00:00
I'm purchasing an office chair online and they're asking me if
00:04
I want to leave a tip,
00:06
25 2018% tip for what tipping culture has
00:11
gone way too far.
00:14
Nowadays,
00:14
you're asked for a tip nearly everywhere.
00:17
Are we tipping at drivers?
00:19
15 20% on a sweatshirt purchase.
00:23
If you're frustrated,
00:24
you're not alone a survey by bankrate.
00:26
Found that a third of people are annoyed by those pre entered tip screens and think tipping
00:31
culture has gotten out of control.
00:33
Businesses in cities have tried to move away from tipping,
00:36
but I don't see any kind of a future where tipping completely goes
00:41
away.
00:42
That's Mike Lynn,
00:43
a Cornell psychologist who studies consumer behavior.
00:46
I've done more research on tipping than anybody else and he'll help us explain why the US
00:51
became so dependent on tipping.
00:53
Why it seems to be everywhere now and why we're probably not getting rid of it.
00:59
Tipping really became popular after the civil war.
01:02
When formerly enslaved black Americans went into service positions like waiters and railroad
01:06
porters and the railroad industry deliberately paid them low wages on account of their
01:11
ability to work for tips.
01:13
And arguably it was this influx of service workers who were receiving low
01:18
wages that contributed to the growth of tipping by the early 19 hundreds.
01:23
As minimum wages were being established,
01:25
tipped workers were initially excluded until 1966.
01:29
When tipped workers were given their own minimum wage,
01:32
it was raised to $2.13 in 1991 where it stayed ever
01:37
since.
01:38
Consumers in this country are aware that servers make a substandard minimum
01:42
wage and that,
01:44
that contributes to their willingness and desire to tip them.
01:48
Some states require employers to pay just that tipped minimum wage to workers where some
01:53
states like California and Minnesota require them to pay workers the full minimum wage
01:58
and then tips are added on to that.
02:00
And those minimum wages affect how people tip.
02:03
I was able to get data from uh credit card payment system
02:08
providers uh on charge sales and charge tips in restaurants
02:13
across states.
02:14
And what I find is the smaller the wages,
02:17
servers are paid the higher the percentage tip.
02:20
In other words,
02:21
he found that people know their tips are how workers get paid.
02:24
So they tip more when they know workers are being paid less.
02:28
In that same bank rate survey,
02:30
41% of people said businesses should pay their employees better rather than relying so
02:35
much on tips.
02:36
But in practice,
02:37
people don't like that.
02:39
I've done the research where I give people hypothetical menus,
02:42
one where they have regular prices.
02:46
And at the bottom,
02:47
it says a customary tip of 15 to 20% is appreciated.
02:50
One where they say tipping is not allowed,
02:53
you can't tip but their menu prices are 15% higher.
02:57
He then asked people how expensive they thought the restaurant was.
03:01
People overwhelmingly thought the menu with the 15% higher prices was more
03:05
expensive than a menu where they would tip 15% or more.
03:09
Anyway,
03:10
other menus that stated in 18 or 15% gratuity would be automatically added were
03:15
also viewed as more expensive.
03:16
We're not rational,
03:18
we're cognitive misers.
03:19
We don't like to add all of the factors together and make logical
03:23
rational comparisons.
03:25
We do quick and dirty heuristics.
03:28
It's called price partitioning.
03:30
You see it with hotel listings or concert tickets with all kinds of fees tacked on at the
03:35
end.
03:35
Partitioning prices often makes things seem less expensive than if you were
03:40
to build all of the cost and be upfront in one big price,
03:45
which is one of the reasons you're seeing tipping just about everywhere.
03:48
Now,
03:49
post COVID,
03:50
we've experienced inflation and full employment
03:55
and service establishments have to compete for
03:59
employees which means paying them more,
04:02
but paying them more requires them to raise prices and customers are already facing
04:06
inflation.
04:07
And and so what's a business to do?
04:11
And I think that tipping is a way to address that problem,
04:15
a good faith effort on the part of,
04:17
of businesses to say I need to pay my employees more,
04:21
but I don't want to raise my prices too much on you guys.
04:24
So,
04:25
are people really tipping 20% for self-service or counter service?
04:29
According to that bank rate study,
04:31
the vast majority of people are still always tipping servers or wait staff at a sit down
04:36
restaurant from what we've learned from Dr Lin studies.
04:38
Probably in part because they know those workers depend on tip.
04:42
But when getting coffee,
04:43
not as many,
04:44
when picking up,
04:45
take out even fewer.
04:47
So just because someone's asking for a tip doesn't mean it's customary doesn't mean everyone else
04:52
is giving the new technology kind of hides from us.
04:56
What the actual behavioral norms are tipping was seen as
05:01
un-american even in the 18 hundreds,
05:03
in the 19 hundreds.
05:04
Polls showed Americans wanting to get rid of tipping today.
05:08
Two thirds of Americans have a negative view of tipping,
05:11
but it's so ingrained into American price models and policies that tipping is
05:16
probably here to stay.
05:17
But where and how much you tip is still up to you.