Have we reached the end of tipping? Are we approaching a point where it is no longer the model that supports the worker’s wage?
I support people in the service industry who rely on the gratuity from patrons to make a decent living wage. Most work hard. They are difficult jobs with challenging personalities. Their efforts to add value to your service experience deserve acknowledgment, and in most cases that comes in the form of a tip for service.
Years ago, if someone left a tip it was a couple of bucks that went into the worker’s pocket and supplemented a minimum wage paycheck. Revenue Canada often was happy to see a token of the amount from some professions claimed and it worked for everyone. The 5-10% tip was common.
Boy has that model changed. Today most tipping is electronic and managed by the establishments offering the service. Employees have no idea what the tip total is until they receive their payout. In speaking with friends who rely on tips it is common for employers to “hold back” a percentage of the tips.
Customer-facing staff would traditionally share their tips with behind-the-counter workers, like the chefs and other kitchen and support staff. This was an opportunity to address the ways they could work together to ensure the tip pool was larger by not serving cold food or forgetting things. Now management does that electronically and if someone is impeding the ability to provide good service, they still get their cut of the tips.
The worker is not getting the full tip. They rely on the integrity of their employer to ensure their payout is accurate. It is all tracked, and Revenue Canada is on top of it collecting their cut. The employer gets to keep subsidizing low wages with gratuities and the worker has little control over it.
Some employers, mostly former service workers, recognize the issue and have produced good schemes to help bolster the pay for their staff. Unfortunately, from what I am hearing, that is the exception and not the rule in the industry. Especially with chains and large corporate establishments that own multiple service industry businesses and factor in a tip line item on store revenue.
Here is the problem. The customer is not happy. Recent surveys show that people feel tipping has spread into areas where it does not belong. It also stated that mandatory tipping and suggested amounts are too high. A problem further compounded by inflationary pricing.
The customer is at the heart of the tipping philosophy. In Canada, we do it out of obligation because as Canadians we “feel bad” not tipping. (then we bitch about it in the car later) That is not the way in the rest of the world. “Tipflation” is now a thing. Tip inflation is increasing past amounts from 5%–15% in pre-pandemic numbers and now 15%–25% in post-pandemic. Add to that the prices on the menu and checks, that the tips are based on have undergone significant increases in recent years.
Workers are feeling it. When you hear that there is a worker shortage in the service industry some of the issue is that tipping is dying. Think about your local coffee shop. When we used cash, you always left the change. The need for speed has given us “the tap” which is preclusive to tipping. Employers skimming off the top really cuts into the “extra” that used to come to an employee working in the service sector.
This also impacts the growing demand for a raise in the minimum wage. Most service jobs were 60-70% salary and the rest in tips. That would account for the living wage. The salary is now up to 90%. Wages have not followed. That means less income for the worker. It also means less ability to pay for the customers.
I read an article recently in another publication that 80% of people now bypass the tip on at least one purchase a week. The number one reason is the transaction did not warrant tipping. This is the other problem emerging. Businesses that have no real reason to put a tip option on electronic payments are using it to generate more money. The movie theatre is one example. Adding ten percent tips to the inflated price of a movie soda and popcorn is a tough pill to swallow.
The pandemic was a takeout boom. Customers kept tipping at good levels to thank workers for being there during that time. Takeout tips are lower. There was a pandemic premium of sorts. That is gone. Now employers are having trouble attracting people to the service sector jobs where tipping supplements wages. Workers are opting for jobs that rely on salary.
In Japan, tipping is considered rude. Canada has a 15% tip mentality. The US is 20%. In Europe you get a 10% tip added without question. Otherwise, 10-15% is the expectation. In Scandinavian countries, tips are persona non grata. Rounding up is ok. Tipping is not.
Electronic tipping has increased the frequency of tipping. Twenty-two percent higher actually. Starbucks employees were looking into formal labor organization. As a concession, their employer agreed to set up a system where your debit or credit card purchases can automatically add a tip as a patron.
Behind-the-scenes in the service industry big corporations are raking in the profits and can afford to pay their employees properly. Smaller businesses not so much. The basis for tipping is a reward for good customer service. Now the industry has stated a 10% tip is an indication you did not like your service as opposed to not leaving a tip. That is twisted. Self-checkout machines at US airports now prompt for tips, I guess you are tipping yourself.
Unless food price inflation is under control, and people know the tip is going to the service provider, the 21% decrease in leaving a gratuity is going to continue. Frequency is up but the overall volume of tipping is down because of the expanded request for tips in no traditional places.
Wages simply are not pacing inflation. Should that be the benchmark? I say if corporate profits are at breaking new records so should wages. That is true for executive-level employees but not workers. The UAW asked for and won double-digit wage increases from the big three automakers. Sounds crazy until you hear that the executives of those companies have had a 62% increase in addition to more stock.
So, do you think tipping is out of control?
by Ryan Myson