Why Tipping Is Everywhere
This episode of The Daily examines the surge of tipping culture into new sectors beyond traditional restaurants and services. The podcast discusses the technological advancements and labor shortages that have enabled this growth, with businesses using tipping as a way to attract and retain workers.
The podcast also delves into the psychological impact of ubiquitous tipping prompts on customers, inducing feelings of anxiety, guilt, and loss of control. It explores the economic considerations surrounding tipping, including the shifting of labor costs onto customers and potential risks for workers who become overly dependent on tips. The episode also touches on policy proposals related to tipping and their potential unintended consequences.
This is a preview of the Shortform summary of the Aug 29, 2024 episode of the The Daily
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1-Page Summary
The Explosion of Tipping Culture in the U.S.
The tipping culture has seen remarkable growth in recent years, spreading into various sectors beyond traditional restaurants and services. This surge was enabled by technological advancements like tablet checkout systems, as Benjamin Castleman highlights, making it easy to incorporate tipping options in new settings. The COVID-19 pandemic also played a role, prompting an outpouring of gratitude and desire to tip essential workers like those handling takeout and delivery.
The Worker Shortage's Impact
Amid labor shortages, businesses have used tipping as a way to attract and retain workers, according to Castleman and Tavernise. This has made it harder to revert to a non-tipping model, as workers now rely heavily on tips for their income. Eliminating tipping would effectively result in a pay cut for many workers.
Customers' Psychological Responses
Sabrina Tavernise and Benjamin Castleman explain how ubiquitous tipping prompts can induce anxiety, guilt, and a feeling of lost control in customers. Many feel compelled to tip simply because a prompt is present, even when the service might not traditionally warrant a tip. The visible presence of tipping screens adds psychological pressure, making customers feel watched and judged for not tipping.
Economic Considerations Around Tipping
Businesses Shifting Labor Costs
Tipping allows businesses to shift some labor costs onto customers, as Castleman notes. Businesses can offer lower base wages, relying on customers to make up a significant portion of worker compensation through tips. This enables businesses to attract cost-conscious consumers with lower prices while still earning more from those willing to pay higher tips.
Risks for Workers
However, Castleman highlights the risks of workers becoming overly dependent on tips. This can exacerbate pay disparities between different types of workers and expose workers to potential exploitation or harassment as their earnings are tied to customer satisfaction. An economic downturn could also severely impact workers who rely heavily on tips.
Policy Proposals and Unintended Consequences
Former President Trump and Vice President Kamala Harris have floated proposals to exempt tips from federal income tax to aid service workers. However, Castleman explains that economists generally view these proposals as problematic, potentially incentivizing businesses and workers to shift more compensation to untaxed tips, further entrenching the tipping system. Concerns also exist about creating unfair distortions in the labor market and leaving workers more vulnerable to economic fluctuations if their income becomes overly reliant on customer generosity.
1-Page Summary
Additional Materials
Counterarguments
- Tipping as a cultural norm may not necessarily be a negative trend; it can be seen as a way for customers to directly reward service staff for their efforts, potentially leading to better service.
- Technological advancements could be leveraged to provide more transparency in tipping, ensuring that tips go directly to workers rather than being absorbed by employers.
- The argument that tipping has expanded due to the pandemic might overlook the possibility that the increase in tipping could be a temporary spike in generosity that will normalize over time.
- While businesses might use tipping to attract workers, this could also be seen as a way to provide workers with the opportunity to earn more based on their performance.
- The reliance on tips could be framed as a form of performance-based pay that incentivizes workers to provide better service.
- The psychological impact of tipping prompts on customers could be mitigated through better education on the purpose of tipping and the norms around it.
- The argument that tipping shifts labor costs to customers could be countered by the idea that it allows for a more direct relationship between service and compensation.
- The risk of pay disparities due to tipping could be addressed through policy measures that ensure a fair distribution of tips among workers.
- Proposals to exempt tips from federal income tax could be refined to prevent potential abuse while still providing relief to service workers.
- The concern about economic downturns impacting tipped workers might be balanced by the argument that a strong tipping culture could provide a buffer for workers during tough economic times.
- The potential for tipping to create unfair labor market distortions could be countered by the argument that many service jobs offer upward mobility and skill development that can lead to higher-paying positions.
Actionables
- You can create a personal tipping policy to manage the psychological pressure of tipping prompts by setting clear guidelines for yourself on when and how much to tip based on the quality of service and your budget.
- Decide on a percentage range for good, average, and poor service that aligns with your financial comfort zone. For example, you might choose to tip 20% for excellent service, 15% for good service, and 10% for service that met but did not exceed expectations. Carry a small tipping chart in your wallet or save it on your phone as a quick reference to avoid on-the-spot stress.
- Develop a habit of providing feedback to businesses about their tipping practices to encourage a fairer tipping culture that benefits both workers and customers.
- After visiting a business, take a moment to write a brief email or fill out a comment card expressing your thoughts on their tipping system. If you felt pressured to tip due to the setup or prompts, let them know and suggest alternative ways they could structure their tipping requests. For instance, you could propose an option for customers to tip after the service has been completed, rather than before or during.
- Support legislative initiatives that aim to balance the reliance on tipping with fair wages by staying informed and participating in local community discussions or online forums.
- Research local and national proposals that address tipping and wage issues, such as movements for a higher minimum wage or changes in tipping tax policies. Join community groups or online platforms where these topics are discussed, and contribute your perspective as a consumer. Your involvement can help shape a more balanced approach to tipping and wages in the service industry.
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The explosion of tipping culture in the U.S. in recent years, including its spread to new industries
The tipping culture in the U.S. has seen remarkable growth, spreading into various sectors beyond traditional establishments. This surge has been intensified by technological advancements and societal changes brought on by the pandemic.
The rise of tipping prompts in new contexts, enabled by technological advancements and the pandemic
The ubiquity of tablet-based checkout systems has made it easy to add tipping options in more settings beyond traditional restaurants and services.
Benjamin Castleman highlights the ubiquity of tablet-based checkout systems that have made it easy to incorporate tipping options in new settings. Tipping prompts are now encountered everywhere from iPad checkouts in coffee shops to self-service machines, causing some to question the necessity of tipping when they perform the work themselves. Castleman speculates that tipping may even spread to retail outlets, gas stations, or grocery stores.
The COVID-19 pandemic prompted an outpouring of gratitude and desire to tip essential workers, allowing tipping to spread to new industries like takeout and delivery.
The hosts discuss how the pandemic led to increased tipping, driven by a desire to express gratitude to essential workers. This sentiment extended tipping practices into domains previously untouched by this tradition, such as restaurant takeout and delivery services.
The worker shortage and business incentives have further entrenched tipping in the economy
Businesses have used tipping as a way to attract and retain workers in a tight labor market, making it more difficult to revert to a non-tipping model.
Tavernise and Castleman explore how the worker shortage has led businesses to leverage tipping to attract and maintain a workforce, solidifying the presence of tipping screens and making the prospect of removing them challenging. Tips, which may be pooled across workers, account for a significant portion of earnin ...
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The explosion of tipping culture in the U.S. in recent years, including its spread to new industries
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Counterarguments
- The expansion of tipping through tablet-based systems could be seen as imposing on customers, making them feel obligated to tip even for services where tipping was not traditionally expected.
- The increase in tipping practices due to the pandemic might not be sustainable or reflective of customers' long-term willingness to tip in new contexts.
- Relying on tipping to attract and retain workers could perpetuate wage disparities and shift the burden of fair compensation from employers to customers.
- The reliance on tips can create income instability for workers, as tips can fluctuate widely and are not guaranteed.
- Some argue that tipping can lead to discrimination, as studies have shown that biases can affect who gets tipped mor ...
Actionables
- You can support workers in tip-reliant industries by setting a personal tipping policy that includes a wider range of services. Decide on a fixed percentage or amount you're comfortable with for tipping in non-traditional settings like takeout or delivery, and consistently apply it to show appreciation for workers in these sectors.
- Encourage fair tipping practices by starting a conversation with friends and family about the importance of tipping in various industries. Share insights on how tipping contributes to the livelihood of workers, especially in light of the pandemic's impact, and suggest that they consider tipping for services where they might not have before.
- Create a tipping budget as part of your monthly financial planning t ...
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Customers' psychological and emotional responses to ubiquitous tipping prompts
Customers are increasingly faced with tipping prompts in places where they might not typically feel tipping is necessary or warranted, causing a complex mix of anxiety, guilt, and the feeling of lost control over their own financial decisions.
The anxiety and guilt many customers feel around tipping decisions, even when the prompt seems illogical
Sabrina Tavernise and Benjamin Castleman shed light on a phenomenon many people experience: feeling obliged to tip simply because a prompt is present. The podcast host themselves confesses to tipping the maximum amount—not out of a sense of service value received but driven by guilt and the fear of being judged by people present. This reluctance to select 'no tip,' regardless of whether the service traditionally calls for a tip, illuminates the emotional and cultural factors at play in what could otherwise be a purely economic decision.
Customers often find themselves tipping more than they logically think they should, with this behavior driven by the potential judgement from workers or other customers. The presence of a tipping screen, therefore, can leverage these feelings, influencing customers to tip out of compulsion rather than satisfaction with the service.
The loss of control and choice customers feel with pervasive tipping prompts
Tavernise and Castleman highlight that the ubiquity of tipping options can make customers feel an acute loss of autonomy. The psychological barri ...
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Customers' psychological and emotional responses to ubiquitous tipping prompts
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Clarifications
- Feeling obliged to tip due to the presence of a prompt is a phenomenon where individuals feel pressured to leave a tip when prompted, even in situations where tipping may not be customary or expected. This pressure can stem from social norms, fear of judgment, or a desire to avoid awkwardness. The presence of a tipping prompt can create a sense of obligation or guilt, leading individuals to tip even when they may not have intended to do so. This dynamic highlights the influence of external cues on tipping behavior and the complex interplay between social expectations and personal financial decisions.
- The psychological burden of deciding whether to press the "no tip" button stems from the internal conflict customers face when they are presented with a tipping prompt but do not wish to tip. This decision involves navigating feelings of guilt, social pressure, and the fear of judgment from service providers or other customers. Customers may feel a sense of discomfort or unease when considering opting out of tipping, especially when the tipping screen is prominently displayed and visible to others. This dilemma highlights the complex interplay between personal autonomy, social expectations, and technological influences in the context of tipping culture.
- The coercive aspect of technology-enabled tipping refers to how the presence of tipping prompts on scr ...
Counterarguments
- Tipping prompts can be seen as a way to support service workers, especially in industries where wages are traditionally low and tips make up a significant portion of income.
- Some customers may appreciate the reminder to tip, as it can be easy to forget or overlook tipping in certain service contexts.
- The feeling of lost control over financial decisions could be argued as a personal issue rather than a systemic one, with individuals having the agency to choose whether or not to tip regardless of prompts.
- The presence of tipping prompts does not necessarily coerce customers into tipping; it simply provides the option to do so, maintaining the customer's freedom to choose.
- The anxiety and guilt associated with tipping could be attributed to broader societal issues regarding money and generosity, rather than the tipping prompts themselves.
- The visibility of the tipping screen to workers and others could be seen as a transparency feature, ensuring that the tipping process is open and honest.
- The argument that technology-enabled tipping creates a coercive environment may overlook the potential benefits of convenience and efficiency that such systems offer both customers and businesses.
- The psycho ...
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The economic considerations and incentives around tipping for businesses and workers
Castleman and Tavernise examine the deeply rooted tipping culture in the service industry, its economic impacts on businesses and workers, and the risks associated with this tipping-centric wage model.
Tips as a way for businesses to shift labor costs onto customers
Tipping allows businesses to shift some of the burden of paying workers from their own revenue directly onto the customers. Castleman explains that businesses can offer lower base wages by relying on customers to make up a significant portion of worker compensation through tips. This system allows businesses to price their goods and services lower, attracting customers with the base price while maximizing revenue from those who are willing to pay more via tips.
Businesses can offer lower base wages and rely on tips to make up a significant portion of worker compensation.
Castleman notes sarcastically, "Great, I don't need to pay my workers. It's all tips now. Workers happy about that, right?" Highlighting the sarcasm, he points out how tipping leads businesses to offload the responsibility of paying their workers adequately onto the customers.
This allows businesses to price their goods/services lower while still attracting workers and maximizing revenue from customers willing to pay more via tips.
Service workers often acknowledge that they are paid lower wages and rely on customers' tips to make up the difference, with tips comprising 50-60% of their paycheck. This system enables businesses to attract cost-conscious consumers with lower prices while still potentially earning more from customers who leave generous tips.
The risks of workers becoming overly dependent on tips for their earnings
Castleman highlights the risks for workers who become heavily reliant on tips, which can lead to wage inequality and financial instability especially if economic conditions change.
Tips can exacerbate pay disparities between different types of workers, such as servers and cooks.
Tipped positions often lead to pay disparities within the restaurant industry. Tavernise points out that individuals trained as cooks sometimes choose to become waitstaff instead because tipped positions offer the chance to earn more money.
Tips may expose workers to greater vulnerability, expl ...
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The economic considerations and incentives around tipping for businesses and workers
Additional Materials
Counterarguments
- Tipping can incentivize better service, as workers know their compensation is directly linked to customer satisfaction.
- Some workers prefer tipping because it can lead to higher overall earnings compared to a fixed wage, especially in high-end establishments.
- Tipping culture can be seen as a way for customers to directly reward service staff for their work, creating a more personal connection between service and reward.
- Eliminating tipping in favor of higher base wages could lead to higher prices for consumers, potentially reducing business and affecting the overall economy of the service industry.
- Tips are often shared among staff, which can help mitigate pay disparities by pooling tips and distributing them among workers, including those who do not directly receive tips from customers.
- Tipping is not the sole factor leading to exploitation or harassment; these issues can occur in many work environments and should be addressed through better management and legal protections, not necessarily by changing the tipping system.
- Some argue that tipping is a voluntary gesture and that customers should not be seen as responsible for a worker's wages; rather, it's a bonus for good service on top of a fair base wage that employers should guarantee.
- In some regions or cultures, tipping is not customary, and ...
Actionables
- You can support service workers by tipping generously, especially during economic downturns, to help mitigate their financial instability.
- When you dine out or use services where tipping is customary, consider the economic climate and the potential impact on the workers' income. If you're aware of a downturn, adding a bit more to your usual tip can make a significant difference for someone relying on that income. For example, if you typically tip 15%, consider 20% or more during tough economic times.
- Encourage fair wage practices by patronizing businesses that pay their workers a living wage instead of relying on tips.
- Research local businesses and support those that advertise fair wages for their employees. This can help shift the industry standard away from tipping reliance. For instance, if you find a coffee shop that pays baristas a full wage without tips, choose to frequent that establishment and let others know about your choice.
- Educate yourself on the effects of tipping on pay disparities and ad ...
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Policy proposals related to tipping, such as tax exemptions
Former President Trump and Vice President Kamala Harris have both floated the idea of not taxing tips to aid service industry workers.
The proposals to exempt tips from federal income tax
Castleman discusses recent political proposals which aim to exempt tips from federal income tax as a means of supporting service workers. He reports that President Trump announced a "big new no taxes on TIPS proposal" several weeks ago, with Vice President Harris later endorsing a similar proposal. Despite the intentions, economists generally view these proposals as problematic, predicting that it would further incentivize businesses and workers to shift more compensation to tips, thereby entrenching the tipping system even more deeply into the fabric of service industry compensation.
Castleman points out that workers typically do not differentiate between a higher wage versus a lower wage supplemented by tips, unless part of that income is untaxed. An exemption would make untaxed tips much more appealing. "As a worker, right, we said before, like you don't care whether you make, you know, $25 an hour or $20 plus $5 an hour in TIPS. Well, except that if some of that money isn't taxed, you want more of that, right? You want more TIPS," he explains. Thus, there's a potential trend where "you're going to see more businesses looking for ways to have their workers count as TIP."
The potential unintended consequences of tipping-related policies
The potential unintended consequences of such policies are concerni ...
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Policy proposals related to tipping, such as tax exemptions
Additional Materials
Counterarguments
- The proposal could increase the take-home pay of service workers, which might be particularly beneficial for those in lower-income brackets.
- Taxing tips can be seen as taxing voluntary gifts, which some argue should not be subject to taxation in the first place.
- The current system may underreport tips, leading to tax evasion; a tax exemption could reduce this and make income reporting more accurate.
- The policy could simplify tax filing for service workers, who often face complexities in reporting tip income.
- Exempting tips from taxes might attract more people to the service industry, potentially reducing unemployment.
- The proposal could be seen as a recognition of the unique nature of tipped work and the effort that service workers put into earning their tips.
- The reliance on tips could incent ...
Actionables
- You can support service industry workers by tipping generously, especially during economic downturns, to help mitigate their vulnerability to fluctuations in customer spending.
- Since service workers might increasingly rely on tips, your consistent tipping can provide a more stable income stream for them. For example, if you frequent a coffee shop, consistently tipping your barista can help ensure they have a more predictable income.
- Consider advocating for fair wage policies by writing to your local representatives, emphasizing the need for balanced compensation for all workers.
- By expressing your concerns about potential unfairness between tipped and non-tipped workers, you can contribute to the dialogue on wage policies. For instance, draft a letter outlining the potential market distortions and send it to your city councilor or congressperson.
- Educate yourself on the financial implications of tipping versus stabl ...
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1-Page Summary- The explosion of tipping culture in the U.S. in recent years, including its spread to new industries
- Customers' psychological and emotional responses to ubiquitous tipping prompts
- The economic considerations and incentives around tipping for businesses and workers
- Policy proposals related to tipping, such as tax exemptions
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