The Racial Tipping Point

A few years back, I got interested in taxicab tipping – and what influences how much people tip. So together with Fred Vars and Nasser Zakariya, I collected data on more than 1,000 cab rides in New Haven, CT and crunched the numbers. The study (published in The Yale Law Journal) found — after controlling for a host of other variables — two independent racial effects:

1. African-American cab drivers, on average, were tipped approximately one-third less than white cab drivers.

2. African-American and Hispanic passengers tipped approximately one-half the amount white passengers tipped.

African-American passengers also seemed to participate in the racial discrimination against African-American drivers. While African-American passengers generally tipped less, on average they also tipped black drivers approximately one-third less than they tipped white drivers.

Passenger discrimination against African-American drivers was not subtle:

African-American drivers were 80 percent more likely to be stiffed than white drivers (28.3 percent vs. 15.7 percent).

But as in all empirical studies, you have to ask whether the results are robust. Do black servers generally receive lower tips, and if so, why?

Our New Haven data did not have good information on the quality of driver service. We did a small amount of secret auditing of the drivers in our study to see if there were gross differences in the quality of service they provided. Our testers:

… subjectively rated the quality of service higher for black drivers than for white drivers (with an average rating of 4.5 out of 5 for black drivers versus an average of 3.3 for white drivers).

But we only succeeded in completing 10 audit rides with participating drivers — so at the end of the day, it was difficult for us to assess whether minorities received poorer tips because of providing poorer service.

However, a new study co-authored by the world’s leading number cruncher on tipping, Michael Lynn, has found a similar effect in a Southern restaurant. His article, “Consumer Racial Discrimination in Tipping: A Replication and Extension” is based on 140 surveys that he and his co-authors:

…collected during three lunch shifts (11:00 a.m. to 4:00 p.m.) at a [large national chain] restaurant located in the southern United States.

Focusing on just blacks and whites, the study once again found that:

Consumers of both races discriminated against black service providers by tipping them less than white service providers.

A cross-tab of the raw data (generously emailed to me by Lynn) shows that white customers tipped black servers almost four percentage points less than white servers and that black customers tipped black servers half a percentage point less.

But unlike my taxicab data, Lynn’s survey asked customers for their perception of service quality, food quality, and atmosphere quality. He also was able to control for the size of the group, the bill size, and a host of other variables.

Lynn emailed me:

After controlling for these other variables … the server race effect is comparable across customer race.

But as a law professor what is most interesting about Lynn’s article is his suggestion that an employer might be held liable under Title VII of the Civil Rights Act for establishing a tipping policy that has a disparate impact against African-American employees.

Lynn has a pretty good argument that restaurant policies are a “but-for” cause of at least some of the racial disparity. If the restaurants posted “no tipping” signs or instituted “service compris” (instead of putting a place on the credit card receipt for customers to write in the tip), the size of the racial disparity would almost certainly decrease.

But the harder question is whether the racial disparate impact of tipping is legally justified by the legitimate interest of businesses to enhance customer service. Not all employer practices that produce racial disparities violate Title VII. But the employer bears the burden of proving that the policy of promoting/allowing tipping is “consistent with business necessity.”

Today we think of tipping as beyond the scope of legal regulation. But in researching my Yale article I was surprised to learn that in the early twentieth century, progressives in seven states passed anti-tipping statutes that, to varying degrees, outlawed tipping.

Critics referred to the practice as “un-American” and incompatible with democracy. Former Yale law professor (and U.S. president) William Howard Taft was the “patron saint of the anti-tip crusade,” and Ralph Waldo Emerson roundly condemned the practice:

I sometimes succumb and give the dollar, yet it is a wicked dollar which by and by I shall have the manhood to withhold.

Tipping was attacked as bribery and as “the training school of graft.” In “The Itching Palm,” a 1916 manifesto against the practice, William Rufus Scott said that tipping is a form of “flunkyism” defined as “a willingness to be servile for a consideration.”

Lynn’s small study of just 140 tips may illuminate another potentially unattractive aspect of gratuities — that they may facilitate a species of employment discrimination. There is a probably apocryphal story that the word “TIP” originated in British pubs, where signs with these three letters were posted on boxes as a reminder that gratuities were welcome. The letters were an acronym for the phrase “To Insure Promptness.” But the evidence from Lynn’s and my earlier studies are suggestive of a new acronym: “To Insure Prejudice.”

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  1. Lenny Timons says:

    It is refreshing to see evidence of what I encountered as a waiter. I often wondered if I wasn’t imagining the bias. Apparently, I was not.

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  2. frankenduf says:

    I don’t buy some of the social analysis here- the whole ‘tip market’ here seems to me a smokescreen that employers use in order not to pay a living wage- instead of postulating liability under ‘tipping policy’, we should be examining liability within the labor market- and I would guess tipping evolved along the lines of stratification- the wealthy tip the laborer to be magnanimous- the irony to me is that there is now social pressure even amongst the lower classes to not be ‘cheap’ and to tip- a neat subversion to have a poor customer subsidize wages that the much wealthier employer should be providing

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  3. Mike says:

    That’d be great if we can abuse the law to get rid of tipping. I hate it, I just want the price up front.

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  4. mesnenor says:

    I travel a great deal, and ride taxis wherever I go. Only once in the last ten years have I encountered an African-American cab driver – that was in Trenton, NJ. White taxi drivers are similarly rare. Taxi drivers all over the US seem to be almost exclusively immigrants: here in NY it’s mostly Pakistanis and Arabs, in other cities there are a great many Africans (Nigerians and Ghanaians down South; Ethiopians and Somalis in the Twin Cities region, for some reason). In many areas the cabbies are predominantly Latino immigrants. New Haven must be highly unusual if there are enough African American and white cabbies to make a study like this possible. Unless of course the study is really comparing how people react to African immigrants, as opposed to immigrants from elsewhere.

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    • jordan. says:

      I Charleston sc the majority if taxis I have taken from the airport to my house have been African American. Everywhere else though has been what seemed to be immigrants.

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  5. David says:

    Restaurants in Europe are almost uniformly servis compris and being a waiter (both genders) there is as decent a job as any….

    But we know how much better our restaurants are than any in, say, Paris.

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  6. BelowTheCrowd says:

    Worth noting that in my area anyway, many restaurants avoid the problem altogether by pooling tips and splitting them among the servers, with pre-determined tip-out percentages to the kitchen, busboys, etc.

    Of course, this begs the question of why to bother making it an optional activity, and suggests that the establishment could probably be sued for effectively making it a form of variable compensation that may or may not be legal…

    -btc

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  7. Jack says:

    It would be beneficial, albeit difficult, to get rid of tipping. Wages would be increased and discrimination avoided. I worry, though, that the difficulty of changing a system that exists in so many millions of places might prevent anything from happening at all. Is it worth the fight?

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  8. AlexW says:

    Here in Canada it’s deemed customary to tip the drive-thru at Tim Horton’s. It’s become so common than if you don’t, the ladies working generally tend to be snarky on your next trip through.

    I refuse to tip one workerdoing the same job that another working for a different establishment would never receive a tip, nor even expect a tip. Point in case, there are often Wendy’s Restaurants in the very same building with drive-thrus on the opposite side. Their employees would never expect a tip for their services, as such, I will not tip at Tim Horton’s.

    What’s more, is that whenever Tim’s raises the prices of its coffee their employees get into a rage as this will now “Cut into their Tips” as though they were something they deserved! Ludicrous!

    Do your job for your wages, the rest of us do.

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    • Eddie says:

      Alex W:
      I disagree with a couple statements you made above. The first being that Wendy’s employees would never expect a tip from a guest, and that Tim Hortons employees do. I happen to be a general manager at a couple different Tim Hortons locations, and have worked my way up through the ranks from a team member over the past 8 years. I can tell you with certainty that the majority of Tim Hortons employees are appreciative of every tip they get because contrary to what you may think, the majority of guests do not tip at Tim Hortons. It is far from expected. If somebody is working for tips and relies on them to pay the bills, they absolutely are at the wrong place working at Tims.

      The point about raising coffee prices may be true to some extent. Some employees may not understand that prices must rise along with the cost of goods in order for the business to stay profitable and for their jobs to be secure.

      I understand that your experience with Tim Hortons may differ from this, and that’s fine. I just hope that people will realize how hard these employees work every single day, and appreciate the work they do for us.

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