You know it’s coming. Order a takeout coffee, burrito, or bagel at a local restaurant, and there it is: the dreaded swivel. As the counter jockey swings the touchscreen around, you’re forced to make a split-second decision over the prompt “Leave a tip?” and push the button for 10%, 20%, or more. What’s the expectation? What does the worker deserve? Will they even benefit?
“There’s a lot of places where we didn’t historically tip before that now seem to be prompting you for a tip, and it’s unclear what to do,” says Matthew Gudgeon, assistant professor of economics, who focuses on the economics of labor.
During the COVID-19 pandemic, many people increased their tips as a nod to the risks taken by front-line service workers; now that the pandemic has eased and prices have risen, it’s sparked a backlash to “tipflation.” Meanwhile, while we once gave taxi drivers something extra at the end of a trip, ride-share apps and food delivery are now requesting tips in advance.
“One reason you might think of tipping is to incentivize performance, but that argument gets hard to stomach when DoorDash asks you to tip before the service even happens,” Gudgeon says.
“There’s a lot of places where we didn’t historically tip before that now seem to be prompting you for a tip, and it’s unclear what to do,” says Matthew Gudgeon, assistant professor of economics. Photo: Alonso Nichols
“There’s a lot of places where we didn’t historically tip before that now seem to be prompting you for a tip, and it’s unclear what to do,” says Matthew Gudgeon, assistant professor of economics. Photo: Alonso Nichols
Americans are greeting the new tipping expectations with a mix of confusion and resentment. A November 2023 poll by the Pew Research Center found only about a third of Americans feel it is “extremely or very easy” to know when to tip, while an equal amount found it “not too or not at all easy”—with respondents all over the map about how much to tip for coffee, taxis, haircuts, and food delivery. Regarding those ubiquitous prompts from counter screens and tableside credit card machines, only about a quarter of consumers said they like it when restaurants suggest tip amounts, while 40% oppose them.
According to surveys and polls, people invariably say they tip in response to quality of service, but economists have found at most a modest link between the two. “We do find some connection between tips and specific server behaviors, but not as much as you’d expect,” says Gudgeon. A recent survey article on the economics of tipping found quality of service only accounted for about a 2% variation in the amount left on the table. Rather, some economists find that people tip simply out of social norms.
“People are probably more likely to tip because it gives them a warm glow or an altruistic feeling,” Gudgeon says. “Or because there is societal pressure.” In other words, we tip because it makes us feel good—or because we’d feel guilty not to.
The Origins of Tipping
Where did all this get started? According to historian Andrew Haley, A91, wealthy Americans began tipping servants in private homes in the early 19th century.
“They were kind of aping their European betters,” says Haley, associate professor of American cultural history at the University of Southern Mississippi and author of the book Turning the Tables: Restaurants and the Rise of the American Middle Class, 1880–1920. “Ironically, as arguments began to arise against tipping in the 19th century, Europeans put the brakes on it, while Americans embraced it full out.”
With the rise of public restaurants, wealthy patrons slipped greenbacks to servers as a way to get better quality food and better recommendations to impress tablemates. “The waiter often had a lot of influence over what came to the table, and could even bring you extra dishes,” Haley says. “People were essentially buying a servant for a period of time while they were in the restaurant.”
As middle-class patrons began eating out at the turn of the twentieth century, many resented these extra perks as anti-democratic. “The backlash was not subtle,” says Haley. “People were genuinely concerned about the loss of equality in the United States.” They complained in letters to the editor, and some states even passed laws prohibiting tipping. Those laws became impossible to enforce, however, and most were quickly repealed.
Eventually the Fair Labor Standards Act of 1938 exempted restaurant servers from minimum wage laws; in 1970, Congress amended the law to establish a subminimum wage for servers. By then, tipping was enshrined, as etiquette guides gave consumers advice on how much to tip, starting at a quarter, then rising over the years to 10%, and finally to our current 15% to 20%.
That doesn’t mean the system is fair, however. Studies have shown that women and racial minorities are tipped less than white men, and higher tips are correlated with everything from attractiveness of the server to whether they draw a smiley face on the check.
“Waiters and waitresses are paid according to this kind of emotional labor rather than the actual work they are doing,” Haley says. “Service has become so unhinged from tips—you go into casual dining spaces where you order at the counter, and before you’ve had much interaction with anyone, you are putting down the tip.”
Not all tips necessarily benefit servers either; economic studies show that people generally like stability over volatility, accepting a fixed payment over a potentially higher but uncertain amount. Pushing tips through touchscreens and apps is also one way businesses can pass increased costs on to customers without having to raise posted prices.To the extent that tips go to workers, it also relieves businesses’ pressure to raise wages or other benefits, Gudgeon says. “If firms are doing this, then it’s probably producing value to both the firm and their workers,” he says. “The fact we keep seeing them everywhere tells me that it works. They are doing this because they either make more money or it helps them appease workers when they would otherwise have to pay them more.”
Is Tipping Here to Stay?
One strategy that hasn’t worked for restaurants is going tip-free and bundling tips into menu prices. When high-profile restauranteurs such as Danny Meyer tried that a decade ago, they fell flat on their face, losing business from customers complaining about higher prices.
That’s in keeping with economic evidence that customers react to “sticker price” of goods and have a hard time computing extras such as fees, taxes, and tips when making buying decisions, says Gudgeon, so a price with tip included seems higher even if it works out to the same amount. At the same time, the Pew survey found only 10% of people in favor of businesses automatically including a tip on the bill, and more than half strongly against it—wanting to maintain discretion on how much to pay their server, as complicated as it might be to calculate.
At the end of the day, it looks like tips are here to stay—at least for the foreseeable future. It’s possible legislation could make pricing more transparent, says Gudgeon, requiring disclosure of taxes and fees and prices with and without tips so people could make a more informed opinion. But doing away with tipping altogether is probably a non-starter, given that people seem to like the control it gives them—or think it gives them.
The best we can hope for in the short term, says Gudgeon, is to take a page from the old etiquette guides and better establish social norms around tipping, taking out the anxiety and guesswork by coming to consensus on what constitutes a fair tip for various kinds of services.
“That might come through more dialogue, or through industry groups issuing some kind of statement,” he says. “If we could agree that the norm for a coffee shop is, say, 5% and not 20, and for drivers it’s a couple of bucks, that might help set better expectations for consumers and workers alike.”
