Beyond good, bad, and mediocre service, how much we tip and why we tip is rich with psychological implications. Find out what tipping reveals about us as consumers and our need for affirmation and societal status.
Shedding light on the complexities behind tipping is nationally recognized expert Michael Lynn, Ph.D. , Professor of Services Marketing at Cornell University’s School of Hotel Administration. A former bartender, busboy, and waiter, Michael Lynn, has also devoted his academic career to the nuances and impact of rewarding and incentivizing good service, a hallmark of hospitality experiences.
Michael Lynn has written over 80 research publications on tipping and has been covered by the New York Times, the Wall Street Journal, the International Herald Tribune, the Economist, and Forbes as well as by ABC’s 20/20, BET’s Nightly News, and NPR.
The “Distinguished” podcast is produced by Boston University School of Hospitality Administration.
Host: Arun Upneja, Dean
Producer: Mara Littman, Executive Director of Strategic Operations and Corporate Relations
Research and Content Creation: Lan Lu
Marketing: Anne Dawson
Editing: Isabella Laikin and James Leon
Music: “Airport Lounge" Kevin MacLeod (incompetech.com)
Licensed under Creative Commons: By Attribution 4.0 License
http://creativecommons.org/licenses/by/4.0
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Episode Transcript
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SPEAKER_00 (00:03):
Welcome to the Distinguished Podcast.
Today we are diving into aritual that closes every
restaurant bill but opens aworld of economic and
psychological intrigue tipping.
I'm Arunapneja, Dean of the BUSchool of Hospitality
Administration, and with me is avirtuoso of the dipping world,
Dr.
Mike Lynn from CornellUniversity School of Hotel
(00:26):
Administration.
He's not only a top-tierprofessor and researcher, but
also a former bartender andwaiter who has transformed his
ground level insights into morethan 80 pivotal research
publications.
Michael, it's a pleasure to haveyou with us to unravel the
complexities of tipping, apractice so routine yet so
(00:47):
deeply ingrained in the fabricof our culture.
Welcome.
SPEAKER_01 (00:51):
Well, thank you.
SPEAKER_00 (00:51):
I'm happy to be here.
Thank you for inviting me.
So before I start, I do want tosay that, and I know we
discussed this in the past aswell, but you were on the
faculty at the University ofHouston in marketing, and I was
a lowly PhD student, hanging outwith all other PhD students, and
it was very exciting for me tosee a social psychologist in the
(01:15):
marketing department doingresearch on tipping.
And I was just so excited whenyou were moving to Cornell Hotel
School, came up and I saidhello, and I had a conversation
with you.
So I'm happy to renew myacquaintance after so many
years.
SPEAKER_01 (01:31):
Well, um my pleasure to renew the relationship as
well.
SPEAKER_00 (01:37):
So let's set the stage for today's discussion.
Tipping, is it merely a socialobligation, a reward for good
service, or something more?
So, Michael, we're gonna startwith your beginnings of your
journey in the heart of theservice industry.
How did your early experiencesshape your research interest,
particularly in tipping?
SPEAKER_01 (01:56):
Well, let me begin by saying I started uh working
for tips as my the summer of myfreshman year in college.
My father had been audited bythe IRS and ended up owing them
a lot of money.
Uh and he told me, look, I hadplanned on paying for your
(02:18):
entire college thing, and I'llstill make you know the bulk of
the contributions, but I needyou to help me out because I got
this big hit.
Uh, you need to get a job andhelp support your way through
school.
So uh what I quickly learned wasthat tipped work paid better
(02:38):
than anything else I wasqualified to do.
And that summer uh of myfreshman year, I got a job at
Pizza Hut.
I was a cook during the day anda waiter at night.
When I went back to Austin,Texas, where I was doing my
undergraduate, uh I managed toget a job as a busboy at La Tour
(03:02):
restaurant, top of the WingateBuilding, super fancy French
restaurant.
And there I worked my way up touh back waiter.
After about a year, maybe a yearand a half, that restaurant
closed.
I moved to the headliners clubwhere I was a reserver, and and
from there I also became abartender.
(03:22):
So I've worked at bothdownscale, mid-scale, and very
upscale restaurants for tips.
And and obviously, when yourliving depends on tips, you care
about it.
But I didn't actually think ofit as a research topic until I
started grad school.
Um, when I went to Columbus,Ohio for my first year of grad
(03:45):
school, I showed up early andgot a job as a bartender.
Uh once school started, Istarted a research assistantship
that technically precluded mefrom holding another job.
Um, but I wasn't going to get myfirst paycheck from the research
assistantship for another month.
So I asked my advisor, BibLatina, if I could keep the job
(04:06):
just for that month so I'd havesomething to live on.
Um, and he said, yes, as long asI used that setting for
research.
I thought about ways to doresearch in that context.
And that's what got me startedthinking about tipping as a
research topic.
I mean, I was interested in itas a source of income for years
(04:29):
before that, but as a researchtopic, I didn't even think of it
until he kind of forced me intoit.
Uh and I basically uh havecontinued doing research on that
ever since.
SPEAKER_00 (04:42):
That's fascinating.
You know, the other thing, um,those good old days, the tips
were all cash.
And I know that um that'sprobably too old, so IRS cannot
come back to you on that.
But you know, those cash tipsmostly were not reported,
whereas now the tips are all oncredit card and they get
reported as income.
SPEAKER_01 (05:02):
And uh, you want me to comment now?
SPEAKER_00 (05:05):
You don't have to.
Um okay.
So let's move, let's go into thedive into.
Um you outlined several motivesbehind why people tip.
Can you explain some of themotivations behind this
reciprocal relationship?
SPEAKER_01 (05:22):
You you've already mentioned that people tip to
reward good service.
Uh that's the most commonlyexpressed motivation or reason
for tipping.
If you ask people why do youtip, that's the most common
answer.
But in restaurant settings, wefind that tips correlate with
customers' ratings of serviceonly about 0.2.
(05:45):
That means 4% of the differencesin tips left by different dining
parties, 4% can be explained bytheir ratings of service.
Clearly, it is not primarilydriven by a desire to reward
good service.
Uh the least commonly endorsedmotivation for tipping is to buy
(06:07):
social approval.
And yet the data I look at tellme that's the most important
reason for tipping.
Why do I say that?
70% of the variance in tippingdifferences in tipping left by
different dining parties in arestaurant can be explained by
bill size.
(06:27):
And that's because of the 15 to20% tipping norm.
Uh bill size defines what thesocial expectations of the tip
would be, and people tend tocomply with that.
The next biggest set of factorsthat influence tipping have to
do with the social connectionthat the server makes with the
customer.
If the server introduces him orherself by name, if they call
(06:51):
the customer by his or her name,if they smile at the customer,
if they squat down next to thetable so they make good eye
contact with the customer, allof these are things that
increase social connection andthey have a pretty substantial
impact on tipping.
Given, and and why does thatmatter?
When you make a socialconnection, people care about
(07:12):
what you think of them.
So given that socialexpectations are the biggest
predictor of tipping, countingfor twice as much as everything
else combined, and that theextent to which you care about
the server's opinion of youbecause you have a connection
with them, that's the nextbiggest factor.
That tells me that mostlyrestaurant tipping is a matter
(07:35):
of buying social approval or atleast avoiding disapproval.
I mean, there are othermotivations.
I don't know how much you wantme to keep going on this.
SPEAKER_00 (07:45):
Well, I'm I mean, I think social approval, you said
70% of the variance is by billsize.
So can you expand on that alittle bit?
SPEAKER_01 (07:54):
The larger their bill sizes, the larger the
dollar tip, right?
And we can look at differentdining parties in a restaurant,
they're gonna leave differentdollar and cent tip amounts.
I can reduce the differences,the variability, by 70% if I
(08:14):
control for bill size.
But that means that everythingelse combined explains the other
30%, right?
Bill size is twice as powerfulas everything else combined in
determining the dollar and centtip amounts that different
dining parties leave.
SPEAKER_00 (08:36):
So so let's then uh so if 70% of the variance is
defined by the bill size, thenthat only leaves the 30%.
And even in that 30%, you'resaying a majority of that is
made by social connection.
So by the server, what kind ofconnection he or she is able to
establish with the customer.
(08:56):
And then and then you also said4% is by the service.
So if a server connects wellwith their guests, even if the
service is not very good,they're gonna get good tips.
Yes.
That's right.
Okay, so then um let's move touh tipping percentage.
(09:18):
Now, as you've noted, that thetip percentages have been
increasing over time.
It started, you know, at somepoint 10% to now 20%.
And in many instances, peoplehave now started using the term
20 to 25% of tip.
And there is more complexity tothis in particularly recent
innovations, which is thatrestaurants have started adding
(09:40):
um, you know, I think the mostcommon I've seen 3% kitchen
appreciation fee.
That's the amount that goesstraight into the kitchen.
So, but no one is backing downfrom this 20 to 25 percent.
So are we now in a 23 to 28% tiprange?
SPEAKER_01 (10:00):
Well, the non-menu price cost of dining has gone up
to 23%, but I'm gonna argue thata 3% kitchen fee is not
voluntary and is not a tip.
So um, but yeah, I mean, andguess what?
(10:21):
People are asking for evenlarger and larger amounts.
It's they're not just asking for20% nowadays, often they start
at 15 and go up to 30.
I've even seen on Redditpictures of receipts that have
tippet that that start with a20% tip suggestion, go up to 50,
(10:42):
and then had a 99% tipsuggestion from one bar.
SPEAKER_00 (10:46):
So do you see any trend or any any anything to say
that this would go this trendwould back down, or is it only
one way straight up?
SPEAKER_01 (10:56):
Wow, that's a great question.
And and I guess I want to answerfirst by saying I can't predict
the future any better than otherpeople can.
Okay, so the short answer is Idon't know.
But there are reasons to believethat the trend will continue.
(11:17):
This it's it's a long-standingtrend, right?
We used to tip 15%.
Today the average tip is about20%.
Uh, might it go up?
Certainly.
Why does that occur?
We don't know for sure, but itprobably has to do with the fact
that tipping is buyingpositional goods.
(11:37):
Some people tip to get status,other people tip to get really
good service.
Both status and really goodservice are defined relative to
the average, right?
Uh, to get really good service,I'm gonna have to give an
above-average tip.
To get the esteem and status, Ihave to give an above-average
(12:00):
tip.
But when I do that, and otherpeople like me with similar
motivations give above averagetips, we start to get attention
and service and and liking tothe detriment of other customers
who then feel like they have totip more to avoid loss.
(12:21):
And once that happens, the wholemore average goes higher.
Then I, looking for status, haveto tip even more.
Right?
And so it's that some of whatwe're trying to buy with tip
depends upon giving anabove-average tip, exerts this
continuous pressure for tipamounts to go up, up, up.
(12:45):
That process has operated in thepast, and I believe is gonna
continue to operate.
Having said that, there's got tobe a ceiling somewhere, right?
I just don't know what thatceiling is or when we're gonna
reach it.
SPEAKER_00 (13:01):
And Mike, you know what is um what is interesting
about this process is uh, and Iknow you talk about uh somewhere
in your papers as well, is thattipping is given, the tips are
given at the end of the service.
So during the service, theserver does not know how much
you're gonna tip unless you area regular customer.
Right.
SPEAKER_01 (13:20):
But presumably they think that if they give good
service, you'll get a good tip.
And if you they give you badservice, you'll leave them a bad
tip.
So presumably, tipping providesan incentive, even if people
don't know what you're gonnagive.
SPEAKER_00 (13:39):
Aaron Powell But at the end of the day, at the
beginning, you said the serviceonly accounts for 4%.
So I'm sure savvy servers havehave already noticed by
experience, not by research, butby experience, that you know
they can do whatever they want,they're gonna keep getting that
you know, 20% coming in most ofthe time.
SPEAKER_01 (13:58):
Yeah, that's a really interesting.
And I tended to assume the samething until I actually asked
servers, how big an effect doyou think your service has on
tipping?
And what I discovered is thatroughly half of consumers think
it has a moderate to largeeffect.
So half of consumers, or I meanhalf of servers, accurately say,
(14:22):
yeah, it doesn't really havemuch of an effect.
But half of them erroneouslybelieve that it has a bigger
effect than it really does.
And I've often been, you know,curious as to why that is.
It I don't have anyresearch-based answers, but I
would speculate that it has todo with one, people are just
(14:44):
buying into kind of thetraditional idea tip's a reward
for service, so it must have aneffect.
And secondly, I think serversare motivated to believe it has
an effect.
Because if one keeps the iftipping's not related to service
levels, it becomes more charity.
And nobody wants to thinkthey're making their living
(15:05):
relying on charity.
And it also means that servershave more control and people
like that feeling of control.
So so it turns out, even thoughtips aren't strongly related to
service, at least half ofservers think it is.
And so it still has an incentivevalue for them.
(15:26):
And uh I think that the reasonthey believe there's a strong
relationship is that they'remotivated to have that belief.
SPEAKER_00 (15:33):
That's that's so interesting.
You know, this charityexplanation is excellent
because, like you said, no onewants to have charity, so they
have to believe that whatthey're doing is causing the
tips.
But I'm curious uh if you'vedone similar work or come across
similar work on the customerside.
I know that your research shows70% social approval and social
(15:54):
connections, but what doconsumers believe is accounting
for the variation in theirtipping percentage?
SPEAKER_01 (16:02):
Consumers believe that they're tipping to reward
service first and foremost.
They also believe they'retipping to buy future service,
and they believe they're tippingto help servers make a living,
right?
Most servers in this countrymake a substandard minimum wage.
Consumers, for the most part,are aware of that.
(16:25):
They may not know exactly whatthe hourly, the tipped hourly
wage is, but they know it's lessthan the standard.
And those people who are awareof that report having stronger
altruistic motivations fortipping and in fact tip more.
SPEAKER_00 (16:42):
So Right.
So, you know, um, and I've andI've, you know, a lot of people
have growing up, you know, haveweighted have weighted tables or
going through college to paytheir expenses.
So to some extent, and I'vespoken to many young people who
were young adults who are intheir working lives who express
that sympathy, say, oh, thisperson is probably going through
(17:03):
college, and you know, I need toum tip to make sure that they
have um a good, make it make adecent living and they're able
to pay for the living expenses.
I have also spoken to manyrestaurant owners who say that
many of the servers are making60, 70, and in some cases even
in six figures, just waitingtables.
(17:24):
So um when you talked about thesubstandard wage, that's the you
know lower than the minimum wagethat is federally allowed, and
in some states it's allowed.
But waiters are servers aremaking, you know, in many cases,
substantially more than theminimum wage.
SPEAKER_01 (17:41):
Oh, absolutely.
When you had asked me earlierabout my history with tipping, I
told you I took tipped workbecause it paid more than any
other job I was qualified to doat the time.
In fact, I remember making moreper hour than my manager did.
I mean, I was only part-time, somy total income was less than
(18:03):
his, but on an hourly basis, Iwas making a lot more than my
manager.
It made me wonder kind of whypeople would go to school to
become hospitality managers whenthe pay was so little and you
could get an entry-level jobthat paid more.
Um, and by the way, my myexperience is it's just
anecdotal, but I helped the NewYork City Hospitality Alliance
(18:27):
do a compensation survey in NewYork City a few years ago.
Servers were making with tipsroughly a$30 an hour.
Cooks and hostesses were makingroughly$12 to$15 an hour.
Why?
I mean, clearly tipping pays apremium above and beyond what
(18:50):
people could otherwise get inmany cases.
SPEAKER_00 (18:53):
Um yeah, I think you know, the other um aspect I'm
very curious about is, and Ispoke to a restaurant from
Chicago, and one of uh one ofthe things, the reason why um,
you know, the the restaurantowners want the waiters to make
(19:14):
more tips is because they kindof instinctively know that the
tip size is related to, like yousaid, is related to the total
bill size.
And waiters know that too, therestaurant owners know that too.
And so they so the the waitersupsell and you know increase the
bill size, which impacts, whichhelp which is helpful to the
(19:35):
restaurant owners, which helpsthe waiters make more as well.
Um let's move to this um thisexperiment that was done a few
years ago, and and some peoplestill do that, which is
restaurant does include a 20%gratuity and say, we've already
included that, but then there isa backlash from the guests.
(19:57):
So can you talk a little bitabout the pros and cons of
preemptively adding the servicesearch?
SPEAKER_01 (20:03):
Um first off, if a restaurant uh pays a higher
minimum wage or eliminatestipping, they've got to pay
higher wages.
They don't make enough profit toeat those extra costs.
They'll have to be passed on tothe consumer either as service
(20:25):
charges or higher menu prices.
Service charges are universallyhated in this country.
Restaurants that replace tippingwith service charges, their
online ratings go down.
And that's true regardless ofthe price tier of the
restaurant.
Upscale, mid-scale, downscalerestaurants, you institute a
(20:49):
service charge, your customersare going to be angry.
And it's fairly straightforwardwhy that occurs.
A service charge is a mandatorytip, and people in this country
don't like to be told that theyhave to do something, especially
when everywhere else it'svoluntary.
The other option is to replacetipping with higher menu prices.
(21:11):
Uh, and although conceptuallypeople are okay with that, the
fact is that causes stickershock, and people start to think
the restaurant is too expensive.
You might think they would takeinto account, yeah, the menu
prices are higher, but I don'thave to tip.
In fact, research tells usthat's not the case.
(21:34):
People tend to minimize tippingas part of the restaurant
expense, and they focus on menuprices.
A restaurant with no tipping and15% higher menu prices will be
perceived as more expensive thana restaurant with the lower menu
prices, but 15 to 20% tipsexpected.
(21:57):
Um, and what we've Find isrestaurants that eliminate
tipping and replace it withhigher menu prices.
Mid to downscale restaurants,their online ratings go down.
Upscale restaurants don't showthat decline.
Presumably because they havewealthier clientele who are less
(22:19):
price sensitive, less affectedby that sticker shock.
SPEAKER_00 (22:23):
Okay, so then I want to move a pivot to the tipping
in general in our society.
And we have seen a proliferationof occasions in which to tip.
And of course, you know, all ofus have seen those memes where
you go to a vending machine andthere is a tip line there.
Okay, how much do you want toare you know go to a
(22:44):
self-service place and thecashier turns the iPad over and
like you said, 15%, 20%, 25%.
So anytime we pay digitally, soyou know, this we earlier we
talked about the cash tipsversus um now it's all being on
the credit cards.
So anytime we pay digitally, theexpectation to add a tip is
(23:07):
presented to the customer, whichincreases the cost of everything
we purchase.
So considering the culturalsignificance of tipping and it's
so ingrained in all of us, um,where do you see the general
landscape of tipping with thisexpectation of tipping
everywhere?
Uh is there at some point goingto be an equilibrium?
(23:30):
I mean, do you feel that thereis a backlash to tipping?
SPEAKER_01 (23:33):
Well, first off, we know from surveys, 70% of
consumers today think thattipping has got out of hand and
they're very unhappy with thepractice.
Does that spell the doom oftipping in the long run?
I doubt it.
Uh, it's very difficult to getrid of tipping.
Um to get rid of tipping inrestaurants, for example, you've
(23:58):
got to either replace it withservice charges, which people
hate, or higher menu prices,which many people dislike.
Um will will it preclude will isthere a limit to the spread of
tipping norms to otheroccupations and and will it
(24:19):
continue to be expected instandard retail places?
Again, it's hard to predict thefuture, but my guess is that it
will not spread.
And at some point, though evenplaces that are currently asking
for it will probably stop.
Let me I let me just pointsomething out to readers.
(24:42):
Today it's very common we we getthese requests for tipping, for
example, restaurant carryout.
Almost every restaurant, if youorder carry out, there's going
to be a line for you to leave atip.
And you may assume, since everyrestaurant is asking, this must
be the new norm.
But there is no God of tipping.
Tipping doesn't come from above,it evolves out of the behavior
(25:07):
of consumers.
So what we really need to knowis are people tipping?
And just because they're askingfor tips doesn't mean people are
giving them.
Surveys tell us that only about40% of consumers routinely leave
a tip for restaurant carry out.
60% of people are not tipping,it's not normative, and you
(25:28):
shouldn't feel that much socialpressure to leave a tip
yourself.
And if that's true of restaurantcarryout, what we know is even
fewer people tip in quickservice or uh convenience store
tipping is even lower than that.
So, yes, you're being asked fortips.
(25:48):
The people who are asking willbe upset if you don't give them
a tip.
But if you fail to tip, you willnot be alone.
In fact, the vast majority ofcustomers don't tip.
So if they're mad at you, it'snot just you, they're mad at
everybody.
And that kind of diminishes thesocial pressure you should feel.
(26:09):
Um, I do think that the currenttechnology is contributing to
people's the boldness with whichpeople are asking, and it's
making it a little bit moreeffective.
We've had counter tipping for along time, but it was in the
form of a tip jar.
The thing is that tip jars, it'seasy to see people put money in
(26:32):
them, and even if you don'tobserve the actual tip itself,
you can see whether the tip jaris full or not.
You know whether other peopleare tipping.
And in these kind of traditionalcounter-service settings, most
people weren't tipping.
Those tip jars, they may havehad some tip in them, but they
weren't full.
And so customers knew, yeah,they'd like a tip, but most
(26:54):
people aren't doing it.
It's no big deal if I don't.
The new tablets hide thatinformation from us, and that
causes us to assume other peoplemust be tipping and we feel more
pressure.
So the technology increasespressure and increases our
tendency to tip.
(27:15):
But that doesn't mean it'scausing the majority of people
to tip.
And in fact, in these newcontexts, the majority of people
still are not tipping.
Tipping norms haven't expandedas much as the press would have
you believe.
SPEAKER_00 (27:29):
Aaron Powell, I think that's a very, very good
point that people listeningshould take home on this issue
that 60% are not tipping forcarry-outs.
That does leave a verysignificant number, 40 percent,
that are tipping for carry-out.
SPEAKER_01 (27:44):
Um So quick service, you said there is not much
tipping happening in um I thinkabout 30% of people say they
will, you know, on asemi-regular basis, tip for
quick service.
Trevor Burrus, Jr. (27:57):
30 percent.
SPEAKER_00 (27:58):
And then convenience store is even less.
Um I think to a to a certainextent, it's these new cafes
where you have to stand in lineto go and order your food, and
then either you pick up orsomeone just delivers it to your
table.
That's where the cashiers turnthe iPad over.
(28:18):
And again, 15%, 20%, 2010.
SPEAKER_01 (28:21):
Even coffee shops and baristas are an example of
what you're just describing.
Even there, less than 50% ofpeople will leave a tip.
Uh so it's not the majority.
SPEAKER_00 (28:33):
Aaron Powell Okay.
I think that's that's a verygood point that people listening
should note.
Okay, so let me ask you um youalso suggested that upscale
restaurants might change thecurrent tipping model.
With tip being a significantpart of the service income, how
might changes in tippingpractices affect the quality of
service?
(28:54):
And what do you think shouldhappen with the with the tipping
models?
SPEAKER_01 (28:59):
Wow.
Um how might elimination oftipping affect service levels?
Look, the research I've donesuggests that servers do provide
personalized service in thehopes of getting better tips,
right?
If I replace tipping withservice charges, they're still
(29:22):
going to be motivated to selland to turn tables quickly
because the larger the bills,the larger the sales they have
at the end of the evening, thelarger the service charges
they'll take home, right?
So service charges and tippingboth motivate sales-oriented
behavior.
But service charges don'tmotivate quality of service and
(29:45):
personalization of service inthe same way that tips do.
If we eliminate tipping, I thinkyou are taking away some of the
motivation servers have toprovide customized personalized
service.
Um can that be made up throughother mechanisms of monitoring
(30:07):
and rewarding?
Of course.
Good service is good in Europeand they don't tip nearly as
much there as they do here,right?
Um, really upscale restaurantscould have managers uh monitor
the behavior of their employees.
And if you want to keep yourjob, you're gonna have to
(30:27):
provide the kind of customized,personalized service that we
expect.
You can hire mystery diners uhand monitor the behavior of your
servers.
And and so I don't thinktipping's the only mechanism for
motivating good service, but itis a mechanism.
What do I think should be donewith tipping?
(30:51):
First off, I guess let me sayone of the problems with tipping
is that it pays so much to frontof house that it creates a pay
disparity that makes cooperationbetween front and back of house
more difficult.
And you would think arestaurateur could simply choose
to pay their back of house more,but to do that, they have to
(31:14):
raise menu prices, which raisesthe base on which customers are
tipping, so tips go up, and infact, tips probably go up more
than the front back of house'spay went up, and you're
increasing, not reducing, thepay disparity.
I think the easiest solution tothis is to let back of house
(31:39):
share in tip pools and torequire servers to share part of
their tips more broadly.
Under current federal law, ifyou don't take a tip credit, you
can do that.
If you do take a tip credit, youcan't.
You can only require servers toshare tips with other
traditionally tipped workerslike bartenders or bus boys.
(32:03):
So I think that we should.
That's only going to boost theiralready high incomes, but then
what you do is you make themshare their tips more broadly
with other people in therestaurant.
(32:24):
And I think, by the way, that'sfair because those other people
are influencing the diningexperience and ultimately the
tipping behavior of customers.
I did a study with a restaurantmagician in New York City and
found that when he performed amagic trick at a table, not only
did he get a tip, but the serverwho waited on that table got a
(32:48):
bigger tip also.
Even though the server hadnothing to do with that magic
performance, right?
It's tips depend upon theoverall experience.
And other people, people otherthan the server are contributing
to that experience.
Why shouldn't they?
It only seems fair that theyshare in some of the financial
(33:12):
benefit of doing that.
So I would eliminate the tipcredit.
It will require uh higherprices, um and at least
initially, right?
Uh, but then I would also use itas an opportunity to share the
tips more broadly, which shoulddecrease future pressure to keep
(33:36):
raising prices and and and wagesover time, should be reduced
because those wages are beingsupplemented with the tips.
But look, given that, you know,it's easy to come up with
solutions like that, but I canalso think of problems.
If we raise menu prices, ofcourse, that's going to price
(33:58):
some people out of the market.
That will be a short-term costand pain to restaurants, but
it's also, you know, adisservice to customers.
What many people don't realizeis they think tipping is a way
that restaurants get customersto subsidize their labor cost.
(34:21):
Yes and no.
The labor savings get passed onin the form of lower prices.
So what real tipping really doesis it gets wealthy, price,
insensitive customers tosubsidize the dining behavior of
poorer, more price-sensitivecustomers.
And you eliminate tipping,you're going to reduce this
subsidy to poor people.
(34:44):
And is that fair and reasonable?
That's more questionable.
Look, it I'm going on and on,but this is just a complicated
issue.
There are no easy answers.
SPEAKER_00 (35:02):
But I really like uh the elegant solution you've
proposed.
And I interviewed um uh thepresident of our taco, who is a
Shah alum, Anthony Valletta.
And they have exactly thesolution that you have uh
proposed, which is they payminimum wage, at least the
minimum wage to everyone, andthe tip pool is shared by
(35:23):
everyone back at the house,front of the house, except in
states where back at bath housesharing is not yet legal.
Okay, so I think uh that was anoutstanding answer.
And as we wind down, um let'slighten the mood with some quick
off-the-cuff questions to learnmore about you beyond the world
of academia.
(35:44):
So you're ready to go?
I'll try.
When you're not deep in researchor teaching, what's your
favorite way to unwind?
SPEAKER_01 (35:50):
It's either reading or flintnapping.
Flintnapping is making stonearrowheads, knives, and things
like that.
Those are my two hobbies.
SPEAKER_00 (35:58):
Aaron Powell, I was gonna say the first one is
relaxing, but the second one alittle stressful for people to
hear.
But here is a fun one.
SPEAKER_01 (36:05):
Oh no, it's it there's nothing that's better
for relieving stress thanbashing a rock and breaking it,
right?
Okay.
And that's what flitnapping is.
I mean, you're breaking it in acontrolled way, but it's banging
on a rock and breaking it, andthat's quite stress-relieving.
SPEAKER_00 (36:23):
I think I'm gonna try that.
So we move on.
Um imagine you're stranded on adesert island.
Which three foods would you wantto have with you?
SPEAKER_01 (36:33):
Is there a refrigerator, a freezer?
Because ice cream would be oneunless there's no freezer,
right?
Let's pretend there is nofreezer.
SPEAKER_00 (36:41):
Oh, there is no freezer.
No electricity.
No electricity.
Oh my god.
Okay, I've really constrictedyour choices here.
SPEAKER_01 (36:48):
Yeah, I'm trying to think, okay, what kind of foods
don't require refrigeration?
SPEAKER_00 (36:53):
I think we might have to relax on the
refrigerator part at least.
Um look, I like red meat.
SPEAKER_01 (37:00):
Okay.
And so red meat.
Um blueberries I eat a lot of.
I guess I'd want blueberries.
And, you know, if I if I couldhave it, cheesecake.
SPEAKER_00 (37:13):
Cheesecake.
Okay.
Well, research has clearly shownthe negatives of red meat, but
clearly shown the benefits ofblueberries.
And I'm even going to leave icecream behind since I like ice
cream as well.
Okay, so I've got a few morequick questions.
Uh, since you are the guru oftipping, what percentage do you
(37:33):
tip when you eat in a finedining restaurant?
SPEAKER_01 (37:36):
I tip between 15 and 20%.
Usually, I actually, because Iget this question a lot, kept a
record.
And it tends to average right at18%.
Now that was several years ago.
Today it would probably becloser to 20%.
But I don't go excessively high.
SPEAKER_00 (37:57):
What percentage do you tip when you go into a
Starbucks or a self-servicecafe?
SPEAKER_01 (38:03):
Nothing.
SPEAKER_00 (38:04):
Okay.
So you're part of that 60% whoare not tipping.
SPEAKER_01 (38:07):
Yes.
SPEAKER_00 (38:08):
What about housekeeping in a hotel when you
check out or daily?
SPEAKER_01 (38:13):
It depends on two things.
One, I have to remember to doit, and two, I have to have the
cash on hand to do it.
But I try to make sure I havecash and I try to remember, and
I leave about$3 per day to thehousekeeping staff.
SPEAKER_00 (38:28):
Regardless of the level of the hotel, so you can
go into the Ritz-Karlton or uhWell, I don't stay at
Ritz-Carlton.
Okay.
SPEAKER_01 (38:36):
In fact, like I'm one of the few Hook Cornell
Hotel School faculty memberswho's never stayed at a four
seasons, never stayed at aRitz-Karlton.
I just so, but mid and lowerscale hotels, yes.
I try to leave$3 a day.
SPEAKER_00 (38:52):
$3 a day in cash.
Excellent.
Michael, it has been a pleasurediving into these complex issues
with you.
Thank you for sharing yourinsights and sparking what I'm
sure will be many conversationsamong our listeners.
SPEAKER_01 (39:07):
Well, thank you for inviting me.
SPEAKER_00 (39:09):
I've enjoyed the conversation.
And thank you all for listeningtoday to our distinguished
podcast.
If you like what you're hearing,be sure to follow up and give us
a five-star rating.
If you want to join theconversation and share your
thoughts and suggestions, emailme at shaden at bu.edu.
That's shawdean at bu.edu.
(39:30):
Special thanks to the team whoproduced this podcast, Mara
Littman, Andy Halleck, and theentire team at BU School of
Hospitality Administration.
To keep up with theDistinguished Podcast, be sure
to subscribe wherever you listento your favorite podcast.
You can also learn more aboutour undergraduate and graduate
programs at BU School ofHospitality by visiting bu.edu
(39:54):
slash hospitality.
Have a wonderful day and thankyou for listening.
Welcome to the Distinguished Podcast.
Today we are diving into aritual that closes every
restaurant bill but opens aworld of economic and
psychological intrigue tipping.
I'm Arunapneja, Dean of the BUSchool of Hospitality
Administration, and with me is avirtuoso of the dipping world,
Dr.
Mike Lynn from CornellUniversity School of Hotel
(00:26):
Administration.
He's not only a top-tierprofessor and researcher, but
also a former bartender andwaiter who has transformed his
ground level insights into morethan 80 pivotal research
publications.
Michael, it's a pleasure to haveyou with us to unravel the
complexities of tipping, apractice so routine yet so
(00:47):
deeply ingrained in the fabricof our culture.
Welcome.
SPEAKER_01 (00:51):
Well, thank you.
SPEAKER_00 (00:51):
I'm happy to be here.
Thank you for inviting me.
So before I start, I do want tosay that, and I know we
discussed this in the past aswell, but you were on the
faculty at the University ofHouston in marketing, and I was
a lowly PhD student, hanging outwith all other PhD students, and
it was very exciting for me tosee a social psychologist in the
(01:15):
marketing department doingresearch on tipping.
And I was just so excited whenyou were moving to Cornell Hotel
School, came up and I saidhello, and I had a conversation
with you.
So I'm happy to renew myacquaintance after so many
years.
SPEAKER_01 (01:31):
Well, um my pleasure to renew the relationship as
well.
SPEAKER_00 (01:37):
So let's set the stage for today's discussion.
Tipping, is it merely a socialobligation, a reward for good
service, or something more?
So, Michael, we're gonna startwith your beginnings of your
journey in the heart of theservice industry.
How did your early experiencesshape your research interest,
particularly in tipping?
SPEAKER_01 (01:56):
Well, let me begin by saying I started uh working
for tips as my the summer of myfreshman year in college.
My father had been audited bythe IRS and ended up owing them
a lot of money.
Uh and he told me, look, I hadplanned on paying for your
(02:18):
entire college thing, and I'llstill make you know the bulk of
the contributions, but I needyou to help me out because I got
this big hit.
Uh, you need to get a job andhelp support your way through
school.
So uh what I quickly learned wasthat tipped work paid better
(02:38):
than anything else I wasqualified to do.
And that summer uh of myfreshman year, I got a job at
Pizza Hut.
I was a cook during the day anda waiter at night.
When I went back to Austin,Texas, where I was doing my
undergraduate, uh I managed toget a job as a busboy at La Tour
(03:02):
restaurant, top of the WingateBuilding, super fancy French
restaurant.
And there I worked my way up touh back waiter.
After about a year, maybe a yearand a half, that restaurant
closed.
I moved to the headliners clubwhere I was a reserver, and and
from there I also became abartender.
(03:22):
So I've worked at bothdownscale, mid-scale, and very
upscale restaurants for tips.
And and obviously, when yourliving depends on tips, you care
about it.
But I didn't actually think ofit as a research topic until I
started grad school.
Um, when I went to Columbus,Ohio for my first year of grad
(03:45):
school, I showed up early andgot a job as a bartender.
Uh once school started, Istarted a research assistantship
that technically precluded mefrom holding another job.
Um, but I wasn't going to get myfirst paycheck from the research
assistantship for another month.
So I asked my advisor, BibLatina, if I could keep the job
(04:06):
just for that month so I'd havesomething to live on.
Um, and he said, yes, as long asI used that setting for
research.
I thought about ways to doresearch in that context.
And that's what got me startedthinking about tipping as a
research topic.
I mean, I was interested in itas a source of income for years
(04:29):
before that, but as a researchtopic, I didn't even think of it
until he kind of forced me intoit.
Uh and I basically uh havecontinued doing research on that
ever since.
SPEAKER_00 (04:42):
That's fascinating.
You know, the other thing, um,those good old days, the tips
were all cash.
And I know that um that'sprobably too old, so IRS cannot
come back to you on that.
But you know, those cash tipsmostly were not reported,
whereas now the tips are all oncredit card and they get
reported as income.
SPEAKER_01 (05:02):
And uh, you want me to comment now?
SPEAKER_00 (05:05):
You don't have to.
Um okay.
So let's move, let's go into thedive into.
Um you outlined several motivesbehind why people tip.
Can you explain some of themotivations behind this
reciprocal relationship?
SPEAKER_01 (05:22):
You you've already mentioned that people tip to
reward good service.
Uh that's the most commonlyexpressed motivation or reason
for tipping.
If you ask people why do youtip, that's the most common
answer.
But in restaurant settings, wefind that tips correlate with
customers' ratings of serviceonly about 0.2.
(05:45):
That means 4% of the differencesin tips left by different dining
parties, 4% can be explained bytheir ratings of service.
Clearly, it is not primarilydriven by a desire to reward
good service.
Uh the least commonly endorsedmotivation for tipping is to buy
(06:07):
social approval.
And yet the data I look at tellme that's the most important
reason for tipping.
Why do I say that?
70% of the variance in tippingdifferences in tipping left by
different dining parties in arestaurant can be explained by
bill size.
(06:27):
And that's because of the 15 to20% tipping norm.
Uh bill size defines what thesocial expectations of the tip
would be, and people tend tocomply with that.
The next biggest set of factorsthat influence tipping have to
do with the social connectionthat the server makes with the
customer.
If the server introduces him orherself by name, if they call
(06:51):
the customer by his or her name,if they smile at the customer,
if they squat down next to thetable so they make good eye
contact with the customer, allof these are things that
increase social connection andthey have a pretty substantial
impact on tipping.
Given, and and why does thatmatter?
When you make a socialconnection, people care about
(07:12):
what you think of them.
So given that socialexpectations are the biggest
predictor of tipping, countingfor twice as much as everything
else combined, and that theextent to which you care about
the server's opinion of youbecause you have a connection
with them, that's the nextbiggest factor.
That tells me that mostlyrestaurant tipping is a matter
(07:35):
of buying social approval or atleast avoiding disapproval.
I mean, there are othermotivations.
I don't know how much you wantme to keep going on this.
SPEAKER_00 (07:45):
Well, I'm I mean, I think social approval, you said
70% of the variance is by billsize.
So can you expand on that alittle bit?
SPEAKER_01 (07:54):
The larger their bill sizes, the larger the
dollar tip, right?
And we can look at differentdining parties in a restaurant,
they're gonna leave differentdollar and cent tip amounts.
I can reduce the differences,the variability, by 70% if I
(08:14):
control for bill size.
But that means that everythingelse combined explains the other
30%, right?
Bill size is twice as powerfulas everything else combined in
determining the dollar and centtip amounts that different
dining parties leave.
SPEAKER_00 (08:36):
So so let's then uh so if 70% of the variance is
defined by the bill size, thenthat only leaves the 30%.
And even in that 30%, you'resaying a majority of that is
made by social connection.
So by the server, what kind ofconnection he or she is able to
establish with the customer.
(08:56):
And then and then you also said4% is by the service.
So if a server connects wellwith their guests, even if the
service is not very good,they're gonna get good tips.
Yes.
That's right.
Okay, so then um let's move touh tipping percentage.
(09:18):
Now, as you've noted, that thetip percentages have been
increasing over time.
It started, you know, at somepoint 10% to now 20%.
And in many instances, peoplehave now started using the term
20 to 25% of tip.
And there is more complexity tothis in particularly recent
innovations, which is thatrestaurants have started adding
(09:40):
um, you know, I think the mostcommon I've seen 3% kitchen
appreciation fee.
That's the amount that goesstraight into the kitchen.
So, but no one is backing downfrom this 20 to 25 percent.
So are we now in a 23 to 28% tiprange?
SPEAKER_01 (10:00):
Well, the non-menu price cost of dining has gone up
to 23%, but I'm gonna argue thata 3% kitchen fee is not
voluntary and is not a tip.
So um, but yeah, I mean, andguess what?
(10:21):
People are asking for evenlarger and larger amounts.
It's they're not just asking for20% nowadays, often they start
at 15 and go up to 30.
I've even seen on Redditpictures of receipts that have
tippet that that start with a20% tip suggestion, go up to 50,
(10:42):
and then had a 99% tipsuggestion from one bar.
SPEAKER_00 (10:46):
So do you see any trend or any any anything to say
that this would go this trendwould back down, or is it only
one way straight up?
SPEAKER_01 (10:56):
Wow, that's a great question.
And and I guess I want to answerfirst by saying I can't predict
the future any better than otherpeople can.
Okay, so the short answer is Idon't know.
But there are reasons to believethat the trend will continue.
(11:17):
This it's it's a long-standingtrend, right?
We used to tip 15%.
Today the average tip is about20%.
Uh, might it go up?
Certainly.
Why does that occur?
We don't know for sure, but itprobably has to do with the fact
that tipping is buyingpositional goods.
(11:37):
Some people tip to get status,other people tip to get really
good service.
Both status and really goodservice are defined relative to
the average, right?
Uh, to get really good service,I'm gonna have to give an
above-average tip.
To get the esteem and status, Ihave to give an above-average
(12:00):
tip.
But when I do that, and otherpeople like me with similar
motivations give above averagetips, we start to get attention
and service and and liking tothe detriment of other customers
who then feel like they have totip more to avoid loss.
(12:21):
And once that happens, the wholemore average goes higher.
Then I, looking for status, haveto tip even more.
Right?
And so it's that some of whatwe're trying to buy with tip
depends upon giving anabove-average tip, exerts this
continuous pressure for tipamounts to go up, up, up.
(12:45):
That process has operated in thepast, and I believe is gonna
continue to operate.
Having said that, there's got tobe a ceiling somewhere, right?
I just don't know what thatceiling is or when we're gonna
reach it.
SPEAKER_00 (13:01):
And Mike, you know what is um what is interesting
about this process is uh, and Iknow you talk about uh somewhere
in your papers as well, is thattipping is given, the tips are
given at the end of the service.
So during the service, theserver does not know how much
you're gonna tip unless you area regular customer.
Right.
SPEAKER_01 (13:20):
But presumably they think that if they give good
service, you'll get a good tip.
And if you they give you badservice, you'll leave them a bad
tip.
So presumably, tipping providesan incentive, even if people
don't know what you're gonnagive.
SPEAKER_00 (13:39):
Aaron Powell But at the end of the day, at the
beginning, you said the serviceonly accounts for 4%.
So I'm sure savvy servers havehave already noticed by
experience, not by research, butby experience, that you know
they can do whatever they want,they're gonna keep getting that
you know, 20% coming in most ofthe time.
SPEAKER_01 (13:58):
Yeah, that's a really interesting.
And I tended to assume the samething until I actually asked
servers, how big an effect doyou think your service has on
tipping?
And what I discovered is thatroughly half of consumers think
it has a moderate to largeeffect.
So half of consumers, or I meanhalf of servers, accurately say,
(14:22):
yeah, it doesn't really havemuch of an effect.
But half of them erroneouslybelieve that it has a bigger
effect than it really does.
And I've often been, you know,curious as to why that is.
It I don't have anyresearch-based answers, but I
would speculate that it has todo with one, people are just
(14:44):
buying into kind of thetraditional idea tip's a reward
for service, so it must have aneffect.
And secondly, I think serversare motivated to believe it has
an effect.
Because if one keeps the iftipping's not related to service
levels, it becomes more charity.
And nobody wants to thinkthey're making their living
(15:05):
relying on charity.
And it also means that servershave more control and people
like that feeling of control.
So so it turns out, even thoughtips aren't strongly related to
service, at least half ofservers think it is.
And so it still has an incentivevalue for them.
(15:26):
And uh I think that the reasonthey believe there's a strong
relationship is that they'remotivated to have that belief.
SPEAKER_00 (15:33):
That's that's so interesting.
You know, this charityexplanation is excellent
because, like you said, no onewants to have charity, so they
have to believe that whatthey're doing is causing the
tips.
But I'm curious uh if you'vedone similar work or come across
similar work on the customerside.
I know that your research shows70% social approval and social
(15:54):
connections, but what doconsumers believe is accounting
for the variation in theirtipping percentage?
SPEAKER_01 (16:02):
Consumers believe that they're tipping to reward
service first and foremost.
They also believe they'retipping to buy future service,
and they believe they're tippingto help servers make a living,
right?
Most servers in this countrymake a substandard minimum wage.
Consumers, for the most part,are aware of that.
(16:25):
They may not know exactly whatthe hourly, the tipped hourly
wage is, but they know it's lessthan the standard.
And those people who are awareof that report having stronger
altruistic motivations fortipping and in fact tip more.
SPEAKER_00 (16:42):
So Right.
So, you know, um, and I've andI've, you know, a lot of people
have growing up, you know, haveweighted have weighted tables or
going through college to paytheir expenses.
So to some extent, and I'vespoken to many young people who
were young adults who are intheir working lives who express
that sympathy, say, oh, thisperson is probably going through
(17:03):
college, and you know, I need toum tip to make sure that they
have um a good, make it make adecent living and they're able
to pay for the living expenses.
I have also spoken to manyrestaurant owners who say that
many of the servers are making60, 70, and in some cases even
in six figures, just waitingtables.
(17:24):
So um when you talked about thesubstandard wage, that's the you
know lower than the minimum wagethat is federally allowed, and
in some states it's allowed.
But waiters are servers aremaking, you know, in many cases,
substantially more than theminimum wage.
SPEAKER_01 (17:41):
Oh, absolutely.
When you had asked me earlierabout my history with tipping, I
told you I took tipped workbecause it paid more than any
other job I was qualified to doat the time.
In fact, I remember making moreper hour than my manager did.
I mean, I was only part-time, somy total income was less than
(18:03):
his, but on an hourly basis, Iwas making a lot more than my
manager.
It made me wonder kind of whypeople would go to school to
become hospitality managers whenthe pay was so little and you
could get an entry-level jobthat paid more.
Um, and by the way, my myexperience is it's just
anecdotal, but I helped the NewYork City Hospitality Alliance
(18:27):
do a compensation survey in NewYork City a few years ago.
Servers were making with tipsroughly a$30 an hour.
Cooks and hostesses were makingroughly$12 to$15 an hour.
Why?
I mean, clearly tipping pays apremium above and beyond what
(18:50):
people could otherwise get inmany cases.
SPEAKER_00 (18:53):
Um yeah, I think you know, the other um aspect I'm
very curious about is, and Ispoke to a restaurant from
Chicago, and one of uh one ofthe things, the reason why um,
you know, the the restaurantowners want the waiters to make
(19:14):
more tips is because they kindof instinctively know that the
tip size is related to, like yousaid, is related to the total
bill size.
And waiters know that too, therestaurant owners know that too.
And so they so the the waitersupsell and you know increase the
bill size, which impacts, whichhelp which is helpful to the
(19:35):
restaurant owners, which helpsthe waiters make more as well.
Um let's move to this um thisexperiment that was done a few
years ago, and and some peoplestill do that, which is
restaurant does include a 20%gratuity and say, we've already
included that, but then there isa backlash from the guests.
(19:57):
So can you talk a little bitabout the pros and cons of
preemptively adding the servicesearch?
SPEAKER_01 (20:03):
Um first off, if a restaurant uh pays a higher
minimum wage or eliminatestipping, they've got to pay
higher wages.
They don't make enough profit toeat those extra costs.
They'll have to be passed on tothe consumer either as service
(20:25):
charges or higher menu prices.
Service charges are universallyhated in this country.
Restaurants that replace tippingwith service charges, their
online ratings go down.
And that's true regardless ofthe price tier of the
restaurant.
Upscale, mid-scale, downscalerestaurants, you institute a
(20:49):
service charge, your customersare going to be angry.
And it's fairly straightforwardwhy that occurs.
A service charge is a mandatorytip, and people in this country
don't like to be told that theyhave to do something, especially
when everywhere else it'svoluntary.
The other option is to replacetipping with higher menu prices.
(21:11):
Uh, and although conceptuallypeople are okay with that, the
fact is that causes stickershock, and people start to think
the restaurant is too expensive.
You might think they would takeinto account, yeah, the menu
prices are higher, but I don'thave to tip.
In fact, research tells usthat's not the case.
(21:34):
People tend to minimize tippingas part of the restaurant
expense, and they focus on menuprices.
A restaurant with no tipping and15% higher menu prices will be
perceived as more expensive thana restaurant with the lower menu
prices, but 15 to 20% tipsexpected.
(21:57):
Um, and what we've Find isrestaurants that eliminate
tipping and replace it withhigher menu prices.
Mid to downscale restaurants,their online ratings go down.
Upscale restaurants don't showthat decline.
Presumably because they havewealthier clientele who are less
(22:19):
price sensitive, less affectedby that sticker shock.
SPEAKER_00 (22:23):
Okay, so then I want to move a pivot to the tipping
in general in our society.
And we have seen a proliferationof occasions in which to tip.
And of course, you know, all ofus have seen those memes where
you go to a vending machine andthere is a tip line there.
Okay, how much do you want toare you know go to a
(22:44):
self-service place and thecashier turns the iPad over and
like you said, 15%, 20%, 25%.
So anytime we pay digitally, soyou know, this we earlier we
talked about the cash tipsversus um now it's all being on
the credit cards.
So anytime we pay digitally, theexpectation to add a tip is
(23:07):
presented to the customer, whichincreases the cost of everything
we purchase.
So considering the culturalsignificance of tipping and it's
so ingrained in all of us, um,where do you see the general
landscape of tipping with thisexpectation of tipping
everywhere?
Uh is there at some point goingto be an equilibrium?
(23:30):
I mean, do you feel that thereis a backlash to tipping?
SPEAKER_01 (23:33):
Well, first off, we know from surveys, 70% of
consumers today think thattipping has got out of hand and
they're very unhappy with thepractice.
Does that spell the doom oftipping in the long run?
I doubt it.
Uh, it's very difficult to getrid of tipping.
Um to get rid of tipping inrestaurants, for example, you've
(23:58):
got to either replace it withservice charges, which people
hate, or higher menu prices,which many people dislike.
Um will will it preclude will isthere a limit to the spread of
tipping norms to otheroccupations and and will it
(24:19):
continue to be expected instandard retail places?
Again, it's hard to predict thefuture, but my guess is that it
will not spread.
And at some point, though evenplaces that are currently asking
for it will probably stop.
Let me I let me just pointsomething out to readers.
(24:42):
Today it's very common we we getthese requests for tipping, for
example, restaurant carryout.
Almost every restaurant, if youorder carry out, there's going
to be a line for you to leave atip.
And you may assume, since everyrestaurant is asking, this must
be the new norm.
But there is no God of tipping.
Tipping doesn't come from above,it evolves out of the behavior
(25:07):
of consumers.
So what we really need to knowis are people tipping?
And just because they're askingfor tips doesn't mean people are
giving them.
Surveys tell us that only about40% of consumers routinely leave
a tip for restaurant carry out.
60% of people are not tipping,it's not normative, and you
(25:28):
shouldn't feel that much socialpressure to leave a tip
yourself.
And if that's true of restaurantcarryout, what we know is even
fewer people tip in quickservice or uh convenience store
tipping is even lower than that.
So, yes, you're being asked fortips.
(25:48):
The people who are asking willbe upset if you don't give them
a tip.
But if you fail to tip, you willnot be alone.
In fact, the vast majority ofcustomers don't tip.
So if they're mad at you, it'snot just you, they're mad at
everybody.
And that kind of diminishes thesocial pressure you should feel.
(26:09):
Um, I do think that the currenttechnology is contributing to
people's the boldness with whichpeople are asking, and it's
making it a little bit moreeffective.
We've had counter tipping for along time, but it was in the
form of a tip jar.
The thing is that tip jars, it'seasy to see people put money in
(26:32):
them, and even if you don'tobserve the actual tip itself,
you can see whether the tip jaris full or not.
You know whether other peopleare tipping.
And in these kind of traditionalcounter-service settings, most
people weren't tipping.
Those tip jars, they may havehad some tip in them, but they
weren't full.
And so customers knew, yeah,they'd like a tip, but most
(26:54):
people aren't doing it.
It's no big deal if I don't.
The new tablets hide thatinformation from us, and that
causes us to assume other peoplemust be tipping and we feel more
pressure.
So the technology increasespressure and increases our
tendency to tip.
(27:15):
But that doesn't mean it'scausing the majority of people
to tip.
And in fact, in these newcontexts, the majority of people
still are not tipping.
Tipping norms haven't expandedas much as the press would have
you believe.
SPEAKER_00 (27:29):
Aaron Powell, I think that's a very, very good
point that people listeningshould take home on this issue
that 60% are not tipping forcarry-outs.
That does leave a verysignificant number, 40 percent,
that are tipping for carry-out.
SPEAKER_01 (27:44):
Um So quick service, you said there is not much
tipping happening in um I thinkabout 30% of people say they
will, you know, on asemi-regular basis, tip for
quick service.
Trevor Burrus, Jr. (27:57):
30 percent.
SPEAKER_00 (27:58):
And then convenience store is even less.
Um I think to a to a certainextent, it's these new cafes
where you have to stand in lineto go and order your food, and
then either you pick up orsomeone just delivers it to your
table.
That's where the cashiers turnthe iPad over.
(28:18):
And again, 15%, 20%, 2010.
SPEAKER_01 (28:21):
Even coffee shops and baristas are an example of
what you're just describing.
Even there, less than 50% ofpeople will leave a tip.
Uh so it's not the majority.
SPEAKER_00 (28:33):
Aaron Powell Okay.
I think that's that's a verygood point that people listening
should note.
Okay, so let me ask you um youalso suggested that upscale
restaurants might change thecurrent tipping model.
With tip being a significantpart of the service income, how
might changes in tippingpractices affect the quality of
service?
(28:54):
And what do you think shouldhappen with the with the tipping
models?
SPEAKER_01 (28:59):
Wow.
Um how might elimination oftipping affect service levels?
Look, the research I've donesuggests that servers do provide
personalized service in thehopes of getting better tips,
right?
If I replace tipping withservice charges, they're still
(29:22):
going to be motivated to selland to turn tables quickly
because the larger the bills,the larger the sales they have
at the end of the evening, thelarger the service charges
they'll take home, right?
So service charges and tippingboth motivate sales-oriented
behavior.
But service charges don'tmotivate quality of service and
(29:45):
personalization of service inthe same way that tips do.
If we eliminate tipping, I thinkyou are taking away some of the
motivation servers have toprovide customized personalized
service.
Um can that be made up throughother mechanisms of monitoring
(30:07):
and rewarding?
Of course.
Good service is good in Europeand they don't tip nearly as
much there as they do here,right?
Um, really upscale restaurantscould have managers uh monitor
the behavior of their employees.
And if you want to keep yourjob, you're gonna have to
(30:27):
provide the kind of customized,personalized service that we
expect.
You can hire mystery diners uhand monitor the behavior of your
servers.
And and so I don't thinktipping's the only mechanism for
motivating good service, but itis a mechanism.
What do I think should be donewith tipping?
(30:51):
First off, I guess let me sayone of the problems with tipping
is that it pays so much to frontof house that it creates a pay
disparity that makes cooperationbetween front and back of house
more difficult.
And you would think arestaurateur could simply choose
to pay their back of house more,but to do that, they have to
(31:14):
raise menu prices, which raisesthe base on which customers are
tipping, so tips go up, and infact, tips probably go up more
than the front back of house'spay went up, and you're
increasing, not reducing, thepay disparity.
I think the easiest solution tothis is to let back of house
(31:39):
share in tip pools and torequire servers to share part of
their tips more broadly.
Under current federal law, ifyou don't take a tip credit, you
can do that.
If you do take a tip credit, youcan't.
You can only require servers toshare tips with other
traditionally tipped workerslike bartenders or bus boys.
(32:03):
So I think that we should.
That's only going to boost theiralready high incomes, but then
what you do is you make themshare their tips more broadly
with other people in therestaurant.
(32:24):
And I think, by the way, that'sfair because those other people
are influencing the diningexperience and ultimately the
tipping behavior of customers.
I did a study with a restaurantmagician in New York City and
found that when he performed amagic trick at a table, not only
did he get a tip, but the serverwho waited on that table got a
(32:48):
bigger tip also.
Even though the server hadnothing to do with that magic
performance, right?
It's tips depend upon theoverall experience.
And other people, people otherthan the server are contributing
to that experience.
Why shouldn't they?
It only seems fair that theyshare in some of the financial
(33:12):
benefit of doing that.
So I would eliminate the tipcredit.
It will require uh higherprices, um and at least
initially, right?
Uh, but then I would also use itas an opportunity to share the
tips more broadly, which shoulddecrease future pressure to keep
(33:36):
raising prices and and and wagesover time, should be reduced
because those wages are beingsupplemented with the tips.
But look, given that, you know,it's easy to come up with
solutions like that, but I canalso think of problems.
If we raise menu prices, ofcourse, that's going to price
(33:58):
some people out of the market.
That will be a short-term costand pain to restaurants, but
it's also, you know, adisservice to customers.
What many people don't realizeis they think tipping is a way
that restaurants get customersto subsidize their labor cost.
(34:21):
Yes and no.
The labor savings get passed onin the form of lower prices.
So what real tipping really doesis it gets wealthy, price,
insensitive customers tosubsidize the dining behavior of
poorer, more price-sensitivecustomers.
And you eliminate tipping,you're going to reduce this
subsidy to poor people.
(34:44):
And is that fair and reasonable?
That's more questionable.
Look, it I'm going on and on,but this is just a complicated
issue.
There are no easy answers.
SPEAKER_00 (35:02):
But I really like uh the elegant solution you've
proposed.
And I interviewed um uh thepresident of our taco, who is a
Shah alum, Anthony Valletta.
And they have exactly thesolution that you have uh
proposed, which is they payminimum wage, at least the
minimum wage to everyone, andthe tip pool is shared by
(35:23):
everyone back at the house,front of the house, except in
states where back at bath housesharing is not yet legal.
Okay, so I think uh that was anoutstanding answer.
And as we wind down, um let'slighten the mood with some quick
off-the-cuff questions to learnmore about you beyond the world
of academia.
(35:44):
So you're ready to go?
I'll try.
When you're not deep in researchor teaching, what's your
favorite way to unwind?
SPEAKER_01 (35:50):
It's either reading or flintnapping.
Flintnapping is making stonearrowheads, knives, and things
like that.
Those are my two hobbies.
SPEAKER_00 (35:58):
Aaron Powell, I was gonna say the first one is
relaxing, but the second one alittle stressful for people to
hear.
But here is a fun one.
SPEAKER_01 (36:05):
Oh no, it's it there's nothing that's better
for relieving stress thanbashing a rock and breaking it,
right?
Okay.
And that's what flitnapping is.
I mean, you're breaking it in acontrolled way, but it's banging
on a rock and breaking it, andthat's quite stress-relieving.
SPEAKER_00 (36:23):
I think I'm gonna try that.
So we move on.
Um imagine you're stranded on adesert island.
Which three foods would you wantto have with you?
SPEAKER_01 (36:33):
Is there a refrigerator, a freezer?
Because ice cream would be oneunless there's no freezer,
right?
Let's pretend there is nofreezer.
SPEAKER_00 (36:41):
Oh, there is no freezer.
No electricity.
No electricity.
Oh my god.
Okay, I've really constrictedyour choices here.
SPEAKER_01 (36:48):
Yeah, I'm trying to think, okay, what kind of foods
don't require refrigeration?
SPEAKER_00 (36:53):
I think we might have to relax on the
refrigerator part at least.
Um look, I like red meat.
SPEAKER_01 (37:00):
Okay.
And so red meat.
Um blueberries I eat a lot of.
I guess I'd want blueberries.
And, you know, if I if I couldhave it, cheesecake.
SPEAKER_00 (37:13):
Cheesecake.
Okay.
Well, research has clearly shownthe negatives of red meat, but
clearly shown the benefits ofblueberries.
And I'm even going to leave icecream behind since I like ice
cream as well.
Okay, so I've got a few morequick questions.
Uh, since you are the guru oftipping, what percentage do you
(37:33):
tip when you eat in a finedining restaurant?
SPEAKER_01 (37:36):
I tip between 15 and 20%.
Usually, I actually, because Iget this question a lot, kept a
record.
And it tends to average right at18%.
Now that was several years ago.
Today it would probably becloser to 20%.
But I don't go excessively high.
SPEAKER_00 (37:57):
What percentage do you tip when you go into a
Starbucks or a self-servicecafe?
SPEAKER_01 (38:03):
Nothing.
SPEAKER_00 (38:04):
Okay.
So you're part of that 60% whoare not tipping.
SPEAKER_01 (38:07):
Yes.
SPEAKER_00 (38:08):
What about housekeeping in a hotel when you
check out or daily?
SPEAKER_01 (38:13):
It depends on two things.
One, I have to remember to doit, and two, I have to have the
cash on hand to do it.
But I try to make sure I havecash and I try to remember, and
I leave about$3 per day to thehousekeeping staff.
SPEAKER_00 (38:28):
Regardless of the level of the hotel, so you can
go into the Ritz-Karlton or uhWell, I don't stay at
Ritz-Carlton.
Okay.
SPEAKER_01 (38:36):
In fact, like I'm one of the few Hook Cornell
Hotel School faculty memberswho's never stayed at a four
seasons, never stayed at aRitz-Karlton.
I just so, but mid and lowerscale hotels, yes.
I try to leave$3 a day.
SPEAKER_00 (38:52):
$3 a day in cash.
Excellent.
Michael, it has been a pleasurediving into these complex issues
with you.
Thank you for sharing yourinsights and sparking what I'm
sure will be many conversationsamong our listeners.
SPEAKER_01 (39:07):
Well, thank you for inviting me.
SPEAKER_00 (39:09):
I've enjoyed the conversation.
And thank you all for listeningtoday to our distinguished
podcast.
If you like what you're hearing,be sure to follow up and give us
a five-star rating.
If you want to join theconversation and share your
thoughts and suggestions, emailme at shaden at bu.edu.
That's shawdean at bu.edu.
(39:30):
Special thanks to the team whoproduced this podcast, Mara
Littman, Andy Halleck, and theentire team at BU School of
Hospitality Administration.
To keep up with theDistinguished Podcast, be sure
to subscribe wherever you listento your favorite podcast.
You can also learn more aboutour undergraduate and graduate
programs at BU School ofHospitality by visiting bu.edu
(39:54):
slash hospitality.
Have a wonderful day and thankyou for listening.
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