(UPDATE) The Tipping Debate

Bon Appétit published a story last month about the impact that digital payment services like Square and others are having on tipping. It seems that the general public has no problem paying 20% or even more, if the option is framed a certain way:

When the Big Apple’s taxis began adopting credit-card readers, many lifelong New Yorkers were shocked to discover that they’d apparently been undertipping their cabbies for years—at the checkout screen, they were presented with their tip choices, with 20 percent being the smallest option. (A small, easily missed button in the corner allows riders to enter other amounts.) Of course, they hadn’t really been undertipping before, but thanks to the way the screens were laid out, 20 percent became the new norm overnight. It’s a strategy known as anchoring, subtly or not so subtly establishing a new standard by shifting the choices you present.

I've noticed this "anchoring" tactic showing up when I pay via Square at a cafe, or use my credit card in a Cab on the road. It bugs me enough that I often find myself searching for the "other" button, so that I can pay less for no other reason than because I'm turned off by 20% being suggested as the lowest amount. There is always the "no tip" option as well, right next to the 20% button. I wonder if they would do better to put a 15% button in there, rather than have patrons faced with a "20 or nothing" option.

I think that businesses should play close attention to how this affects the tips of their employees. It sounds like things are looking up right now, but that could always change.

Originally Posted 2/17/14

Just like so many of us, I had jobs throughout high school and college at which I made most of my income from tips. Even so, I've always had a strained relationship with the idea of paying a gratuity. My perspective is pretty basic, and you've surely heard or thought it before: I just want these people to be paid, whatever amount they deserve, by the company they actually work for. Isn't that simple enough? It works just fine in all the non-service industries, so I think it could work for those industries that operate with a compensation based on tipping.

Again, I know that my disdain for tipping is not a radical thought. In fact, it just feels a lot like common sense. The practice has been a controversial topic in this country as long as it's been around, but the ritual of paying a little extra to workers in the service industry is receiving a fresh round of scrutiny. In his piece about "The Anti-Tipping Revolution" that's getting new legs in the US, Vice's Ben Richmond spoke to hospitality trends expert Andrew Freeman about how tipping might shift in 2014, and why:

But Freeman thinks that upscale restaurants might take a “nod towards Europe,” and replace the “tip” with an included service fee. Anything you leave on top of the service fee then becomes that retrograde-maybe-never-real “discretionary addition for really good service.” The goal isn’t to make things fairer for the wait staff, but rather to spread the (now compulsory) love to the back of the house as well.

“Our thinking was with all these new restaurants opening, there’s obviously a shortage of back-of-house people—cooks and sous chefs and things like that,” Freeman said, “so our thought was that [the practice of tipping] is going to really change because in the service fee model, when there’s a service charge added in, that gets split between the front and back of the house.”

“There’s obviously implications for wanting to tip to reward good service, and there’s also tax questions and all of that,” Freeman explained. “We’re definitely thinking it might take on different models—maybe they’ll just start splitting gratuity between front and back of house without switching to a service fee.”

This is not just a predicted trend- it's actually happening in some places. Freeman identifies one of the core problems with tipping, in my opinion, when he talks about the tip failing to extend to the back of the house staff. There needs to be a way to honor the kitchen and support staff for a job well done. They are probably not being fairly paid out when they've done well, even though a bad/cold/wrong dish is a surefire way to turn a nice tip into a lousy one.

That brings me to my my biggest gripe about the way that tipping is setup: if tipping is supposedly a way to reward good service, it's theoretically also a way to communicate that there was poor service, right? The problem is, there is basically nothing in place to help you communicate specifically about the service you received. You tip below 15% 1 because you were unsatisfied with the service, but really the server just thinks you're a cheapskate, right? If you tip a healthy amount over the standard, does the server know it was for great service or do they just think you have too much money to spend?

Finally, the whole tipping paradigm isn't even setting out to do what it's meant to do and it may be perpetuating a racial bias among servers.

Slate's Brian Palmer:

Tipping does not incentivize hard work. The factors that correlate most strongly to tip size have virtually nothing to do with the quality of service. Credit card tips are larger than cash tips. Large parties with sizable bills leave disproportionately small tips. We tip servers more if they tell us their names, touch us on the arm, or draw smiley faces on our checks. Quality of service has a laughably small impact on tip size. According to a 2000 study, a customer’s assessment of the server’s work only accounts for between 1 and 5 percent of the variation in tips at a restaurant.

Tipping also creates a racially charged feedback loop, based around the widely held assumption—explored in an episode of Louie, in the Oscar-winning film Crash, and elsewhere—that African-Americans tend to be subpar tippers. There seems to be some truth to this stereotype: African-Americans, on average, tip 3 percentage points less than white customers. The tipping gap between Hispanics and whites is smaller, but still discernible in studies. This creates an excuse for restaurant servers to prioritize the needs of certain ethnic groups over others.

Suffice to say, tipping is broken. It was essentially never a good idea, and I'm shocked that we've kept it around this long.

  1. 15% is the amount that I generally adhere to for a acceptable-though-unexceptional service experience. However, I am trending toward 20% as I grow older, for no good reason that I can find.