A waiter on a balancing beam with a tip jar on the end.
Illustration: Stephen Cheetham

Was tipping ever simple? Probably not. Even so, there’s no denying that today the practice has gotten more complicated.

First, consider tip “mission creep.” Where we once threw a couple of bucks on the table to show our appreciation for a waiter who served us, tipping upward of 20 percent of the tab at restaurants is now pretty much the standard. (Find out who tips what, where, and when.)

The teenager who mixes your post-workout smoothie, the restroom attendant at the wedding who hands you a paper towel, the deli cashier who rings up your check, the woman who drops off your online grocery order, and dozens of others have joined the ranks of those who might expect a gratuity.

Add to that the ubiquitous tip jars half-filled with bills and change—and sometimes bearing guilt-inducing labels such as “College Fund.” Even the on-demand ride-hailing service Uber, which was conceived as tip-free, now openly encourages customers to tip “as an easy way to recognize drivers for their excellent work.”

And then there’s the way technology is used to pressure you into tipping, such as when a barista hands you your morning java, then swivels an iPad point-of-sale system so that the screen displays—for you and for anyone watching behind you—the cost of your transaction along with precalculated, sometimes preselected, options for tips, sometimes starting as high as 20 percent.


Check out "A Brief History of Tipping," below.
 

More on Tipping

In a recent CR nationally representative survey of more than 1,000 adult Americans, 27 percent of respondents said that there are more situations today where they are expected to tip than there were a mere two years ago.

At the same time, many of us are more than a little conflicted about tipping. We may resent the ever-expanding need to give workers something extra simply for doing their jobs—really, you have to tip the deli guy? Or we may be bothered that the obligation to leave a gratuity means we are in effect being asked to subsidize the salary of somebody else’s employee.

Another source of resentment among consumers is the perception that tipped wages open up an opportunity for income that’s unreported to the IRS by employers and employees alike.

There’s also the basic problem of being unsure of how much to tip in the first place. We worry that we’ll fail to recognize the need to tip in a certain situation and be taken for a cheapskate or a jerk. Sure, tipping’s proliferation may be straining our budgets, but wouldn’t we be hurting the wrong people—say, struggling single moms—if we fail to do it?

Given all the anxiety over tipping, it’s perhaps not a surprise that 46 percent of Americans in CR’s survey said they favor a system that would do away with tipping and instead charge prices that reflect the true cost of paying workers a living wage.

The Twisted Tipping Economy

The federal minimum wage—a law that dates back to 1938 as part of the Fair Labor Standards Act of the New Deal—is currently $7.25 per hour. (As of the publication of this article, at least 29 states and the District of Columbia, as well as certain companies, notably Amazon, have established minimum wages above that amount.)

However, the federal minimum wage for tipped employees (defined as workers who make at least $30 monthly in tips) is currently $2.13 per hour. Almost inconceivably, that subminimum wage hasn’t budged since 1991, when it was equal to 50 percent of the full wage, then $4.25. In 1996 Congress froze the tipped wage in response to demands from the powerful restaurant industry. It remains $2.13 in 17 states and slightly higher—but still less than $3—in five more. Only seven states (Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington) have ended the two-tier system and established the same minimum wage for all workers—a goal that a campaign called One Fair Wage is dedicated to achieving nationwide.

The rationale for the lower amount is that tips will lift the workers’ wages into the same realm as those of regular payroll workers—and indeed the law mandates that a tipped worker’s wage, plus tips, be at least equal to the state’s regular minimum wage, with the employer making up any shortfall. The reality: Most tipped workers’ meager hourly wages are swallowed by payroll taxes. Income from tips is unstable and unpredictable. It’s also subject to changing work schedules; limited hours; external conditions, such as bad weather and a slow night; and the generosity of the consumer the tipped worker caters to.

Compounding the workers’ problems are the rampant violations among employers. It’s up to the employer to enforce the so-called “tip credit”—in other words, to ensure that the tipped worker’s earnings reach the threshold of the state’s full minimum wage. But wage theft is all too common. In 2018 alone, the Department of Labor concluded more than 5,700 investigations in the restaurant industry, collecting more than $42.8 million in back wages for more than 41,000 workers, according to a DOL spokesperson. In a 2012 case in New York, celebrity chef Mario Batali, his business partner Joseph Bastianich, and the companies they co-owned agreed to pay a record $5.25 million to settle a tip-skimming lawsuit brought by then-current and former employees at several of their restaurants, while denying the allegations.

The upshot of low and unsteady wages? Tipped workers are about twice as likely (13 percent) to live in poverty as nontipped workers (6.5 percent), according to a joint study from the University of California, Berkeley, and the Economic Policy Institute (EPI), a think tank based in Washington, D.C., that focuses on the economic needs of low- and middle-income American workers.

Another point of contention in the restaurant subculture is the much-discussed wage discrepancy between “back of house” staff (dishwashers and cooks), who do not get direct tips, and “front of house” staff (servers and bartenders), who do—a division that also tends to break along racial lines, with African-American and Latino employees much more likely to be working in the untipped positions.


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Can Restaurants Reform?

The restaurant industry is an $800 billion business that employs nearly 15 million people nationwide. So when reforms are debated, they usually focus on dining establishments.

One proposed solution—the pooling of tips by all workers—has been extremely controversial, particularly a fix the Trump administration tried to mandate in 2017, wherein restaurant owners and managers would control the collection and distribution of all tips. Under pressure from Congressional Democrats and labor groups, who argued that the policy would enable management to do whatever it pleased with the tips—including legally pocket them—the administration backtracked on it in early 2018.

Another potential remedy is the one promoted most famously by New York restaurateur Danny Meyer, whose Union Square Hospitality Group in 2015 began abolishing tipping in most of its 18 restaurants, incorporating extra costs into menu prices. USHG pays salaries commensurate with employees’ skills and experience. It also offers benefits such as health insurance, paid vacation, sick leave, and 401(k) plans—all fairly standard workplace practices but rare in the restaurant business.

Not all of Meyer’s fellow restaurateurs are onboard with his solution. Several restaurants that tried gratuity-free dining, including upmarket spots such as Agern in New York City and Le Pigeon in Portland, Ore., have abandoned the experiment. Although USHG remains committed to the no-tipping model, according to Erin Moran, the group’s chief culture officer, who spearheads the initiative, the company suffered a big spike in server turnover in the first months of the transition, although that has stabilized.

Indeed, many workers who rely on tips oppose getting rid of them. A 2016 study from the University of California, Irvine, found that no-tipping policies, specifically those meant to abolish the tip credit and set a minimum wage of $15 per hour, may lower the overall income of servers, even those at mass-market chain restaurants. “The servers I interviewed reported median hourly wages of $30—the range was $18 to $50—with the wage going much higher at more upscale restaurants,” says the study’s author, Richard McKenzie, professor emeritus of economics and management at UC Irvine.

Some consumers have had good experiences with no-tipping policies. Last year, Pittsburgh schoolteacher Charles Magee found hosting a recent birthday dinner for his brother at a local “tip inclusive” restaurant to be “the best dining-out experience ever” because there were no complex tipping calculations to do or debates over which palms to grease at the end of the evening.

However, more typically, diners reel from sticker shock at the cost of an entrée at a restaurant that has jettisoned tipping. For instance, in 2015, when the Joe’s Crab Shack restaurant chain was experimenting with a no-gratuity model, its Rum Island Shrimp dish reportedly cost $17.89 at a no-tipping location, compared with $15.99 at a location that still allowed tips.

The problem, of course, is purely perceptual—the entrée price at the no-tipping location was just 12 percent more. “Higher menu prices make a restaurant seem more expensive to customers, and they don’t take into account the fact that they’re not adding a tip,” says Michael Lynn, a professor at the Cornell University School of Hotel Administration and a tipping expert. “It’s irrational, but they don’t.” Magee’s final tab, for instance, was roughly the amount he would have paid—including his customary 20 percent tip—at a restaurant with lower-priced entrées.

What Drives Tipping Behavior

The reason that logic and math don’t prevail is that tipping is about more than just money. Many consumers feel that the implicit promise of a reward at the end of the meal nets better service from a waiter. Lynn’s research reveals that approximately half of those servers who responded to past surveys believe that excellent service yields higher tips, and this belief probably leads to improved service. Yet despite the fact that 65 percent of Americans in our survey who tip when dining at sit-down restaurants said they base their tips on the quality of service, Lynn and other researchers have found a weak correlation between the two, with quality of service affecting tip size by a variance of less than 2 percentage points.

What does drive tip amounts up? Factors that Lynn broadly terms “social connection”: servers who introduce themselves to customers, who squat to be at eye level with diners or briefly touch them on the shoulder, who compliment diners’ food choices, who draw a smiley face on the back of the check, who deliver a few mints with the check. Oh, and slender, good-looking women garner higher tips than heavier, plainer ones. The same goes for young women and blondes.

Servers of color fare the worst: They’re much more likely to work at lower-end restaurants (and thus earn smaller tips), and their tips are substantially lower than those given to white servers at the same establishments, according to Lynn’s research.

These findings may owe something to the quirky nature of tipping itself. The very practice defies the economic norm, in which a payment is made so that a good may be obtained for the lowest possible price. Tips are dispensed after the good has been delivered and are a voluntary addition to the price of that good. Another puzzle: Why do people tip at all, even when they know they will never return to the same establishment and thus don’t need to tip to ensure high-quality service in the future?

The reasons are complex, Lynn says. Some people, for example, may relish tipping as a chance to flaunt their wealth and status. Others enjoy the feeling of performing a “good deed,” of helping someone in a way that speaks to their altruistic impulses and keeps guilt at bay. “People by nature care about what others think of them,” Lynn says. “And even if they’re never going to encounter that worker again, the thought that the worker is unhappy or dislikes them is painful, and they want to avoid it.”

But perhaps tipping’s biggest perception problem stems from the way it intersects with certain current cultural flash points. In recent months, servers at restaurants (about 70 percent are female, according to the EPI, the Washington, D.C., think tank) have increasingly gone public to raise awareness of the way tipping can enable sexual harassment and other inappropriate or degrading behavior from customers—behavior that the staffers must tolerate to optimize their earnings.

As for tip givers, age, gender, geography, race, and ethnicity bear on their behavior. Women tend be bigger tippers than men (20 percent vs. 16 percent on average), and residents of the Northeast and Midwest tip more than those of the South and West, according to a recent survey conducted by GfK Custom Research North America for CreditCards.com. In the same survey, millennials report tipping less generously than their Generation X and baby boom elders. African-Americans and Latinos also report tipping lower, partly, Lynn’s research suggests, because they are less aware of the norm of tipping up to 20 percent. Some of this could also be a chicken-and-egg situation because nearly 40 percent of waiters admit that they have given substandard service to minorities, teenagers, the elderly, and users of discount coupons—based on a belief that these groups will tip poorly.

Is Tipping Here to Stay?

No one seems particularly happy with the tipping status quo, but so far no one has come up with a viable alternative. Amid the voices calling for change, there is little agreement on what form it should take. And even in the unlikely event that the tip-dependent businesses across America did agree, they couldn’t get together to ban tipping because that could be collusion, a violation of antitrust laws.

One recent attempt at reform in Washington, D.C., exemplifies how contentious this topic can be. Called Initiative 77, it would have phased out, by 2026, the subminimum wage earned by D.C. bartenders, hairstylists, barbers, restaurant waitstaff, and other tipped workers (currently $3.89 vs. $13.25, the full minimum wage in the district). Some owners, of course, opposed the measure as too costly. Waitstaff were also divided. Some welcomed the measure’s stabilizing effect on their incomes; others viewed it as needlessly disruptive and, like the subjects in McKenzie’s study, said it would result in lower pay.

Initiative 77 was approved as a ballot measure last June; in October the city council repealed it—outraging the 56 percent of D.C. voters who passed it. There is now a movement to repeal the repeal. Maine voters passed an almost identical measure in 2016; it too was quickly overturned by the state legislature, bowing to the restaurant industry.

One step forward, two steps back. (Or perhaps it’s the other way around.) As with so many situations, the tipping “solution” may involve a combination of half-measures that are meant to please all parties and end up pleasing none.

Ultimately, Lynn says, tipping may be under fire from all sides, but it’s too firmly entrenched in our culture to go away—or even to stand still: There may yet be some untapped untipped corners of American life waiting. In the meantime, most of us will continue to stumble and secretly fear we’re going about it all wrong. For those who need some help, see “How Much of a Tip Should You Leave?


A Brief History of Tipping

The exact origins of tipping are unclear, but it possibly got its start in the late middle ages, when wealthy estate owners would give a servant a few extra coins out of appreciation or compassion. By the Tudor era in Britain, tips were likely to be in the form of gratuities given to servants of the landed gentry by overnight guests, according to Kerry Segrave’s “Tipping: An American Social History of Gratuities” (McFarland, 2009). By the 17th century, Segrave says, such small tokens of appreciation were routine in commercial eating and drinking establishments throughout Europe. One bit of folklore has it that “TIP” is an acronym for “To Insure Promptitude.”

Americans who traveled in Europe imported the custom to the New World, but it was regarded as a European institution and mostly rejected in the U.S. as undemocratic. Gradually, however, tipping subsided in Europe and flourished on this side of the Atlantic.

Because of its origins, tipping has been suffused with issues of class—so much so that other analysts argue that in the U.S. the custom is associated with slavery. That’s largely because tipping’s earliest American iterations were tied to train travel—and to the Pullman Company in particular. Beginning in 1867, Pullman put newly freed slaves to work for almost no salary, forcing them to rely on the gratuities train passengers gave them for cheerfully performing the servile tasks that enabled those travelers to ride in what was then the height of luxury. Thus Pullman established the template of a large, prosperous company paying its employees substandard wages and asking its customers to voluntarily make up the difference. Critics of tipping say it’s a system that effectively makes employees dependent on a highly mutable form of private charity.

Pullman’s porters eventually improved their working conditions by establishing America’s first black labor union in 1925. But to this day, tipping’s sociopolitical dimensions retain vestiges of its thorny past.


Who Tips What, Where & When

We recently asked a nationally representative sample of 1,031 U.S. adults about their ­tipping habits.

Who Tips What, Where & When

We recently asked a nationally representative sample of 1,031 U.S. adults about their ­tipping habits.

Editor’s Note: This article also appeared in the February 2019 issue of Consumer Reports magazine.