When was the last time you purchased something
and you weren't asked for a tip?
Yeah, I can't remember either.
Tipping culture has gotten out of control.
I get up to the pay window and she's like,
How much do you want to tip? What am I going to
tip you for?
I'm in the drive through.
Oh my God. Tips have been on the rise for
decades. During the 1950s, people commonly
tipped 10% of the bill.
By the 1970s and 1980s, that jumped to 15%.
Today, people tip anywhere from 15% to 25%.
According to one 2022 survey, consumers said
they tipped more than 21% on average.
Nowadays, there are people who argue 20% is
kind of a cheap tip.
While the percentage that consumers are tipping at
full service restaurants in the past couple of
years has remained about the same, in the fourth
quarter of 2022, the number of tips provided
at full service restaurants grew 17%.
Meanwhile, the tip frequency at quick
service restaurants such as coffee shops and fast
food chains rose 16% during the same time
period.
What we're seeing now nationwide is something
that is known as tipflation.
At every opportunity, we're being presented
with a tablet that's asking us how much we'd
like to tip.
In many cases, not only replacing the old
fashioned tip jars that you could feel good about
throwing some spare change into, but actually
suggesting tip amounts, often right in front of
the employee receiving that tip, not to mention
also your dinner date and the dozen or so
people standing behind you in line.
And it's gone beyond just the tablets.
The other day I was using the Hopper app to
book a hotel, and it wasn't until I confirmed
my payment that I realized my hotel was $10
more expensive.
It turns out, Hopper assumed I wanted to add a
tip and I had to go back to a prior page in order
to opt out. Tipflation refers to not just that
we're tipping more, but we're tipping everyone
for everything.
You're being guilted into tipping on something that
is not technically a service.
Someone simply doing their job.
In those situations, consumers are feeling
resentful. Where do you draw the line?
Tip stands for "to ensure promptness." Tipping may
go back as far as the Roman era, but according
to most experts, the practice likely has its
origins in medieval Europe.
Noblemen taking passage on roads would throw
coins to the rubble to ensure safe passage.
One theory is that it evolved in eating and
drinking establishments as a way to forestall
envy that when you're eating and drinking,
you're having fun and the people who are
serving you are not.
Fast forward to the 19th century when waiters who
received a full wage went on strike demanding
higher wages. They were replaced with women who
employers could pay less. A decade later,
there was the population of newly freed slaves.
The idea from these restaurant owners was
that they were giving the luxury or privilege
of a white person's tips .
That was without a full wage.
Ironically, as tipping exploded in the United
States, it became less common in Europe and was
replaced with service charges.
While the first federal minimum wage law was
passed in 1938, it wasn't until almost three
decades later when the tip minimum wage was
established. In 1991, the federal minimum wage
for tipped employees was set at $2.13, which is
what it remains at as of March 2023.
As far as I know, the United States is the only
country that exempts tipped workers from
having to receive the full minimum wage.
In 43 states, it is legal to pay tipped workers
less than the standard minimum wage because tips
presumably make up that difference.
In recent years, you might have found yourself
asking, Do I tip this barista for pouring that
hot coffee? What about when I'm going to a
restaurant and picking up takeout?
And how much do I tip that doorman, driver or
dog walker? When those in the service industry
were feeling the brunt during the coronavirus
pandemic, consumers started tipping for
things they never had before, and the
percentage of remote transactions when tipping
was an option in which the consumer tipped
soared from about 46% before the pandemic to
around 86% in January 2022.
If people were willing to tip the person
delivering food to their home 30%, why not ask if
they'd like to tip when they come pick up?
During the pandemic, businesses who lost a lot
of traditional customers and transactions were
looking for alternative ways to make up that
income. And if asking for tips was one way to
do it, they were willing to try it.
And since then, that ask hasn't dissipated.
Another reason consumers say they feel pressured
to tip more? They're being asked to tip prior
to service completion.
Asking for a tip beforehand is almost like
a bribe, right?
It's, I'm afraid not to tip because would you do
less good work?
Customers might not be concerned about the
barista's perception of their tip before getting
their latte, but what about the mechanic
repairing your car?
I don't know about you, but I'm certainly going
to make sure to tip them well to ensure my safety.
Another reason consumers are tipping more: newer
technologies.
Kiosks and tablets with three large tipping
suggestions that pop up on the screen in front of
you. Three Options chosen by the business.
I have not yet been to the restaurant where they
recommend 5, 10 or 15% for quick takeout.
It normally always starts at 15 as a bare
minimum, sometimes even starting at 20, 25 and up
to 30.
According to a 2022 CreditCards.com survey,
22% of respondents said when they're presented
with various suggested tip amounts, they feel
pressured to tip more than they normally would.
They use those options as an indication of kind of
what the normative range is and feel compelled to
tip within that range.
So the more you ask, the more you get.
The three prominent companies with that
trendy, sleek look are Square, Toast, and
Clover. They launched a bit more than a decade
ago to help businesses run smarter, faster and
easier, all in one point of sale or POS systems.
In some cases, fewer fees so it's less of a
burden to accept multiple credit cards, no
long term contracts and multiple other useful
tools, including inventory and employee
management.
They got credit card processing into the hands
of individuals and very small merchants.
Square did a great job and it's been a
tremendous growth story.
That's half of the business today.
Do you think these companies are responsible
for this turn of events that we've seen with
tipping?
I would say they could take some of the credit
for helping restaurants gather more tips.
Robert Sanchez manages Eli's Essentials in New
York City. One of the business's locations uses
Toast while the other uses this.
He says the storefront that uses Toast sees more
and higher tips.
The Clover, Square and Toast terminals to a
consumer are very easy to use.
Big buttons, big areas to sign the tip, and easy
way to tip a different amount if you don't like
the starting at 20% option.
There are others that do it.
They're just not as cool looking.
We've come a long way from being able to just
throw your spare change into the jar by the cash
register.
The new tablets have turned what used to be a
sin of omission, I simply didn't put money
into the tip jar, into a sin of commission.
I have to hit a button and say no tip.
I have to actively choose not to tip.
Whereas before, not tipping was a kind of a
passive thing.
Glancing at the tip jar could have also been a
way to get a sense of how many others are
tipping on that service and maybe even how much
money. Meanwhile, not only can the tipping
options be customized, but the tipping feature
can be disabled as well.
So it's the merchant's choice to ask or not to
ask for tips.
From the business side, it makes employees want
to perform better and do a better job.
It's seriously significant.
It really pays for the software.
You'd be a foolish business owner not to
install it based on what the numbers display.
Even a mammoth company as large as Starbucks has
decided that they need to sink or swim.
And the best way for them to do that is to
offer the tip screen.
Starbucks rolled out the tipping feature in stores
in September 2022.
It's one thing to have a happy staff.
It's another thing to have customers that are
feeling resentful.
I think it's a calculus that all business owners
really need to make.
Do you think that they're somewhat going to start
seeing that they're getting lower tips
because people are paying tips to so many
services or they're resentful of the act of
tipping in general?
I think that's a very real danger.
Servers in a sit down restaurant, they were
greatly affected during and immediately
post-pandemic by restaurants doing all
sorts of fees.
Their tips were actually going down because
consumers were saying, well, if I'm paying for
their health insurance and I'm paying for
inflation and I'm paying for this and I'm paying
for that, enough is enough.
The more you levy these line items onto
consumers, guess who's being penalized?
It's the one area that's still quasi
discretionary, which is the tip.
I went door to door talking with waitresses,
bartenders and baristas, and while they wanted to
remain anonymous, they told me it's happening
already. With inflation and being prompted for
tips left and right, they say customers have
already started to tip less and sometimes not at
all. A 2022 study found that 17% of Americans are
tipping less because of inflation. However, 10%
report tipping more.
At the same time, more than half of Americans,
or 60%, want to do away with tipping entirely.
The extent of pandemic-influenced
generosity has also gone down.
43% of consumers typically tipped servers
20% or more in 2022, compared to 56% of
consumers in 2021.
Meanwhile, the average tip for full service
restaurants has gone down only slightly during
the same time period.
According to Toast, 19.6% in the fourth quarter of
2022, compared to 19.8% in 2021.
However, according to surveys conducted in
those same years, respondents said they're
tipping higher percentages: 21.2% and
18.9%, respectively.
It can genuinely hurt the people who truly, truly
rely on gratuities for their livelihood.
I firmly believe that the tipping invasion we
are experiencing right now, I think it's a net
negative for society.
And with that tablet at just about every counter,
no matter where you go, the question is, where is
the tipping point?
I'm wondering how long before I'm tipping my
doctor after an annual physical?
If you want to seem especially generous after
an exceptional meal, you might decide to go big
and tip 30%.
But it's a cycle.
As more people seeking to make a good impression
then up their tips to 30%, maybe even 35%.
What becomes a generous tip?
I have to believe tips are going to go up from
where they are today.
But I also think there's got to be a logical
ceiling somewhere.
I just don't know where it is.