Tips on Tipping

In a world where tip jars and swiveling iPad screens have proliferated onto the counter of every business establishment you visit, the tipping culture has spiraled into uncharted territory.

Once upon a time, we tipped restaurant workers and food servers because legislation allows them to receive less than minimum wage. Tips theoretically make up the difference. A New York City server, for example, earns $10.65 per hour with the presumption that they'll make $5.35 an hour in tips to collectively compensate them the current minimum wage of $16 per hour there. Servers rely on and need tips.

However, tipping has proliferated from restaurants to every other business establishment. You're asked for a tip at the bakery, deli, dry cleaners, takeout counter, the dermatologist office, the mechanic's shop, and the movie theater concession kiosk. It may feel a little excessive. A Bankrate survey found 35% of respondents say tipping is out of control.

"You could go to a self-checkout and be expected to tip," jokes Laurens Debo, the C.V. Starr Professor of Operations Management at the Tuck School of Business at Dartmouth College in Hanover, New Hampshire, and co-author of an academic research paper on social pressure to tip.

Debo and his colleague and co-author Ran Snitkovsky, an assistant professor at the Coller School of Management at Tel Aviv University, research tipping culture, including how a tipping norm evolves, consumer's tipping habits and their underlying motivations.

Social pressure to tip has reached new heights, leaving consumers to traverse a puzzling landscape of generosity, guilt and gratitude with nearly every transaction.

Debo explains there are two categories of tipping motivators.

The first is about your relationship with the worker. They give you goods or provide service, and you tip them. The motivation is about the relationship between you and the provider of the goods or services.

The other is your relationship with society. "You don't want to stand out negatively for not tipping when everyone else tips," Debo says. People want to feel similar to other people. They don't want to feel different or get ostracized with a dirty look by the workers or other customers for not tipping when it's the norm.

Have you ever had the iPad swiveled toward you with a line of people behind you watching to see if you clicked a 15%, 20% or 25% tip? "This is all on purpose to propel people to tip higher," says Debo.

Interestingly, he says that tipping is something whose origins and motivations differ greatly from what companies may think it is. Businesses may be using tips as a way to pay workers less as a subsidy to labor costs. Bosses, for example, can say, "Hey you don't need to make as much money, since you're getting tips," similar to restaurant workers.

Businesses may also think that allowing workers' tips motivates employees to perform better or improve quality. However, Debo says that most of their research shows that tips don't improve quality and are not a good incentive to do so. Finally, tips are unreliable. Some days tips may be better than others, and some days are busier, hence fewer tips on one day than another. Debo says this adds to the variability of these workers' income, the people who may be among the lowest paid.

"I do think some businesses make errors by pushing too hard on having their customers tip," he says.

"While the extra revenue can be great, getting too pushy or greedy with the tip requests can actually undercut their business, annoying customers and potentially keeping them from returning," says Matt Schulz, chief credit analyst at LendingTree, an online lending marketplace.

The last thing any business wants is to lose good-paying customers because their tipping culture has gone haywire.

As digital payments make tipping easier and more visible, technology has played a pivotal role in tipping proliferation. "Technology allows changing behavior for many people at the same time," says Debo.

For instance, initially the ride app Uber didn't have tip functionality. Uber even discouraged drivers from accepting cash tips. But Lyft, its competitor, did have tip functionality on its app. A lot of drivers preferred driving with Lyft for that reason. Uber then added tipping to its app. Now tipping rideshare drivers is par for the course. "Shifting a norm is really difficult, but technology can accelerate that," says Debo.

Likewise, Square, the point-of-sale app that accepts credit card payments, has evolved business tipping in numerous ways, such as the ability to add a tip to any businesses' invoice, prompt a tip and include pre-set and default tip amounts like the 25% tip button. Now, tipping your landscaper, housekeeper, pest control professional, personal trainer and dog walker is de rigueur.

"The current tipping culture has definitely evolved from its original purpose of providing extra income for restaurant workers, as it has become almost expected for customers to tip at every establishment, regardless of the service provided or the employee's wages," says Michael Collins, CFA, founder and CEO of WINCAP Financial, a wealth management company in Massachusetts.

"While it is important to recognize and appreciate good service, the expectation of tipping everywhere can put pressure on customers and lead to confusion about how much to give," he says.

While the pandemic and a show of support for frontline and essential workers were drivers in the noticeable spike in tipping small business workers, the rise in gig work, where app-based service personnel request tips at every turn, also fuels the tipping fire.

"Whether we have come to the point of starting to dislike tipping or shunning an establishment or service because they request tips is not clear," Debo says. "Tipping is emotional. You may be guilted into it via human nature."

Just how much you stuff into the jars, cups and containers or tap on the keypad is still up to you, the consumer. It is also for you to decide if it's a choice or an obligation, whether your finances feel generous or tightfisted, and whether the service or goods was exemplary or unworthy.

"My general thought is that when in doubt, you should go ahead and tip," says Schulz. "Chances are the tip amount isn't going to rock your world financially."

Suppose you're tip-fatigued, cash-strapped or just tired of everyone's proverbial hand out? In that case, you can always hit no tip/skip on the swiveling iPad or deny your sandwich maker, barista or baker the dollar or two you would otherwise deposit in the tip jar.

Debo says tipping may calm down a little when businesses realize too much tipping may create more backlash than it's worth.

Meanwhile, dear reader, how about a tip?

Jennifer Nelson is a Florida-based writer who also writes for MSNBC, FOXnews and AARP. Read More