Name: Why the U.S. Can’t Quit Tipping
Uploaded: 2023-10-24T09:30:00Z
Duration: 5 min 24 s
Description: You’re being asked to tip more and more places today. If you’re annoyed, you’re not alone. WSJ explains why tipping culture has grown, and why the U.S. probably isn’t getting rid of it anytime soon. Photo illustration: Annie Zhao

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You’re being asked to tip more and more places today. If you’re annoyed, you’re not alone. WSJ explains why tipping culture has grown, and why the U.S. probably isn’t getting rid of it anytime soon. Photo illustration: Annie Zhao

https://m.wsj.net/video/20231024/12e92aa7-426e-4d89-bc22-aea5a5f3556f/1/hls/manifest-hd-wifi.m3u8

Why the U.S. Can’t Quit Tipping

I'm purchasing an office chair online and they're asking me if I want to leave a tip.

25, 20, 18% tip for what?

Tipping culture has gone way too far.

Narrator: Nowadays, you're asked for a tip nearly everywhere.

Are we tipping at drive-throughs?

15, 20% on a sweatshirt purchase.

Narrator: If you're frustrated, you're not alone. A survey by Bankrate found that a third of people are annoyed by those pre-entry tip screens and think tipping culture has gotten.

Out of control.

Narrator: Businesses and cities have tried to move away from tipping, but.

I don't see any kind of a future where tipping completely goes away.

Narrator: That's Dr. Mike Lynn, a Cornell psychologist who studies consumer behavior.

I've done more research on tipping than anybody else.

Narrator: And he'll help us explain why the US became so dependent on tipping, why it seems to be everywhere now and why we're probably not getting rid of it. Tipping really became popular after the civil war when formerly enslaved Black Americans went into service positions like waiters and railroad porters.

And the railroad industry deliberately paid them low wages on account of their ability to work for tips. And arguably, it was this influx of service workers who were receiving low wages that contributed to the growth of tipping.

Narrator: By the early 1900s, as minimum wages were being established, tipped workers were initially excluded until 1966 when tipped workers were given their own minimum wage. It was raised to $2 and 13 cents in 1991 where it stayed ever since.

Consumers in this country are aware that servers make a substandard minimum wage and that that contributes to their willingness and desire to tip them.

Narrator: Some states require employers to pay just that tipped minimum wage to workers, where some states like California and Minnesota require them to pay workers the full minimum wage and then tips are added onto that, and those minimum wages affect how people tip.

I was able to get data from credit card payment system providers on charge sales and charge tips in restaurants across states. And what I find is the smaller the wages servers are paid, the higher the percentage tip.

Narrator: In other words, he found that people know their tips are how workers get paid, so they tip more when they know workers are being paid less. In that same Bankrate survey, 41% of people said businesses should pay their employees better rather than relying so much on tips. But in practice, people don't like that.

I've done the research where I give people hypothetical menus, one where they have regular prices, and at the bottom it says a customary tip of 15 to 20% is appreciated. One where they say, tipping's not allowed, you can't tip, but their menu prices are 15% higher.

Narrator: He then asked people how expensive they thought the restaurant was. People overwhelmingly thought the menu with the 15% higher prices was more expensive than a menu where they would tip 15% or more anyway. Other menus that stated an 18 or 15% gratuity would be automatically added were also viewed as more expensive.

We're not rational, we're cognitive misers. We don't like to add all of the factors together and make logical, rational comparisons. We do quick and dirty heuristics.

Narrator: It's called price partitioning. You see it with hotel listings or concert tickets with all kinds of fees tacked on at the end.

Partitioning prices often makes things seem less expensive than if you were to bill all of the cost and be upfront in one big price.

Narrator: Which is one of the reasons you're seeing tipping just about everywhere now.

Post COVID, we've experienced inflation and full employment and service establishments have to compete for employees, which means paying them more, but paying them more requires them to raise prices. And customers are already facing inflation, and so what's a business to do? And I think that tipping is a way to address that problem, a good faith effort on the part of of businesses to say, I need to pay my employees more, but I don't wanna raise my prices too much on you guys.

Narrator: So are people really tipping 20% for self-service or counter service? According to that Bankrate study, the vast majority of people are still always tipping servers or wait staff at a sit down restaurant. From what we've learned from Dr. Lynn's studies, probably in part because they know those workers depend on tips. But when getting coffee, not as many. When picking up takeout, even fewer.

So just because someone's asking for a tip doesn't mean it's customary, doesn't mean everyone else is giving. The new technology kind of hides from us what the actual behavioral norms are.

Narrator: Tipping was seen as un-American even in the 1800s. In the 1900s polls showed Americans wanting to get rid of tipping. Today, two-thirds of Americans have a negative view of tipping, but it's so ingrained into American price models and policies that tipping is probably here to stay. But where and how much you tip is still up to you.

News moves fast, and there's not always time to untangle the complex forces driving the day's biggest stories. WSJ Explains breaks down big market moves, business and economic trends, and scientific developments to help you stay ahead of the curve.