An Economist's Tipping Strategy

I have a friend with whom I regularly eat out at restaurants and from time to time we disagree on how much to tip.  Traditionally, I have been a hard-wired 20% tipper.  But since studying the racial effects of taxi-cab tipping, I’ve been more attracted to tipping less – sometimes closer to 15%.  This has at times created disagreements between my friend and I on how much to tip.  He always wants to tip 20%.  But when we’ve disagreed, we’ve always resolved the issue by tipping the larger amount.  We always split the bill—including the tip—50/50. 

But a few weeks ago, my friend and I were eating dinner and experienced exceptionally bad service.  The server twice put in the wrong order and charged us for items that we had not ordered.  I suggested that we reduce our tip to 10% (I note that while I’m high maintenance in many aspect of my life, I’m not persnickety about restaurant service and the last time I reduced my tip to 10% was probably more than 1000 restaurant meals ago).  My friend agreed that the server had made these errors (and indeed, the sever himself acknowledged that the service was subpar),  Nevertheless, my friend still wanted us to leave a 20% tip. 

FREAK-est Links

1. Drew Brees criticized for not tipping enough for takeout. (HT: Steve Schwinger)

2. The People’s Daily Online Public Opinion Monitoring Center: where the Chinese government collects data on Chinese public opinion.

3. The women of the "Opt-Out Revolution" are ready to lean in.

4. In South Korea, where 93 percent of students graduate from high school, "rock star" teachers earn millions.5. Is Boeing buying back old 747s to drive demand for new ones?

Lessons From a No-Tipping Restaurant

Our recent podcast about tipping mentioned a San Diego restaurant, the Linkery, that adopted a strict no-tipping policy. The Linkery has since closed its doors, but owner Jay Porter (who was featured in the podcast) has been writing about the effects of a no-tipping policy. Here's Part 1 and Part 2 of his blog posts. A summary of his takeaways:

1) Due to poorly cohering laws in many Western U.S. states, using a service charge has typically been the only legal way for a restaurant business to balance wages between servers, bartenders, cooks and dishwashers. That’s why restaurants like Chez Panisse instituted such a [service charge] policy.. Subsequent court decisions in the Western U.S. have opened up the possibility that other arrangements are legal, but the service charge is still the safest model.

2) Because tips cannot legally, in most cases, be controlled by the employer, they are typically distributed (or not distributed, as the case may be) according to a social compact between the employees. That social compact is either unenforced or enforced through social means, like ostracization. In either event, the systems for both acquiring and distributing tips are easily gamed by members of the compact who are intent on doing so.

More Stories About Tipping

Our latest podcast, "Should Tipping Be Banned?," has stirred up a lot of response. Below are a few interesting e-mails from listeners. First one is from Spencer Doren:

Like Levitt, tipping makes me uncomfortable. He'll be happy to know that Sushi Yasuda (my favorite sushi in NYC) doesn't accept tips in order to stay true to Japanese tradition. In Japan, tipping isn't practiced as it is considered rude.

A listener named Heather Rush doesn't like tipping reform at all (and plainly didn't know me back when I bussed tables, and worse):

As someone who has spent her whole life working in an industry that offers servers no job security, tolerates rampant sexual harassment, long unregulated work days and no fringe benefits, your suggestion that tipping should be banned because it's unfair seems trite. Try standing on wet mats for 12 hours while enduring abusive customers, crooked managers, criminal owners, no sick leave, no unemployment and no job security and then I'll listen to your musings on what the real value of a tip is to the people that served you dinner. Until your first bus-boy shift, however, perhaps you ought to research the real cost of service and why people are content to ignore the "unfairness" of an entire industry so long as their drinks and appetizers arrive on time.

Do We Really Tip Based on the Waiter's Service?

For whatever reason, tipping is a subject that always seems to fascinate. Maybe it's because it represents a sort of shotgun marriage between economic behavior and "normal" behavior (i.e., profit-maximizing and altruism). In that light, a reader named Joshua Talley raises an interesting question. I am interested to hear your replies.

I've been a waiter for years.  I pride myself on providing prompt, professional service.  But I've always wondered how much the quality of service impacts the tip. Despite the notion that the tip reflects the quality of service, it seems likely to me that aside from instances of extremely good or extremely poor service, most people simply tip what they normally tip.  For instance, some people are 10 percenters, many are 15 percenters and some are 20 percenters, etc., and it takes either very good or very poor service to change this.  Am I right?

Taxi Tipping and the Principal-Agent Problem

A reader named Matt Hasten writes in to say:

While in Las Vegas last week for a convention, I took a taxi between casinos (might as well see a few while making my contribution). When it came time to pay and I pulled out a credit card, the cab driver informed me that using a credit card would mean paying a $3 fee in addition to the fare ($11.50). This struck me as a ridiculously high surcharge and when it came time to tip the cab driver (all of this using the back seat electronic card reader), I did not add anything extra. My logic was that while I usually tip 20% on cab fare, that would have only been $2.30 and I already was paying $3 above the fare.

I explained to the cab driver that the money I would usually spend tipping him was instead paying for the $3 fee the cab company imposed on me. The cab driver, understandably, saw things differently and had some colorful wishes for the remainder of my evening. At the time, I felt justified not tipping because I felt the only way to make my displeasure known about the fee was to stiff the cab driver and hope his (and other cab drivers') anger of missing out on tips might put pressure on the cab company to change the policy. In hindsight, I do feel bad about stiffing the driver! I'm the kind of guy where you have to really mess up to earn less than a 20% tip at a restaurant.

I know the driver didn't set the $3 credit card fee, but taking it out on him by not tipping was the only way I saw to make my displeasure known or, better yet, impact a greedy policy.

Was I right to not tip?

Innovations in Restaurant Tipping: Just Do the Math For Us

At a local cafe in western Massachusetts the printed bill contains something I’ve never seen before: At the bottom is a list of percentages—15, 18 and 20—with suggested gratuity amounts based specifically on the bill’s total. While tipping is a social norm in the U.S., it’s a hassle to figure out the right amount to tip. The tip amount is rarely suggested, and never in specific dollar terms (though sometimes a gratuity is included for larger groups of diners).

So why not do this everywhere? Perhaps it could be viewed as crass; but it saves time and makes the social norm explicit (as it already is in our minimum wage laws)—and it might shame those who refuse to tip. I hope this innovation spreads rapidly in this time of apparently decreasing social cohesion.

Is Tipping Really So Hard?

Here’s what I came across while browsing the finance section of the App Store on my new iPhone: iTip, from palaware iTip, from Uncouth Software BigTipper, from PureBlend Software TipCalc, from BAMsoft Tiptap, from Made with Bananas Tipulator, from tap tap tap Tip Calc, from Charles Ying Tip, from Carlos Perez CheckPlease, from Catamount Software […]

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 […]