The author said tipping in the US “lost all semblance, meaning, and motivation for good service”. The author’s solution?
Simply increase food prices by 20% so owners could pay staff a direct, clear wage and eliminate all other situations where tipping is irrelevant or inappropriate.
As a veteran bartender, I had a visceral reaction. If our author, a white male venture capitalist, had ever worked a day in service or hospitality — it didn’t show. Many of his "down with tipping" supporters also appeared to lack industry experience. They jumped on his bandwagon due to feeling “too much pressure” to tip in numerous situations.
To be fair, I understand the frustration. I too have felt the effects of “tipflation” and I agree it’s a system wrought with challenges.
But first let me blunt — there is nothing simple about eliminating the practice of tipping in the US.
It’s a classic wicked problem: it is not clear, easy, or solved solely by an increase in prices.
People in the industry know this all too well.
This is part one of a larger series. In this post, I'll explore tipping history and leave you with my $0.02 on tipping guidelines. Stay tuned for more in this series by signing up for our newsletter at balance.cash.
"It’s the legacy of slavery that turned the tip in the United States from a bonus, or extra on top of a wage, to a wage itself."
— Saru Jayaraman from a Time article in August 2019
When I read this, I felt guilty and foolish for being unaware of the origins of a system I've been involved in, supported, and defended for over a decade. The connection between tipping and exploitative labor is well-documented in history. After the Civil War, many African Americans entered service roles, and employers, in order to evade fair wage payments, implemented a tipping system. This exploitative practice disproportionately impacted black workers, perpetuating economic inequality and racial discrimination as they became heavily reliant on tips for their livelihoods.
The data is overwhelming: Tipping encourages racism, sexism, harassment, and exploitation.
— Vince Dixon, Eater 2018, The Case Against Tipping in America
I encourage you to read the full analysis from Vince Dixon ☝️, but in the meantime, here are some ugly truths:
I have first-hand experience with every single one of these issues. Every. Single. One.
Yet I still find the aggregate data confronting, sobering, and shocking.
In the early 1900s, there were full scale anti-tipping movements that waged war against what they considered to be the most un-American of practices.
But to no avail. Cheap labor and social customs fostered a uniquely American habit.
Fast forward to modern times and the anti-tipping debate gains momentum again.
Danny Meyer, famous restauranteur and founder of Shake Shack, has loudly championed a no tipping policy. His move was heavily covered in the press, though it ultimately failed and was rolled back. Here is the rough timeline:
And then there was Joe’s Crab Shack, who barely made it a year in 2015 with a no-tipping policy. The chain suffered a significant reputation hit in the process.
Numerous researchers have conducted in-depth studies on this topic, but I'll summarize a handful of themes that may surprise you.
"It's just not as simple as people tend to think it is. People think it's just norms—and it's not just norms in the United States. Tipping is intricately tied to policy,"
— Sylvia Allegretto, quoted by Giulia Carbonaro for Newsweek, April 2023
In the US, we have a two-tiered wage system, with a federal minimum wage and a lower sub-minimum wage for tipped workers. Tipped workers can be paid less than the federal minimum wage, as long as their tips make up the difference. The federal tipped wage is $2.13, while the federal minimum wage is $7.25. While the numbers can vary between state and even cities that have elected to increase those minimums over the years, the federal tipped wage of $2.13 hasn’t changed since 1991.
Unsurprisingly, the battle over eliminating the sub-minimum wage and raising the minimum wage is highly politicized, with Republicans and Democrats at odds. Interestingly, the National Restaurant Association, representing over 380,000 US restaurants, opposes eliminating tipping. They argue that it would harm restaurants, already struggling with low margins, and result in lower earnings for servers.
And so for the last five decades, legislators, lobbyists, and presidents have stalemated on any significant changes to this deeply ingrained policy.
“People are happy to pay $25 for a pizza if it’s $20 plus tip, but if the menu reads $25 for a pizza you’re looked at as ripping people off, even if it’s the right price for the cost of getting the food to the table.”
— Mike Fadem quoted, Gratuity (Still) Not Included, Eater, Sep 1, 2020
There’s what people say and then there’s what people do.
Since the early 1900s, Americans have complained about the practice of tipping - rightly so given its systemic issues. Yet, time and time again, when an alternative option presents itself, we choose tipping. In fact, we’ll tarnish the reputations of establishments that eliminate tipping and complain at the inclusion of service charges to ensure fair pay among staff.
Something many tipping abolitionists fail to understand is that their idealized “living wage” for the good of the servers is quite often a pay cut.
Tipping abolitionists might be surprised to learn that all servers surveyed chortled at the suggested replacement of their tip incomes with a “living wage” of $15 an hour. Most servers responded with comments of the essence, “How stupid can these people be?”
— By Richard B. McKenzie, Cato Institute 2016, Should Restaurant Tipping Be Abolished?
Well, I think the biggest thing we’ve learned is that this is really tough, and it’s tough because it’s really a three-legged stool that we’re trying to balance. How do you create a menu price that doesn’t frighten away a prospective customer who’s just casually looking up your restaurant online and may not understand that there will be no tipping on top of that? And then did you actually compensate your team to the degree that you hope to? And now the third leg of the stool is: did you actually make enough money to cover all of the costs involved?
— Danny Meyer, Freaknomics Interview 2019, Why Does Tipping Still Exist?
Habits by themselves are hard enough to break, but consider having to break the habits of a collective. An interdependent system of groups who’ve built their businesses, their careers, and even government policy around a wage system that heavily relies on tipping to make it all work.
And thanks (or no thanks) to innovations in point-of-sale software in the last decade — that tipping habit has grown to epic proportions.
Navigating tipping can be confusing. Whether to tip or not is subjective. What constitutes great service? It's subjective, but we can usually recognize it when we see it. However, this subjectivity can lead to problems like inconsistent evaluations and uneven tips. Despite these drawbacks, many of us in the service industry would rather take our chances with subjective evaluations than have our earnings determined by legislators or owners. That doesn't mean the industry shouldn't reflect on issues such as being paid a sub-minimum wage because we rely on tips.
In the rest of this series I’ll try to widen your aperture on the industry with topics that include how tip pooling/sharing works, how quality of service actually correlates to tipping, the impact of software innovations on tipping, and how servers, who are often left out of the conversation in the news reports and polarizing social posts feel about tipping.
If you're looking for a definitive answer on whether to tip or not, I’ll leave you with my (admittedly biased) rules. I've experienced both the challenges and benefits of this imperfect system. It has given me control over my work-life balance, provided opportunities to pursue my passions, and instilled a deep appreciation for the hard work required in this demanding industry. I wouldn't change that for anything.
I checked my premises at the door before diving into this post.
I hope you will too as you consider that next opportunity for gratuity.
