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.
