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July 10, 2013

Why tipping is bad for everyone

When wealthy Americans brought home the practice of tipping from their European vacations in the late 19th century, their countrymen considered it bribery. State legislatures quickly banned the practice. But restaurateurs, giddy at the prospect of passing labor costs directly to customers, eventually convinced Americans to accept tipping.

We had it right the first time. Tipping is a repugnant custom. It's bad for consumers and terrible for workers. It perpetuates racism. Tipping isn't even good for restaurants, because the legal morass surrounding gratuities results in scores of expensive lawsuits.

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.

Irrelevant or insidious factors will dominate the tipping equation until quality of work becomes the main driver of tip size, but that's unlikely to happen. And tip size isn't the real problem anyway. The real problem is that restaurants don't pay their employees a living wage. The federal "tip credit" allows restaurants to pay their tipped employees as little as $2.13 per hour, as long as tips make up the shortfall — which turns a customer into a co-employer. Although federal and state law requires restaurants to ensure that tips bring employees up to minimum wage, few diners know that. (Hosts/hostesses, bussers and food runners, who receive a small fraction of the servers' tips, often fall short of minimum wage on some nights.) The tip credit has turned the gratuity into a moral obligation, and we ought to cut it from our statute books with a steak knife.

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