they are primarily responsible for the quality of the meal). At some businesses, service fees also cover healthcare or retirement for workers. Service fees aren’t a panacea - they can be opaque, even unfair, and aren’t as regulated as tipping. Nonetheless, if you trust a restaurant’s reputation regarding service fees, it is often a more equitable option.
Frequent businesses that build the cost of wages into their services. Significant research finds that customers are willing to pay more for services that fairly compensate employees and that doing so generates far less resentment and anger than tipping.
Vote for elected officials (such as those in California, Montana and Alaska) who support a unified minimum wage - where tipped workers make at least the marginally better $7.25 an hour - making it less likely that they’ll have to depend on tips to make up their wages.
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