Should Tipping Be Banned? A New Freakonomics Radio Podcast

(Photo: Aaron Stidwell)

Our latest podcast is called “Should Tipping Be Banned?” (You can download/subscribe at iTunes, get the RSS feed, or listen via the media player above. You can also read the transcript; it includes credits for the music you’ll hear in the episode.) 

As we all know, the practice of tipping can be awkward, random, and confusing. This episode tries to offer some clarity. At its center is Cornell professor Michael Lynn, who has written 51 academic papers on tipping. A few examples: 

Because Lynn has largely built his career around tipping, it came as a bit of a surprise when Stephen Dubner asked him what he would change about the practice: 

LYNN: You know, I think I would outlaw it. 

Why ban tipping? Lynn has found that tipping, as currently practiced in the U.S., is in fact discriminatory. If that’s not enough to make you dislike tipping, consider what Magnus Torfason, from the Harvard Business School, has to say

TORFASON: The more tipping you see in a given country, the more corruption you generally see in that country as well. 

You’ll also hear from a New York lawyer named Justin Swartz on the legality of tipping; Jay Porter, the owner of the San Diego restaurant The Linkery, where tipping is forbidden; and from people from all over the country who work for tips — as they dish on their strategies to make more money. (Thanks to radio producers Marc Sanchez, Colin Weatherby, Avishay Artsy and Kaitlin Prest for recording.)

Finally in this episode, you’ll hear how Steve Levitt and Stephen Dubner dole out their dough.

Magnus Torfason's research shows the association between tipping and corruption in 32 countries.

Audio Transcript

[MUSIC: Pearl Django, “Bohéme Auberge” (from New Metropolitan Swing)]

 

Stephen J. DUBNER: Uh, hey Levitt?  

Steven LEVITT: Hey Dubner.

 

DUBNER: When I say the word tipping, what do you think of?

 

LEVITT: I think of discomfort.

 

DUBNER: Discomfort for whom?

 

LEVITT: Oh. For the tipper. For me. I don’t like to tip. I think tipping’s…Tipping’s unpleasant.

 

DUBNER: Now, it’s not that you’re an ungenerous person. I find you quite generous.

 

LEVITT: Yeah, no I just don’t like social interactions that much. And I don’t like the idea that I’m not sure how much to tip, or what’s fair or what’s right. And it leads me in the exact opposite direction. Whenever there’s someone doing a job that deserves to be tipped or that socially we think should be tipped, it’s always my inclination to not let them do their job. So I always want to carry my own bags in airports or in hotels. Obviously I can’t serve my own food at the restaurant, but if I could I’d go right in the kitchen and make my own food.

 

LEVITT: Can I say something about you?

 

DUBNER: Sure Levitt, go ahead.

 

LEVITT: So I always thought I was a good tipper until I hung out with Dubner. Man you throw the money around like it’s going out of style. It’s embarrassing to be around you.

 

DUBNER: That’s not true.

LEVITT: Its’ so embarrassing. Oh man we get in some car, some sedan to take us 15 minutes from one place to the next and you’re flashing twenties and fifties and stuff like that.

 

[THEME]


ANNOUNCER: From WNYC and APM, American Public Media: This is Freakonomics Radio, the podcast that explores the hidden side of everything. Here’s your host, Stephen Dubner.

[MUSIC: Pearl Django, “Samba du Cabaret Rouge” (from Chasing Shadows)]

 

DUBNER: So Steve Levitt, my Freakonomics friend and co-author, thinks I am a grotesque tipper. For the record, I believe he’s exaggerating. But yes, I do routinely tip people who work hard for a living, especially when they’re not getting paid all that well. That said, I agree with Levitt that tipping can lead to discomfort. It can be confusing. Why do you tip a hotel doorman, but not the person behind the reception desk? Why tip a baggage handler at the airport, but not the flight attendant? How much is enough for a tip? How much is too much? And, if you’re on the receiving end how do you get the biggest tips? This is a question that everybody has an opinion about. We talked to people all over the country who work for tips.

 

[MONTAGE OF NAMES OF PEOPLE AND WHERE THEY WORK]

 

MAN: You know what’s really interesting is if you see someone smoking, they’re usually going to be a good tipper.

 

WOMAN: The older, the fatter, the better.

 

MAN 2: You can get a guy that looks like a bum that seems to be a super guy, and you get a guy that looks like a millionaire and he won’t tip you a thing, you know.

 

MAN 3: Black card holders from American Express, 10 to 15 percent, I understand you got rich by being frugal, but that doesn’t fly. Look at their shoes!

 

INTERVIEWER: Their shoes?

 

MAN 3: The shoes. Shoes can say a lot.

 

[MUSIC: The Diplomats of Solid Sound, “Growin’ In It” (from Destination... Get Down!)]

 

DUBNER: Tipping is an idea that economists, traditionally, have a hard time with. Why should I give more of my money to someone else on top of what I’ve already paid for a meal or a ride to the airport? And what is a tip exactly, a fee? A tax? Is it altruism? We needed to find someone who could answer all our tipping questions.

Michael LYNN: My name is Mike Lynn. I’m a professor at the Cornell Hotel School. I do research mostly on tipping behavior.

 

DUBNER: There you go. Why does Michael Lynn find tipping so interesting? In his words it’s “not only because it is widespread but also because it is an expense that consumers are free to avoid.” And how big is this expense?

 

LYNN: I haven’t done it recently with the most up to date records, but approximately $40 billion a year is tipped in the United States.

DUBNER: Forty? Four zero, $40 billion dollars a year.

 

LYNN: Yes.

 

DUBNER: Holy cow. I’m clicking around here. I see that the budget for NASA is under $20 billion. So we could double, we could build two NASAs for tipping. So that’s a pretty astonishingly large amount of money for what is essentially a voluntary financial transaction, yes?

LYNN: I think so, yeah.

 

DUBNER: Lynn has written 51 papers on tipping behavior. Here’s one title: “Are Christian/Religious People Poor Tippers?” The answer to that is yes, relatively speaking. Here’s another paper: “Sweetening the Till: The Use of Candy to Increase Restaurant Tipping.” Yes, Michael Lynn found that candy correlates with higher tips. As you can probably sense by now, Lynn has studied all sorts of factors that may or may not influence tipping.

 

DUBNER: So if we could, we could almost do this as a sort of a lightning round if you’re comfortable giving short answers. Talk to me about how tipping varies based on the following factors. Let’s start with attractiveness of the server.

 

LYNN: Attractive waitresses get better tips than less attractive waitresses. Men’s appearance, not so important.

 

DUBNER: Okay, and what about a waitress versus a waiter generally?

 

LYNN: Hard to say. In general, I would say that waiters get better tips from women than men. Waitresses get better tips from men than women.

 

DUBNER: And what about let’s say among women, hair color? Blonde is better than brunette or red, or no?

 

LYNN: Yes, blondes get better tips than brunettes. Slender women get better tips than heavier women. Large breasted women get better tips than smaller breasted women. Surprisingly, at least in the studies I’ve done, women in their 30s get better tips than either younger or older women.

 

DUBNER: So a skinny, good looking, big-breasted woman in her 30s is going to get big tips.

 

LYNN: I would simply replace the word skinny with slender.

 

DUBNER: Slender. A slender, good looking, big-breasted woman in her 30s gets a big tip. Color me shocked I have to say.


LYNN: Yes.

 

[MUSIC: Texas Gypsies, “Maxwell Swing” (from Café du Swing)]


WOMAN 2: I have tried using my feminine wiles before with mixed results. When I really made an effort at that it tended to work.

 

WOMAN 3: You know, you just flash your smile and make sure that your hair and your makeup is done, even if you’re sweating like a pig. As long as your hair and makeup is done you’ll be alright.

 

WOMAN 4: I pretended to be French for a while, and I put on this accent like this, and I said I was from France. And I have been in New York, for I don’t know, six months, and I love it…It got so tiring though. I was exhausted. It worked though.

 

[MUSIC: Soulglue, “Freakbus”]

 

DUBNER: So how does Michael Lynn know what he knows? Well, he’s studied tipping since he was a grad student.

 

LYNN: The first study I did on tipping was outside of an IHOP.

DUBNER: Then, as now, he looks for as much data as he can get. Even today, he’ll still stand outside a restaurant, interviewing customers as they leave.

 

LYNN: Asking them questions about their perceptions of the dining experience, how much their bill was, how much they tipped. Some of it is having servers keep records of their customers including their bill size, tip amount and race. But a lot of it is either online or telephone interviews with customers asking about their general habit, you know, tipping habit and tendencies.

 

DUBNER: He focuses on restaurant servers since they take in about 70 percent of all tips in the U.S. The server-customer relationship begins the minute you sit down.

LYNN: Introduce yourself by name, not in some remote mechanical kind of way that says, “Hi, I’m Mike, I’ll be your server.” But if you can genuinely have a conversation with that table and as a part of that, you know, introduce yourself by name, that’s good.

DUBNER: Well let’s hear you introduce yourself the right way. Because they way you just said it is the way I hear it a lot. And I have to say it doesn’t make me want to cozy up and dump a 20 in his pocket.


LYNN: That’s true. Please understand, I’m no longer a waiter. The reason I didn’t get good tips when I was a waiter is I’m not the most sociable of people so I’m not sure I can do it right.

 

DUBNER: I’m sure you can. Come on.

 

LYNN: But if you go up to a table and go “Hi, my name’s Mike, I’m going to be…” No, see, it’s starting to sound mechanical. I don’t know how you do it, especially if you’re having to do it over and over again without being mechanical.

 

DUBNER: So that’s interesting. Even the tipping sage cannot master the game. This is a complicated art, no?


DUBNER: What else, what are the other habits, or traits, or tricks that a server can do generally to increase? You said a little bit of a touch is good. I’m guessing a lot of a touch is not so good.

LYNN: Touching…Although, I did do one study where I had a server touch customers and either count one one thousand, two one thousand, remove his hand, or touch one one thousand, two one thousand, three one thousand, four one thousand and then remove his hand. Obviously the counting was meant to be silent.

 

DUBNER: Yep.

 

LYNN: But the point is, that four seconds actually seems like a long time. And it turns out that he got higher tips on both conditions. It didn’t matter how long, as long as he touched.

DUBNER: As long as there’s a touch, yeah.

LYNN: As long as there’s a touch.

 

DUBNER: And where was he touching them?

 

LYNN: On the shoulder when we went to deliver the check at the end of the meal.

 

[MUSIC: Pearl Django, “Blues for Venetia” (from Under Paris Skies)]

 

WOMAN 5: I mean, particularly…It depends on the job, but at this job I definitely touch people on the, like on the shoulder. Often when there’s a big party and I need to lean in, I’ll tap them on the shoulder and be like hey. My boyfriend who’s also a server, we worked together for many years at the same place, he would bend down, you know, but I always thought that was a weird thing to do as a girl, I don’t know.

WOMAN 6: I’ve never been one of those people that tried leaning down, or tried talking to people or touching people. I could just never quite get into the rhythm.

 

WOMAN 4: If I’m gauging a client and he’s much older and he wants to sort of make sure that you’re okay and you’re going in the right direction in your life, and he’s taking a kind of fatherly approach to you, at the end of a dance, or at the end of a champagne room, you know, you might touch his shoulder and say thank you sweetie and ask him if he wants to take care of you. And always flash a really big smile. If you don’t you’re not getting anything.

 

DUBNER: What about, you know, sometimes the server will write the little note, you know, thanks, or a smiley face, or whatnot, does that work?

 

LYNN: Sure, yes, smiley faces have been shown to increase tips of waitresses, not of waiters. Drawing other pictures, like of a sun, increases tips. Squatting down next to the table, or pulling up a chair and sitting at the table if there’s room will increase tips.

DUBNER: And when they increase, by how much are we talking?

 

LYNN: In one study, the server got a dollar more per table when he squatted down next to it. And it turns out this was one of my former students. I asked him what do you do to get better tips. He goes, oh well I squat down. And I said you really think that helps? And his response was sure I know it does. And I asked him if he’d be willing to test his theory. He said sure. So he agreed to randomly assign his table to conditions. He would squat or not squat. And sure enough he was right. Those tables he did not squat at, he got a dollar less. So it cost him money to help me do this research. But I put him as an author on the paper as a small compensation.

 

[MUSIC: Teddy Presberg, “Sunrise on St. John’s” (from Blueprint of Soul)]


DUBNER: So clearly there are all sorts of little things that can nudge a tip up or down. But forget all those little things for a minute. What about the big issue: how good is the service? The conventional wisdom says that good service brings a good tip and vice versa. True? Not true, says Michael Lynn.

LYNN: First off, I’ve done a lot of research looking at the size of tip and how it relates to the customer’s perceptions of service quality. And a consistent finding is that there is a relationship, people do tip more the better the service they get. But that relationship is very weak. It’s a correlation…The average correlation is 0.2. That means about 4 percent of the variability of the differences in the percentage tips left by different dining parties can be explained by their service ratings. So…

 

DUBNER: It’s astonishingly low, isn’t it? Not just a little bit?

 

LYNN: Yes, it’s astonishingly low. So it’s absolutely the case that tips are not as strongly related to service as you would expect. Absolutely, I believe that that’s got to reduce the incentive value of tipping. Having said that though, even though the actual relationship between tips and service is low, servers think there’s a relationship, and that’s enough to motivate them to deliver good service.

 

[MUSIC: Teddy Presberg, “Free Love” (from Blueprint of Soul)]


DUBNER: That’s surprising, isn’t it, how weak the relationship is between service and tipping? On the other hand, maybe we shouldn’t be so surprised. It reminds me of some of the research on altruism. If you ask people why they give money to a certain cause, they’ll talk about how meaningful the cause is. But if you look at the actual numbers, you see that the cause takes a back seat to who’s doing the asking. Like Mike Lynn’s research on tipping, it turns out that a pretty blonde woman has advantages collecting charity, too. So a lot of our behavior that we may think is because of Reason X may actually have a lot more to do with Reason Y.

 

DUBNER: Coming up on Freakonomics Radio: an argument for why tipping is just bad …   

 

Magnus TORFASON: We found that even after controlling for these other things we still find this positive relationship between tipping and corruption.

 

DUBNER: And an argument for why tipping is really, really bad:

 

LYNN: It’s discriminatory.

WOMAN 6: I lost my job because my manager said that I didn’t fit the look of the company, or the restaurant. So I don’t know if it was because I’m a lot more curvier than the other girls or because my skin is darker. I don’t know. This new manager he was an a**hole.


[UNDERWRITING]

 

ANNOUNCER: From WNYC and APM, American Public Media: This is Freakonomics Radio. Here’s your host, Stephen Dubner.

[MUSIC: Das Vibenbass, “Third Tongue” (from Mind Wrestling)]


DUBNER: Michael Lynn is a scholar of tipping, at Cornell. He’s examined just about every little thing that can affect tips. Some of his most interesting research looks at how people of different racial and ethnic groups tip and get tipped.

 

DUBNER: What can you tell us about race of the tipper? So you know, waiters talk about certain racial and ethnic groups, and I should say national groups always tip, you know, worse than others. What do you know about that?

 

LYNN: Blacks tip less than whites in this country. They’re more likely to leave without tipping at all. If they do leave a tip it’s on average a smaller amount. They’re more likely to be flat tippers and not tip a percentage of the bill. It’s partially a little bit mediated by socioeconomic status, that is blacks also have lower educations and incomes in this country than whites, and people with higher incomes and educations tend to tip more. So that’s part of the reason that blacks tip less, but it’s only a tiny part.

DUBNER: What’s the other part? What do you know about why that is then?

LYNN: I can tell you it’s not exclusively an issue of service discrimination, because I find even controlling for the customer’s perceptions of service quality, blacks tip less than whites. The most powerful explanation is that it is a difference in perceived injunctive and descriptive tipping norms.

DUBNER: Ooh, I didn’t understand that.

LYNN: Alright, an injunctive norm is a norm about what you should do. And a descriptive norm is a norm that describes what people do do.

 

DUBNER: I see.

 

LYNN: Okay, what I found is that blacks in this country, only about a third of them, if you ask how much are you expected to tip in a restaurant context, only about a third of blacks will give an answer in the 15 to 20 percent range.

 

DUBNER: I see and that compares how to whites then?

 

LYNN: Two-thirds of whites.

 

DUBNER: Interesting. It makes sense that social norms vary from group to group, right, so I guess it’s not so surprising in some way.

 

LYNN: That’s right, it’s not completely surprising. But what’s surprising to me is the knowledge of the injunctive norm explains only about a third of the black-white difference in tipping. When I include differences in descriptive norms, because I could note, oh yeah, you’re supposed to tip 15 percent, but nobody really does that, that would be being aware of the injunctive norm but having a different perception of what the descriptive norm is. And it turns out that there’s also a black-white difference in perceptions of what people do. If I take both of those perceptions of the injunctive and descriptive norms, I can account for about half of the black-white difference in tipping.

DUBNER: Wow.

 

LYNN: What’s beyond that, I’m stumped. I have tested everything I can think of. If any of the listeners have ideas, have them email me, because I’m looking for areas, you know, to test next.

DUBNER: Alright, that’s fascinating. So first of all, what is your email?

 

LYNN: WML3@Cornell.edu.

 

[MUSIC: Pearl Django, “Eleventh Hour” (from Eleven)]


JACKRABBIT. They call me Jack Rabbit. They call me Jack Rabbit. I’m an exotic dancer.

 

Yvette MORGAN: Alright, my name is Yvette Morgan. And actually I’m a host at a restaurant.

 

JACKRABBIT: Basically because, I mean I’m not speaking for all blacks, but we have a mindset of the fact that whatever we’re doing for that service, we’re getting paid, so a tip is basically a gratuity, which is an extra. And then I guess in other cultures they see it as a form of income. I know, for example, when I talk to some people that I know that are white, when it comes to restaurant tipping, they always presume the fact that they don’t make any money so the tip is all they count on. So they view it differently.

MORGAN: It’s your attitude. It’s your attitude. I mean, I’m not saying that black people have bad attitudes, but if you don’t…You know, you can make good tips if you have a good attitude. I don’t care if you’re black, white whatever. If you have a bad attitude you’re not going to make good tips.

 

DUBNER: What about differences in tipping for black customers toward black versus white servers.

LYNN: Both groups, black and whites, will tip a white server more than a black server. And that’s even controlling for perceptions of service quality.

 

DUBNER: So a black customer will tip a black server less than a black customer will tip a white server, all else being equal?

 

LYNN: Yes.

DUBNER: Wow. So it’s fascinating. What can you tell us about other racial or ethnic groups, Asians, Latinos, immigrants versus, you know, on and on I’ll take whatever you have? It’s fascinating.

 

LYNN: Sure. The data on other ethnic groups is more mixed. There are plenty of…There are several studies finding that Hispanics tip less than whites. But there are studies showing no Hispanic-white difference in tipping. I haven’t yet teased apart what’s going on, why am I getting it sometimes and not others. And the same thing is true with Asians. I do have some studies showing that Asians tip less than whites, other studies showing that they do not. The one thing that I can say for certain is that the Asian-white difference even when it does exist is very fragile. That is, I can control for things like sex, education, income and it disappears. The Hispanic-white when it exists is often robust. I can control for education, income and it’s still there. But I don’t find it as consistently as I find the black-white different.

 

DUBNER: With all groups, once you control for income if you can, men versus women as customers, who tips more?

 

LYNN: In general there’s no sex difference.

 

DUBNER: Is that right?

 

LYNN: Yeah, and even the sex of server, sex of customer interaction that we talked about previously, it has been observed consistently enough for me to say it’s a real effect, but it’s not universal. You don’t always find that effect either.

 

DUBNER: I see, what about the age of the customer, how do we see that?

LYNN: Older customers tend to tip less. They’re also more willing, they base their tips on service quality a little bit more than younger people

 

DUBNER: So let me…You obviously know so, so, so much about this strange but common practice of tipping. If you could rewrite the custom, rewrite the social more, which is obviously impossible because it arrives over time with a lot of people participating in it, what would you do, how would you make tipping more either sensible, or directly related to the things it should be related to, and so on?

LYNN: You know, I think I would outlaw it.

 

DUBNER: You would?

 

LYNN: Yeah, and it might be illegal as it is because of the race of server effect that we had previously discussed. It’s conceivable…You could make the argument that tipping is a condition of employment that has an adverse impact on a protected class.

 

DUBNER: So it’s discriminatory you’re saying.

 

LYNN: It’s discriminatory. Yes, and the Supreme Court has ruled that even neutral business practices that are not intended to discriminate, if they have the effect of adversely impacting a protected class are illegal. And so it’s not inconceivable to me that there will be a class-action lawsuit on the part of ethnic minority waiters and waitresses claiming discrimination in terms of employment. And it’s conceivable that tipping might be declared illegal on that basis.

 

DUBNER: You’re talking theoretically, or is this a movement that actually exists?

 

LYNN: Oh, I know of no such lawsuit right now in existence.

 

DUBNER: But it’s not hard for you to imagine.

 

LYNN: It’s not hard for me to imagine. I’ve talked to lawyers including people who specialize in labor and employment law. And I’ve gotten mixed opinions. I mean, some of those lawyers have said, not the courts would never go there. Others go, no that is a reasonable theory of the law, that’s plausible.

Justin SWARTZ: I think it is plausible. My firm would take a good, hard look at a case if a server came to us and made that complaint.

 

[MUSIC: Jessica Lurie, “Solitaria” (from Licorice & Smoke)]

 

DUBNER: Justin Swartz is a lawyer at Outten & Golden in New York City. He represents employees in class-action discrimination cases. He’s sued some of the biggest restaurants in New York for shorting employees on the tips they deserved. If his firm were to take on a discrimination case, like Michael Lynn has proposed, Swartz pursue two lines of argument. 

 

SWARTZ: The first would be disparate impact analysis. The purpose of disparate impact analysis is to eliminate what the Supreme Court calls headwinds, policies that make it harder for racial minorities or other people in other protected classes to succeed.

 

DUBNER: With disparate impact, you don’t have to prove that discrimination is intentional; it’s a proxy for discrimination.

SWARTZ: The idea is that if there’s a disproportionate impact on a particular group here it would be African American or non-white servers, then the plaintiffs have made the first showing that they need to make in their case.

DUBNER: And the second argument?

SWARTZ: The second step then is the employer’s burden.

 

DUBNER: Meaning, it’s up to the employer to prove that tipping is a business necessity—not a custom, but a necessity.  

 

DUBNER: Let’s say I’m a restaurateur and I come to you and I say look, I know what you do, I know who you represent, and I want to avoid, I want to avoid unfairness and I also want my business to prosper. So let’s say I calculate the average tips in my restaurant and it’s 20 percent, and I hate the fact that wait staff member A earns 50 percent more than wait staff worker Z because wait staff worker A happens to have these attributes that for whatever reason get a lot of tips. Pooling is complicated for whatever reason. Let’s just say I don’t want to deal with all the complication, so I’m just going to say on my menu to my clientele, we’re getting rid of tipping because it’s inefficient, sloppy and potentially discriminatory. Average tips here were about 20 percent and therefore we’re going to ban tipping and instead raise our prices 20 percent.


SWARTZ: I don’t see any problem with that from a labor law perspective. And in fact, that might be the best way for restaurants to insulate themselves from liability.

 

[MUSIC: Ruby Velle and The Soulphonics, “The Man Says” (from Album Title)]

 

DUBNER: Now, you may know that some restaurants in the U.S. have already eliminated tipping, opting for an automatic service charge instead. If customers want to, they can tip on top of that service charge. One restaurant in San Diego, called the Linkery, has gone so far as to ban tipping. If you leave extra money on top of the Linkery’s 18% service charge, it will be donated to charity. Jay Porter owns the Linkery. He thinks tipping is absolutely ridiculous.

 

Jay PORTER: If tipping had never been invented and you were starting a restaurant, would you use tipping as the way to compensate your best employees? You know, your most important employees? All your employees? Would that be the system that you would pick in a vacuum to compensate your team? And I think the answer’s clearly no, because it’s a stupid system. So why not do it the right way even if it’s a little scary.

 

[MUSIC: Pearl Django, “The Conversation” (from It’s About Time)]

 

DUBNER: Now, if you live or travel outside the United States, this entire discussion on leaving a tip in a restaurant might seem ridiculous. Most of the world operates on the simple premise of a service charge or a fixed price, no tip expected. The U.S. is empirically tip-crazy.

 

TORFASON: In the U.S. we have 31 different service professions being tipped.

 

DUBNER: That’s Magnus Torfason.

 

TORFASON: In Canada we have 26 or 27, which is the same as in India. In the Netherlands we have 15, then we have in Norway, Sweden and Denmark we have between 5 and 10.

DUBNER: Torfason teaches entrepreneurship at the Harvard Business School.

 

TORFASON: In Japan we have 4, and in Iceland we have 0.

 

DUBNER: Guess where Torfason is from? Yes…Iceland.

 

TORFASON: So that’s on the exact opposite end of the spectrum from the U.S., which is the most, which is the country where tipping is most prevalent.

 

DUBNER: Now, why was Torfason comparing tipping in countries around the world? What does his research show? Well, if you’re looking for yet another reason to hate tipping, listen to this:

 

TORFASON: The more tipping you see in a given country, the more corruption you generally see in that country as well.

 

DUBNER: Here’s how he came to that conclusion.

 

TORFASON: So we started by collecting information about tipping in some 33 different countries and in 33 different service professions. These are waiters, hairdressers, taxi drivers and so on. And we also looked at the levels of corruption in these countries looking at how they scored on the corruption perception index, which is publicized by Transparency International. Running a simple correlation we found that there’s a positive relationship between those two, which could have been for many different reasons. But we then control for a number of other factors such as GDP, the culture in a country in general, homicide rates and other measures of legal enforcement—and this relationship stayed significant. In other words, we found that even after controlling for these other things we still find this positive relationship between tipping and corruption.

 

DUBNER: Why in the world would this be? Was Torfason surprised?

 

TORFASON: Well so I was not as surprised as many others. I started this research because I had an inkling that there was this dark side of tipping. In the U.S. we have a strong norm for tipping, and so if you’re an upstanding and law-abiding citizen you’re very likely to be also a good tipper, because that’s what the norms tell you. And you’re also likely to avoid corruption. But across countries we see a different pattern where these norms that encourage tipping, which is a form of informal payment for services, may be leaking over into other forms of exchange which are not as positive and not as socially beneficial as tipping.

 

[MUSIC: Pearl Django, “Bohéme Auberge” (from New Metropolitan Swing)]

 

DUBNER: So in the end, Steve Levitt is right to dislike tipping, isn’t he? Even if he’s not right for all the right reasons.

 

LEVITT: I don’t like to tip. I think tipping’s…Tipping’s unpleasant.

 

DUBNER: As I said earlier, it’s not that Levitt is ungenerous. It’s just that tipping is too woolly, too random, too confusing.

 

LEVITT: Well, I tip caddies, so when I play golf I’m extremely generous with caddies.  

 

DUBNER: Mmmhmmm.

 

DUBNER: See I think my tipping has rubbed off on you frankly, because when we met you didn’t tip, you wouldn’t tip anybody. You would barely tip at a restaurant.

 

LEVITT: Well I didn’t like to talk to people so I just let you do the tipping because that was easier. But you have a different strategy than me. Every time you get into a car that takes you from someplace to another as we often do when we’re on the road you tip the guy, which I think is a terrible equilibrium. So I have a different equilibrium where for the entire year I don’t tip anyone ever, no mention of it. And then what I’ve taken to doing now is there’s a car service I use a lot to get to the airport and so what I did is instead of ever tipping, I just sent a bunch of cash to this car service and I said will you just give it to the drivers according to what you think would be fair.

 

DUBNER: I’m sure that was distributed equally, right.

 

LEVITT: I don’t know about equally, but let me say, the reaction of the drivers…

 

DUBNER: Okay, let me rephrase, I’m sure that was distributed at all. An envelope of cash comes to like…One person at a car company gets…That’s how you tip?

 

LEVITT: It is funny. So I called up, I called up the car company and said I would like to give this money. And the woman said send it right to me. And I thought it would never be distributed, but what I will say is that the reaction I’ve gotten from the drivers has been really, really positive, and I sometimes won’t see these drivers for months and months, and they will say how thankful and grateful they were that I made this generous gift. I think it really worked so much better, because the hard part about tipping is well you don’t have the right change, and then you’ve got to say oh hey I’m sorry…

DUBNER: Can I tell you something though? I really think it’s the duty of an adult in a tipping society to like pre-think that. It’s like when I go to a, like if I go away to with the family, we’re going on vacation somewhere, we’re going to be staying at a hotel, I like load up on the right denomination bill. Because I feel like…Here’s what I feel like: I want to reward the people who are working hard whether or not they really deserve it because they’re already working hard, and I figure that probably most of the people that I come into contact with in that situation—hotel, car, whatever—are being underpaid for what they’re working. That’s my view. Maybe I’m wrong, maybe I’m naïve, maybe I’m a bleeding heart, but that’s the way I feel.

LEVITT: I think that’s nice that you work that hard, but I don’t work that hard on other people.

 

DUBNER: Well let me just say this, I was in Chicago a few weeks ago, I flew out to work with Levitt, I got picked up at the airport by a car, the same car service that Levitt uses it turns out. And my phone rang and it was Levitt. So I said, hey Levitt. And the driver says that’s Levitt? That’s my boy, Steve Levitt! So apparently Levitt’s strategy works just great.  

 

[CREDITS]

 

 

Leave A Comment

Comments are moderated and generally will be posted if they are on-topic and not abusive.

 

COMMENTS: 186

View All Comments »
  1. Samantha says:

    If tipping were banned I would seriously need an increase in the minimum wage.

    Well-loved. Like or Dislike: Thumb up 39 Thumb down 21
    • Dave says:

      If tipping were banned waiters’ wages would increase regardless of the minimum wage. If wages didn’t increase, no one could afford getting a job waiting tables. The lack of supply would dry up and restaurants would have to start paying more.

      That’s simple economics. No need to have the government intervene (further).

      Well-loved. Like or Dislike: Thumb up 123 Thumb down 26
      • Phil Persinger says:

        Dave–

        Would that it were so: that simple economics take care of a issue like this. The absolutely flat median wage in this country over the past 40 years says it might be otherwise.

        Without government regulation/oversight or strong union representation, minimum wage workers are at a distinct disadvantage in individual wage negotiations w/ their respective employers.

        That said, I would prefer that staff wages did not depend on tips.

        Well-loved. Like or Dislike: Thumb up 57 Thumb down 36
      • BSK says:

        Of course, a ban on tips is itself government intervention.

        Well-loved. Like or Dislike: Thumb up 26 Thumb down 11
      • Phil Persinger says:

        BSK–

        We need a lawyer here to discuss the constitutionality of the Government’s banning tips (a suggestion, presumably made sardonically, by Michael Lynn), but I imagine that the First Amendment would protect my right to reward stellar service– whether at a restaurant, to a tow-trucker driver on a AAA call, to a cracker-jack cabbie, etc. Such a ban, even if constitutional, would be unenforceable.

        Many of the commenters here who seem to be in the service industry are making the point that wages should not depend primarily on such a sometime thing as tips.

        Well-loved. Like or Dislike: Thumb up 12 Thumb down 2
    • Nick says:

      Tipping is actually used to justify paying waiters LESS than minimum wage. So maybe minimum wage would not have to go up for the majority of waiters to earn just as well. (However, I do support raising the minimum wage but not necessarily just in case tipping is outlawed.)

      Well-loved. Like or Dislike: Thumb up 20 Thumb down 6
      • Juanblnco says:

        Yeah, I was hoping to hear something regarding why the restaurant industry is allowed to pay less than minimum wage. Wherevand why did this start, and how is it that the practice still survives. Essentially, the customers subsidize the industry…I don’t know of anywhere else in the service industry this happens…?

        Well-loved. Like or Dislike: Thumb up 18 Thumb down 0
      • Thanos says:

        @Phil they have service jobs where employees aren’t allowed to take tips and all you would be doing is getting them fired if you dis try to give it to them

        Thumb up 0 Thumb down 0
      • Phil Persinger says:

        Thanos–

        Thank you for your reply, if it was to my (now-hidden) comment above. Only Mike Lynn is saying (and, I gather, not seriously) that tipping should be banned– although that is the deliberately provocative title to this blog page.

        The questions the practice of tipping raises are: how does tipping affect customer/server interactions and, incidentally, what would the fall-out be if tipping were not the custom?

        The “getting them fired” argument is a common one in minimum-wage discussions, but I’m not sure that it’s actually been demonstrated that the institution or raising of minimum wage has resulted in across-the-board mass firings. Citations to this effect are welcome.

        As is evident from other comments here, tipping is a cultural practice and is viewed as an insult in some countries. My position is that all workers should be paid a living wage regardless of tipping customs precisely because these customs are arbitrary– and the cost of living is mandatory.

        Well-loved. Like or Dislike: Thumb up 8 Thumb down 2
      • Chris says:

        As a server, while I would like to be paid at least minimum wage for my check, my average hourly wage is $20-$30 an hour. So without tipping I can’t image a restaurant agreeing to pay servers an hourly wage in that range. It would be a loss for many of us.

        Well-loved. Like or Dislike: Thumb up 22 Thumb down 4
      • Thanos says:

        @Phil I am speaking from personal experience, we were payed well above the minimum wage IIRC(it’s been over 6 years since i worked in service) it was about $20+ and under no circumstances were well allowed to take tips. People were fired for pocketing money if it was found out. You advocate the free-market so in a free market an employer has a right to set those rules

        Thumb up 3 Thumb down 0
      • Phil Persinger says:

        Thanos–

        Well, I don’t have the skill-set (by a long shot) to be a good server, but judging from other comments in this thread your personal experience in the profession was not universal. Tipping policy and division-of-tips policy is all over the map; I imagine not many servers pull $20/hr as a salary– assuming I’ve understood you correctly.

        I sympathize with the free market, but I also believe that achieving a free market is like producing a perfect vacuum, hitting absolute zero or matching light-speed: impossible to do, with the effort involved totally beyond value to the everyday experience of most folks.

        A free market, for instance, only works with an absolutely transparent information environment. Where does that exist? How do the wage negotiations between an individual worker and her employer typically play out with the asymmetry in what each knows? Not to the worker’s advantage.

        Now, I know that some workers thrive in that environment and view the above asymmetry as a challenge. But that set is individuals is not identical with the full set of workers. And that defines the polarity of this whole discussion: individual challenge vs. the general fairness of transparency. It’s hard to find a happy medium here.

        Thanks again for your comments.

        Thumb up 3 Thumb down 1
      • bignurse says:

        FYI, a few states such as California, Oregon, Washington and Alaska require employers to pay minimum wage REGARDLESS of whether the employee is tipped or not. And yet here in California, 15-20% tips are still the norm.

        Well-loved. Like or Dislike: Thumb up 12 Thumb down 1
  2. tabitha says:

    Yes, if tipping were banned, us servers would need to make more than the national pay of $2.13 an hour. Which after paying taxes leaves us with a zero paycheck. Did you know that the $2.13 an hour has not been raised since the early 1970s?

    Hot debate. What do you think? Thumb up 12 Thumb down 9
    • BSK says:

      Hidden due to low comment rating. Click here to see.

      Disliked! Like or Dislike: Thumb up 20 Thumb down 26
      • Mickey says:

        Servers are taxed with the assumption that they make some %(10?) of their bill in tips, so that is added to their taxable income. So the paycheck could be close to zero, while their take home pay would not be

        Well-loved. Like or Dislike: Thumb up 20 Thumb down 3
      • CJL says:

        Hidden due to low comment rating. Click here to see.

        Disliked! Like or Dislike: Thumb up 1 Thumb down 10
      • Lori says:

        Really? Impossible? That means the 4+ years of $0.00 paychecks I’ve received at my current server position have all been horribly wrong! I must tell the rest of the girls immediately.

        Well-loved. Like or Dislike: Thumb up 16 Thumb down 2
      • Steve Cebalt says:

        Hi BSK: I own a business and take a salary and profits/losses. I put all of my salary into tax withholding for convenience. In years where there is not profit (2009, 2010) a zero paycheck is very much possible. I have the 1040s and W-2s to prove it

        Thumb up 3 Thumb down 0
      • Steverino says:

        No, that’s not true. It’s possible to have a zero paycheck because of taxes. I know this for a fact: I once was the back-of-house manager at a restaurant, and ran the payroll for the employees.

        Your taxes are a percentage of your TOTAL pay, but your wages (hourly pay) are only a part of your total pay. Nowadays, you are required by Uncle Sam to pay income tax on your tips, as well as payroll taxes (Medicare and Social Security). (Your employer is also required to pay into Medicare and Social Security based on your tips.)

        If you make enough in tips, the tax on those tips can easily be higher than your hourly wages. To give you an example, if you make $7/hour and you pull in $100/hour in tips, just your Medicare/SS will be more than your hourly wage.

        Where can you make $100/hour in tips? Well, that depends on the restaurant. A fine dining place, where the entrees run upwards of $35 (in addition to wine/cocktails and desserts), will easily have bills of upwards of $60/person. At 20%, that’s $12 per person in tips. It doesn’t take many tables over the course of an hour to get to $100.

        Thumb up 4 Thumb down 3
      • Spencer says:

        Yes, taxes are a percentage, of your total income. As a server/bartender your hourly wage is a very small part of your pay, typically 5-20% of your total pay (hourly+tips)

        So if you have more than that withheld in taxes you won’t get a paycheck, just a slip that says “THIS IS NOT A CHECK”

        Thumb up 2 Thumb down 0
      • J.J. says:

        I’ve received paychecks that said zero. Multiple ones actually. I work near a ball park so sometimes I’ll make some pretty good money in tips which gets taxed.

        Thumb up 1 Thumb down 0
    • Nick says:

      Hidden due to low comment rating. Click here to see.

      Disliked! Like or Dislike: Thumb up 5 Thumb down 16
      • caleb b says:

        “Your take home pay is not zero. ”

        @Nick

        Especially at high end restaurants, the waiters never receive a pay check. Technically, a paper check is written, but the server owes more in taxes than the $2.15 per hour, so every check says zero. I know waiters that haven’t picked up a pay check in 25 years. They collect their W2 at the end of the year, then write a check to the IRS for the difference that they still owe.

        Well-loved. Like or Dislike: Thumb up 7 Thumb down 2
    • James says:

      Employers are legally required to pay the difference to the actual minimum wage (varies by state) if it is not met by tips.

      Well-loved. Like or Dislike: Thumb up 9 Thumb down 0
      • Dylan says:

        While that might technically be the case, I doubt any employers -or employees for that matter- are in any rush to enforce it. Workers in the service industry can be fired at essentially any time, for any reason, and asking for more money at one of these jobs can be an excellent way to test that principle.

        Well-loved. Like or Dislike: Thumb up 15 Thumb down 3
    • EvannG says:

      where in hell is $2.13 the minimum hourly wage? and are you incapable of finding another job elsewhere?

      Thumb up 1 Thumb down 5
      • Marita says:

        My sweet, well-educated brother was laid off from his management job when he was 54. He ended up as a waiter in Phoenix, Arizona and makes $2.35 an hour. It is a “right to work” state. Luckily, he makes good tips. He went from making 60K to 25K, no benefits. His parent company, Darden, makes a fortune.

        Thumb up 1 Thumb down 0
  3. Claire says:

    @Samantha, of course there would be an increase. Right not it is a reduced minimum wage for servers b/c of the presumption of tips.

    Well-loved. Like or Dislike: Thumb up 7 Thumb down 1
  4. Ber says:

    But the supply of waiters won’t necessarily dry up depending on the location. Some locations with a high rate of unemployment will still pay the same wage and the people won’t be able to simply change jobs because they want to…

    Thumb up 4 Thumb down 3
  5. John Patrone says:

    What I find offensive are businesses that count tips as wages and pay their employees less than minimum wage so that tips have to make up the difference. I wouldn’t mind doing away with the practice tipping altogether, but I don’t trust businesses not to find a way to further screw their employees in favor of their own self interest if such a change were to occur.

    Thumb up 11 Thumb down 8
    • Ber says:

      I friend of mine worked as a waitress here in Brazil and she said she had to pay 3% of the bill to the kitchen, regardless of the customer paying the customary 10% tip or not.

      That means, if the waiter does a bad job or the customer simply didn’t want to pay the tip, he has to pay the kitchen using his own money…I find this outrageous

      Well-loved. Like or Dislike: Thumb up 12 Thumb down 1
    • Chris says:

      Unfortunately a business is established with the intention of making a profit. If costs are more than income the costs are passed off to the consumer. What this means for restaurants, and the service industry in general, is that the lower price for food and drinks customers enjoy is directly because they don’t have the high cost of labor due to only having to pay servers 2.13/hr in many places. This benefits both parties as servers generally end up making more in tips than they would be able to with a straight hourly wage, and customers don’t pay ridiculous prices for their meals. In the US especially they are numerous hidden costs to running a business such as a restaurant that can drive up the price paid by the consumer, occupational licenses, vendor license, alcohol licenses (which are often split up into several categories where many restaurants need multiple licenses), restaurants even end up paying the health department to do inspections just so that they can stay open.
      If you’re still confused as to why many restaurants operate the way they do and pay their employees the way they do then I’m not sure you can comprehend that as a business, as opposed to the government, you have to make more than you spend to stay in open.

      Thumb up 2 Thumb down 0
  6. zsz says:

    I am an Asian immigrant and because I look different I feel I am forced to tip more.

    I always tip about 20% no matter what. If I were white, I would probably tip less and tip based on the service and food.

    Well-loved. Like or Dislike: Thumb up 40 Thumb down 35
    • amswiss says:

      it’s hilarious that people down-voted this to the point of hiding it. i think what zsz might be getting at is something like the feeling i got listening to the show’s breakdown of tipping patterns by race … i’m a nonwhite person who has some small and probably crazy thought in my head that if i don’t tip at least 20% (in nyc) then, not only will the server basically think i’m a bad tipper (stigma enough already) but he or she might also have some kind of negative racial stereotype (statistically justified or not) reinforced … so i feel like i need to counteract this probably imaginary circumstance with some preemptive generosity. instead of down-voting this comment, try to give this thought the benefit of a doubt … it’s not race-baiting or something … it’s just an expression of the awkwardness problem that levitt was talking about.

      Well-loved. Like or Dislike: Thumb up 39 Thumb down 8
      • csdx says:

        Interestingly enough in the “Are Christians poor tippers” study it turns out that Jewish people are among the highest tippers, perhaps many other people feel that same need to combat stereotypes?

        Well-loved. Like or Dislike: Thumb up 32 Thumb down 2
      • Phil Persinger says:

        To bolster the argument above, please refer to Mr. Twenty Percent’s comments below. Apparently, zsz and amswiss are not alone.

        Awkwardness is universal, if not always owned up to.

        Thumb up 4 Thumb down 0
  7. Daedaldagny says:

    When I took a trip to Japan, I found there is no tipping custom and insulting for the worker.

    Thumb up 7 Thumb down 4
    • holycalamity says:

      Whenever anyone suggests that service would decline if tipping were eliminated, I point to Japan, where you’re likely to get better service in any setting that normally requires tipping in the States.

      Well-loved. Like or Dislike: Thumb up 16 Thumb down 2
      • Daedaldagny says:

        Right, the Japanese worker finds Americans who try to tip them insulting, because they are paid well to do the job well. They don’t need any other incentive than the pride of their work. At least, what I found on my trip, which you’re right- best customer service everywhere I went there.

        Well-loved. Like or Dislike: Thumb up 22 Thumb down 0
      • Enter your name... says:

        You can’t just transplant Japanese non-tipping culture to the US. There is a long-established cultural tradition here of tipping as a both a reward for service and how servers earn the bulk of their income.
        If tipping were somehow outlawed here what you would get is a serving staff that has lost significant compensation and is unhappy about it. That is very likely to cause a decline in service by underpaid staff.
        You can’t really expect American businesses to raise wages to compensate for lost tips? The Japanese serving staff are (according to others in the commentariat, I have no experience) paid well enough to be insulted by tips. I simply cannot believe that his will be the case in America if tips are banned- owners will do their best to minimize what they pay servers and maximize profits in the fine American tradition .

        Thumb up 5 Thumb down 3
    • MW says:

      In the ‘national personality and tipping’ paper linked above, the list of national characteristics which correlate with prevalence of tipping is a very close match to the stereotype of Japanese national character. (The one exception being masculinism.) It is interesting that they run counter to the paper’s conclusions.

      (I’m a New Zealander, and I have never in my entire life tipped in New Zealand. I’m very happy with the clarity of this situation. Here’s one of a number of instances where Miss Manners deplores the practice: http://www.dispatch.com/content/stories/life_and_entertainment/2008/11/09/2_MANN1109.ART_ART_11-09-08_E8_GQBQCA5.html)

      Thumb up 4 Thumb down 0
    • Aaron says:

      This is false. A 10-20% service fee is added to your bill in Japan. Its the same as tipping.

      Thumb up 3 Thumb down 1
  8. holycalamity says:

    What’s worse than tipping itself is the practice of tip-outs, i.e. requiring staff to distribute their loot to non-tipped positions.

    Commonly, restaurant waiters either pool their tips into a single pot or take a cut of their own tips, so they share their earnings with busboys, hosts, etc. It’s another fun way for management to avoid paying their service staff.

    Though the worst case is strip clubs. Strippers don’t earn a salary, and their income depends entire on tips (though the money ends up being good if you can hack it). But before they can earn a single cent, they have to tip out to bartenders, bouncers, DJ, makeup and house mother. Which means they’re often $100 or more in the hole before they start their shift.

    Well-loved. Like or Dislike: Thumb up 10 Thumb down 4
    • BSK says:

      Most strip clubs are egregious business models, many of which are probably illegal. “$20 cover! Oh, and once you’re inside, we’re going to enforce a drink minimum we didn’t tell you about. And that cover only covers getting you in the door, not a table or a seat, despite what the doorman told you. And if you don’t tip, we’ll quickly escort you out for mistreating the ladies.” It is a bait-and-switch scam.

      Thumb up 5 Thumb down 5