The US Should Have Banned Tipping Long Ago

The very concept of tipping is somewhat ambiguous.  Is it some sort of courtesy fee?  Is it meant to incentivize better service?  Is it a form of charity?  Whatever an individual’s motivation is for tipping, it is a practice that has become so ingrained in American society that it is considered a repugnant act to not leave a tip, even though a person is still entirely free to do so.  The history of tipping is rather dark – the practice was born out of malevolent intentions.  As Steve Dublanica writes in his book “Keep the Change” (the first chapter of which is available in this article by Today), The Pullman Company, a railroad company that was the first large business to force its workers to rely on gratuity-supplemented wages, exploited a largely ex-slave workforce by paying them far below living wages, citing tipping as the reason.  The company even went so far as to play to the compassion of its customers so that they, the customers, would be responsible for ensuring the employees were adequately compensated, instead of the employer.  The St. Louis Republic wrote at the time, “Other corporations before now have underpaid their employees … but it remained for the Pullman Company to discover how to work the sympathies of the public in such a manner as to induce the public to make up, by gratuities, for its failure to pay its employees a living wage.”  This exploitation of workers by retail and restaurant businesses was pushed to the extreme in some cases, like a restaurant in 1920s New York that paid no wages, and actually required employees to pay the restaurant $10 a week for the opportunity to earn tips.  There were some movements to ban tipping, and per Wikipedia, six states successfully outlawed tipping in the early 1900s, only for the bans to be repealed.

Some might argue that the current tipping system is more well established, that it’s a concept that makes sense in a modern, polite society.  I wholeheartedly disagree.  The burden should be on the employer to decide on the precise compensation for their employees, not the customer, even if it means adding fixed service fees to every bill.  It’s a custom that adds unnecessary friction to the server-customer relationship, and there’s evidence that it’s discriminatory.  Research presented by Michael Lynn in a Freakonomics podcast (link to study available on page) suggests that factors such as race, gender, hair color, and physical appearance play a large role in determining the average tip that a server will receive.  While most would have probably predicted this, it is hard evidence of discrimination at play.  As the study points out, both black and white customers will, on average, tip a white server more.  Another worthwhile tidbit from the study is the fact that the correlation between service quality and tip size is incredibly weak, with about 4% of the variation in tip size explained by service.  Here is evidence that perhaps the best argument for tips – to incentivize and reward better service – is practically moot.  As tips rise over time, there will be less pressure to increase the sub-minimum or tipped minimum wage, forcing workers to rely more and more on the tips that they earn, and allowing businesses to survive that cannot afford to pay their employees minimum wage.  The New York wage board will vote Friday on a measure to increase the tipped minimum wage to $7 (or 80% of the state’s minimum wage), as reported by the Wall Street Journal, a measure that will hopefully prompt other states to re-evaluate their tipped wage as well.

2 thoughts on “The US Should Have Banned Tipping Long Ago

  1. Jake Weimar

    My friends from China have said the service here in the U.S. is much better than in China. Without tips there is no incentive to provide good or timely service. While it might be less efficient there are higher returns from labor in the American system

  2. William King

    I think tips are necessary but it is interesting that only 4% of tipping is explained by service. The idea of a fixed service charge would work very well and could solve some of these problems. Tipping shows gratitude but it should not account for a large portion of the salary. I think that the minimum wage should be the minimum wage, regardless of whether or not tips happen to account for part of the salary.

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