Is Our Tipping System Gratuitous?

The way we tip and pay servers in North American restaurants fosters unfair and unequal paychecks for the whole staff. But it's so entrenched -- how can we fix it? Learn more in this episode of BrainStuff.

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Episode Transcript

Speaker 1 (00:02):
Welcome to brain Stuff from how Stuff Works, Hey, brain Stuff,
Lauren Vogel bomb here. Why do restaurants use tipping? Is
it a reward for good service? Studies show that tips
don't go up or down significantly based on the quality
of service. Does tipping attract and retain better wait staff? Not? Really?
Is it a bribe so the waiter won't spit in

(00:23):
your soup the next time you come? Probably depends on
the waiter. In most countries, a service charge is included
in the bill. However, in America, instead of an upfront
service charge, diner's hand over fifteen or more of the
price of the meal to the server at their own discretion.
It's not required, but it is customary. But this seemingly
generous practice has some unpleasant hidden costs for starters. The

(00:46):
existence of tipping allows restaurants to pay servers a federal
minimum wage of two dollars and thirteen cents an hour,
so waiters in most states basically live and die by tips.
The result is that tipped workers are twice is likely
to live in poverty and depend on food stamps as
other workers. Then there's the opposite problem. In stronger restaurant markets,

(01:07):
like big cities, the existence of tipping means that waiters
in busy restaurants end up making a lot more money
than neque cooks and dishwashers, who get paid a fixed
hourly wage while working just as hard. Add to all
that mess the fact that America's tipping system is rooted
in racist hiring practices that emerged after the Emancipation when
white business owners were trying to avoid paying new black employees,

(01:29):
and tipping comes out looking decidedly ugly. So when does
it make sense to abandon tipping in favor of raising
restaurant prices so that all staff is paid fairly or
would customers bulk get that? Sarah Clifton is a mathematics
professor at the University of Illinois who specializes in modeling
complex social behaviors. In a recent paper, she created mathematical

(01:51):
models of two hypothetical competing restaurants, one with conventional tipping
and one without. The paper was published in the February
issue of Chaos, a journal from the American Institute of Physics.
The key variable in Clifton's models is the average tipping rate.
Tipping rates have been creeping up of the past few
decades from ten percent to fift and now close in

(02:14):
major US restaurant markets. Clifton's models are designed to be
as simple as possible, with every player in the system
motivated purely by monetary gain, meaning that when cooks are
paid better, they're more likely to stay, meaning that food
quality goes up. When waiters are paid less, they're more
likely to leave, decreasing service quality, but eventually the waiters
would return if diners flooded the restaurant because of the

(02:36):
food quality, which would presumably mean more profit and higher
wages for all. What Clifton found was that when the
average tipping rate crosses a certain threshold call it the
tipping tipping point, restaurants will make more money by abandoning tipping. Unfortunately,
Clifton doesn't have enough real world data to calculate exactly
what that magic tipping point is. Dozens of end restaurants

(03:00):
across the United States, led by New York chef and
restaurant tour Danny Mayer, began experimenting with no tipping policies.
These trend setting restaurants either increased MANU prices by an
average of twelve to fifteen percent or included gratuity in
the final bill. That way, the restaurants could distribute the
earnings more fairly and pay everyone a fixed hourly wage,

(03:21):
but this plan was not popular with the public. Michael Lynn,
a professor of consumer behavior at the Cornell University School
of Hotel Administration who researches tipping, reported that online customer
reviews of no tipping restaurants went south when those no
tipping policies were instituted, and we're worse when tips were
replaced with service charges. Lynn said, people hate service charges,

(03:43):
and if I increase my menu prices, They're going to
think I'm more expensive, even if the combined bill is
no different. In other no tipping restaurants, it was the
waiters who revolted. At Bar Agricole in San Francisco, servers
were used to making twenty five dollars to forty dollars
an hour, including tips, while the hitchen staff was only
making thirteen to twenty dollars an hour. When owner Thad

(04:04):
Woggler decided to ditch tipping, his cooks and dishwashers were psyched,
but the serving staff kept leaving for more traditional restaurants,
so Waggler like lots of other pioneering restaurant owners switched
back to the normal tipping scheme. Clifton, our mathematician, feels
that these restaurateurs were simply ahead of their time. She said,
when restaurant owners get rid of tipping too early, as

(04:26):
we've been seeing with some really nice restaurants, they sometimes
have to reinstate it because it's not profitable that would
conform with what customers want. Her model indicates that casual
restaurants should actually make the move before fancy ones, because
the point at which the tipping rate becomes profitable would
be lower for them than in the high end places. However,
Joe's Crabshack, a decidedly not high end chain, tested the

(04:49):
waters in late when eighteen of its restaurants abandoned tipping.
Although customers were essentially paying the same exact total for
a meal as they were when tipping was allowed, said
they didn't like the no tipping policy. According to restaurant research,
customers said they didn't trust management to share the money,
and they felt it took away incentive for good service.

(05:09):
Joe's dropped the no tipping policy less than a year
after it started, after losing eight of its customers. During
the trial, so Americans themselves haven't reached the tipping tipping
point yet. In the meantime, restaurants will likely keep experimenting
with various tipping policies until they find one that keeps customers, waiters,
and kitchen staff all equally happy. Today's episode was written

(05:35):
by Dave Ruse and produced by Tyler Clang. For more
about the history and science of tipping, check out our
episode on the topic over on my other podcast, food Stuff,
And of course, for more on this and other depressing
but important topics, visit our home planet, how stuff works
dot com.