Why Tipping Is So Out Of Control In The U.S.
Summary
TLDRThe tipping culture in the US has seen a significant rise, with consumers now tipping 15-25% on average, up from historical norms. The term 'tipflation' has emerged, reflecting the pressure to tip more and more frequently, even in situations not traditionally associated with tipping. Technology, such as payment tablets, has made tipping easier but also more expected, with preset tip amounts influencing consumer behavior. However, there's a growing resentment among consumers and concerns about the sustainability of this tipping culture, with some advocating for its abolition.
Takeaways
- đ Tipping culture has become pervasive, with customers being asked for tips in various service scenarios, including drive-throughs.
- đ The percentage of tips has increased over the decades, with the average tipping rate in 2022 being over 21%.
- đ 'Tipflation' refers to the phenomenon of increased tipping amounts and frequency, with technology like tablets and apps making it easier to suggest and collect tips.
- đĄ The origin of tipping dates back to medieval Europe and has evolved over time, with the U.S. being one of the few countries where tipping is customary and not included in the service charge.
- đŒ The federal minimum wage for tipped employees in the U.S. has remained at $2.13 since 1991, which is significantly lower than the standard minimum wage.
- đ The pandemic has influenced tipping behavior, with an increase in remote transactions and a higher percentage of customers opting to tip.
- đ± Technology, particularly POS systems from companies like Square, Toast, and Clover, has made it easier for businesses to suggest and receive tips, potentially contributing to the rise in tipping.
- đ€ There is a growing consumer sentiment of resentment towards tipping, with some feeling pressured to tip more than they are comfortable with.
- đ Inflation and the constant prompting for tips have led some customers to tip less or not at all, affecting service industry workers who rely on tips as a significant part of their income.
- đ There is a debate on whether the tipping system should be reevaluated, with some advocating for the abolition of tipping in favor of service charges included in the bill.
Q & A
What is the current tipping culture like according to the transcript?
-The current tipping culture is described as being out of control, with people being asked to tip at every opportunity and for services that are not traditionally associated with tipping.
What historical percentage did people commonly tip at during the 1950s?
-During the 1950s, people commonly tipped 10% of the bill.
How has the average tipping percentage changed from the 1970s and 1980s to today?
-By the 1970s and 1980s, the average tipping percentage jumped to 15%, and today people tip anywhere from 15% to 25%, with a 2022 survey indicating an average of more than 21%.
What term is used to describe the phenomenon of being asked to tip more and for more services?
-The term used to describe this phenomenon is 'tipflation'.
How has technology, such as tablets and kiosks, influenced tipping behavior?
-Technology has made it easier to present tipping options and suggest tip amounts, which can lead to consumers feeling pressured to tip more than they normally would.
What is the current federal minimum wage for tipped employees in the United States as of March 2023?
-The federal minimum wage for tipped employees in the United States as of March 2023 is $2.13.
How has the coronavirus pandemic affected tipping habits?
-During the coronavirus pandemic, consumers started tipping for services they never had before, and the percentage of remote transactions with tipping increased significantly.
What is the impact of businesses asking for tips before service completion?
-Asking for tips before service completion can create a sense of obligation or even a feeling of a bribe, potentially leading to customers tipping more out of fear of receiving lesser quality service.
What are the three prominent companies mentioned in the script that have contributed to the increase in tipping?
-The three prominent companies mentioned are Square, Toast, and Clover, which have developed point of sale systems that make it easier for businesses to gather tips.
How do the new tablet systems for tipping change the consumer's experience compared to traditional tip jars?
-The new tablet systems make it more difficult to avoid tipping as consumers have to actively choose not to tip, whereas with traditional tip jars, not tipping was more of a passive omission.
What is the potential danger of the current tipping culture according to the transcript?
-The potential danger is that consumers may start tipping less or not at all due to resentment or feeling overwhelmed by the constant requests for tips, which can hurt those who rely on tips as a significant part of their income.
Outlines
đž Tipping Culture and Its Evolution
The script discusses the pervasiveness of tipping in modern society, noting that it has become increasingly common and expected. It traces the history of tipping from the 1950s, where 10% was standard, to the present day where 15% to 25% is typical, with some considering 20% as low. The term 'tipflation' is introduced to describe the phenomenon of being prompted to tip more frequently and for a broader range of services. The script also touches on the historical origins of tipping, from medieval Europe to the 19th-century United States, and how it has become ingrained in the service industry, with the U.S. being unique in allowing employers to pay tipped workers less than the minimum wage.
đ The Impact of Technology on Tipping Trends
This section delves into how technology, particularly point-of-sale systems like Square, Toast, and Clover, has influenced tipping habits. These systems often suggest tip amounts, which can pressure customers into tipping more than they might otherwise. The convenience and prominence of these systems have made it easier for businesses to collect tips and for customers to tip, but they have also made the act of not tipping more noticeable. The script suggests that these technologies may be partially responsible for the increase in tipping amounts and the expectation to tip for services that were previously not tipped.
đ Economic Factors and Changing Tipping Behavior
The final paragraph addresses the economic factors affecting tipping, such as inflation and the pandemic's impact on consumer behavior. It notes that some consumers are tipping less due to financial pressures, while others are tipping more out of generosity or because of the increased use of tipping prompts. The script also points out that the pandemic led to a temporary increase in tipping for services like food delivery. However, there is a growing sentiment among consumers to abolish tipping altogether, with 60% of Americans surveyed expressing this desire. The paragraph concludes by questioning the sustainability of the current tipping culture and the potential for a societal shift away from it.
Mindmap
Keywords
đĄTipping culture
đĄTipflation
đĄFull service restaurants
đĄQuick service restaurants
đĄTip jars
đĄPOS systems
đĄTipped minimum wage
đĄService charges
đĄInflation
đĄGratuity
đĄDiscretionary
Highlights
Tipping culture has become ubiquitous, with customers rarely making a purchase without being asked for a tip.
Historical tipping rates have increased significantly, from 10% in the 1950s to 15-25% today.
A 2022 survey revealed that consumers tipped an average of over 21%.
Despite similar tipping percentages, the number of tips and their frequency have increased notably in recent years.
The term 'tipflation' describes the phenomenon of increased tipping expectations and frequency.
Technological advancements, such as tablets, have made tipping more prominent and sometimes obligatory.
The origin of tipping is rooted in medieval Europe, with a history of ensuring promptness and safety.
In the 19th century, tipping became a way to supplement wages for waitstaff, particularly women and newly freed slaves.
The U.S. is unique in allowing tipped workers to be paid below the standard minimum wage.
The COVID-19 pandemic led to an increase in tipping for services like food delivery, setting new expectations.
New technologies, such as kiosks and tablets, have made it easier for businesses to suggest and receive tips.
Some businesses have seen higher and more frequent tips by using modern POS systems like Square, Toast, and Clover.
Consumers feel pressured to tip within suggested ranges, which can lead to higher tipping amounts.
The new tipping culture has turned not tipping into an active decision, rather than a passive omission.
Some businesses see tipping as a way to improve service quality and employee performance.
Large companies like Starbucks have adopted tipping features to stay competitive.
There is a risk of customers becoming resentful and tipping less as tipping becomes more common and expected.
Inflation and the pressure of frequent tipping prompts have led some customers to tip less or not at all.
A significant portion of Americans are in favor of abolishing tipping culture entirely.
The tipping invasion is seen as a net negative for society, with concerns about where the tipping point will be.
Transcripts
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.
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