Friday, December 19, 2014

Why is Tipping for Service Assistance Spreading?

Observations from Tyler Cowen:
I now regularly find that when I buy something from a cashier — especially small ticket items — that I have the option of tipping the salesperson.  There will be a cup for tips, or the space to write a tip into the credit card transaction.  If I buy a gelato, or a newspaper in the airport, these tipping chances present themselves.
I take it there are a few classes of customer:
1. Those who are looking for chances to tip more, to feel good about themselves.
2. Those who are uncertain about when they should be tipping, and who will now enter a tip to avoid feeling bad, out of fear that the social default has shifted toward tipping in some additional arena.  They don’t prefer to tip, but they figure they are supposed to, and do not therefore hold a grudge.
3. Those who are indifferent to this new possibility, or perhaps who actively resent it, and who will leave no tip at all and do not feel guilty about that.
4. Those who aren’t sure what they should be doing, ultimately decide against the tip, feel bad about this, identify the establishment which made them feel bad, and avoid that establishment in the future.
If the share of individuals described by #4 is sufficiently large, suppliers will be reluctant to create new tipping opportunities, but it seems that is not the case.  And so the practice of tipping is spreading.  Note that as new tipping opportunities spread, uncertainty about the true social defaults increases (“hmm…maybe coffee servers do deserve a tip…”) and that increases the share of individuals who fall into #2.  Which in turn raises the profitability of creating new tipping opportunities, which in turn muddies the understanding of social defaults, and so on.  That is indeed the Dantean inferno we live in these days.
I ignore most tip jars. I tip when I believe it will improve service (generally if it is a place I frequent with some regularity) or if a  person is particularly cheerful. BUT, when I do tip, I make sure I do it when the person I am aiming the tip at sees me put it in the jar.

If the person you are tipping doesn't know that you made a tip, you might as well go home and burn that money in the fireplace.


  1. I think the establishments and workers forget that exchange benefits both sides. So maybe the customer should hold a "tips jar" to the casher as well.

  2. I have noticed the same thing. When I get my credit card receipt to sign, the only time I have ever given a tip under these new "social defaults" is when someone went beyond and made the extra effort. I find this trend annoying when I order take out from a sit-down restaurant or even driving through McDonald's for a cup of coffee on a freezing day. I will tip if someone made the extra effort or if someone made the effort to be unusually kind or upbeat. Some make this extra effort because of the new tip opportunity or because they're asked to cover more with fewer staff and now have a way to increase their intake for their shift. I do not feel bad about not leaving a tip. I think of tips as charity, which comes from the heart and not something obligated. That's goofy and too millennial. If I don't tip, it means that the server or assistant did not make the extra effort or that they were rude. Some young kids will insinuate the new "social defaults" and expect to get more for doing next to nothing or basic service. I once gave a gal working an all-night Taco Bell as order taker. I could hear her dreary, tired voice through the intercom. When I picked up my order at 1am, I put a $5 bill in her and she was ecstatic. She didn't provide any unusual or ebullient service. Sometimes it's just fun to throw people's expectations way off in a very memorable way.

  3. In addition to Tylers comments, tipping tends to distort both the implied relationship between employers and employee, and base salaries. It is not uncommon to find that establishments were tipping is allowed, some if not most employers justify a lower base salary. In the past, prior to some wage regulations, employers were allowed to pay below the minimum wage laws. Perhaps this still exists in some cities.

    During my visit to Italy, tipping was mandatorily included in the transaction, and printed on the restaurant receipt. Ironically, even in these instances, the staff often tried to get an additional tip added to the table bill. In some cases the waiter-waitress would lie, and say it was good manners to add a tip on top of the tip.

    I suspect this concept of tipping may confuse the implied contract as to whom does the employee owe allegiance to: the employer, or the diner. Ideally the waiter owes allegiance to his/her employer AND his client: the diner.

    Part of the issue may be that we live in an entitlement society. It is indeed interesting to watch the various people who leave a tip in the tip jar for nothing more than the employee doing his/her job. I often wonder if they give because they are wealthy, or afraid of being nonconformist.

    PS--never mention this topic to anyone who has been a table server ( waiter-waitress), they become violently defensive and biased in favor of the tipping conundrum.

    1. How would an establishment go about "justifying a lower base salary"? Employees voluntarily trade their labor for pay and it's easy to move your labor around. It's simply not possible for an employer to pay below market. Labor would move on.

      As far as minimum wage law, economically, the business owner will simply adjust to the artificial price fixing:

      1) increase productivity thru process changes, mechanization
      2) arrange intangible benefits toward certain employees, such as providing the best work hours to certain employees
      3) raise product prices
      4) close businesses that are unprofitable

      I think Robert Murphy does a pretty good job of describing the economics of tipping at

      Tipping is an unspoken relationship between merchants and customers where customers, who are better able to assess the quality of service, adjust the level of pay for the employee. That explains your situation in Italy: the "tip" on the receipt is no tip at all. It's just a way for the employer to display lower costs on his menu. So real tips try to emerge.

      I'm not sure why you use the term "confuse" in describing how tipping places allegiance on a waiter to both employer and customer. Why the negative terminology? The water does have allegiance to both - and that allegiance is mutually beneficial. If I'm the business owner, that's exactly what I want.

      Any mandatory tipping schemes, whether your Italian story, the American "party of 8 or more", tip pooling all undermine the legitimate purpose of tipping.

    2. I agree with most of your points... but in regards to your question.
      1) Employers dont have to justify a lower base salary where tipping is the norm, this evolves through a market process on its very own. A sort of consensus if you will, in conjunction with the supply of waiters that will apply for that salary.
      2) When cities create laws allowing for lower base salaries by allowing for tips, this alone would convince some employers its the proper way, and legal way to manage employee wages of table servers.
      I have not done any recent research on wage-tipping regulations, but I believe this has slowly been changing in some cities, and may indeed be prohibited in some places. You will find more base salary info here

  4. I purposely use my atm card when I see those annoying tip jars. I have been driven to avoid some of those places that have them too when there's an easy alternative (#4).

    I'm not averse to tipping either, if someone genuinely goes out of their way, provides excellent service, etc., I'll tip-but I don't like it when it come to Dunkin Donuts for example...which recently placed a tip jar at their checkout counter in my neighborhood.

    I avoid them now. How could you tip someone for pouring a cup of coffee and handing you a donut?

    Oh well, maybe I'm falling behind the times. I worked as a waiter through school too, and tip very well under those circumstances, but hell, I had no wages and lived off of tips and everyone knew it.