On Tipping

Living in a big city, one is confronted daily with decisions on what is, in theory, a type of discretionary spending otherwise known as tipping. However, few people ever delve deeper into the reasons for, significance or outcomes of tipping. I believe that the phenomenon deserves very serious attention for a multitude of reasons.


Usually, a consensus on who to tip and at what rate is made within a specified geographical area. Tipping becomes a part of the local culture, and is often seen as a necessary hassle for tippers and a natural part of the job for receivers of tips. So, what do a few dollars here and there mean for one’s everyday life if it can make someone happy? I argue that the culture of tipping has vast implications on both receivers and givers of tips, as well as on society as whole. I argue that intrinsic in the tipping culture are strong values which carry a large amount of symbolic significance, which is why the topic is important to discuss, and put into a modern perspective.


We can start by attempting to establish the true reasons for tipping. Is it something people do out of the goodness of their hearts, do they do it because they feel absolutely obligated to, or might they do it for other reasons?


Turning to the first alternative; there is obviously a great need for additional income for people in the United States who earn the minimum wage or a little more. For all intents and purposes, the United States as a society is not a first-world country in terms of the standard of living it guarantees its citizens. In other words, in contrast to other first-world countries, the low-wage earner in the United States is on his or her own. Surely, many people recognize this situation as a problem and take pity on the low-wage earners, and hence tip them (out of the “goodness” of their hearts). In a given service industry, a deficiency of income among service providers is hence recognized, and compensated for by customers voluntarily. A tipping culture is created as a result of a perceived discrepancy between the value of the labor, and the actual compensation from the employer, while also taking the local cost structure into account. This could be described as a type of solidarity, similar to the solidarity of welfare societies where a larger amount of the national income is distributed to the lower echelons of society.


By raising wages for low-wage earners, the need for tips in many countries in Europe was eliminated. Of course, the tipping culture process is also different because it requires that the receiver of tips interacts with customers so that the customer is able to recognize the need for a tip, and is able to deliver the tip at all. No one would think of seeking out low-wage earners who provide services for them, but with whom they have no contact, in order to give them tips. Does anyone tip the guy or girl who mows the lawn in the local park, or sweeps the streets outside your house or apartment building? So, the voluntary compensation that is done for solidarity reasons by individual customers only reaches small parts of the low-wage earners, the vast majority of which never receive any tips at all.


Once a culture of tipping has been established in a given service industry, it is difficult for someone to deny it, and an obligation to participate in it is created. I once saw an episode of “Candid Camera” where the joke was a mailman ringing the doorbell of a house on his route, telling the inhabitant that, from now on, one is expected to tip one’s mailman. The inhabitants looked confused, wondering how much was expected, and started ruffling through their bags for cash, while the audience laughed. With this moderately funny episode in mind I was very surprised to learn, when I moved to New York City, that one is indeed expected to tip one’s mailman in this city.


So what happens if you don’t? Naturally, as soon as the tipping culture is established, the receivers of tips will participate in it and try to perpetuate it (for better or worse for themselves). An obvious risk is created where a service provider might in some way or another refuse to work if not paid tips, just like he or she would most likely refuse to work if the employer did not pay any wages. In a normal employer-employee relationship, the employer is obligated to pay the employee, while the employee is obligated to work. End of story. Via the establishment of a tipping culture, a second employer is, in essence, created. This involuntary employer in turn has little control over the behavior of the employee, and the employee has no guarantee of being paid.


A common misconception is that the word “tip” is in fact an acronym, meaning “To Insure Promptness” (please give money to your waiter). This would have been written on signs in British pubs. In actual fact, the meaning of this originally Germanic word has not changed much since it was incorporated into English. However, the story serves as a cautionary urban legend, stressing the importance of tipping.


Another way in which the tipping culture is perpetuated is through peer pressure. There are less tangible forms of peer pressure, like “tradition”, and then there are very tangible forms of peer pressure, like when a group of people are splitting a bill in a restaurant. All the members of the group may not agree on the appropriate rate of tips, or if any tips should be given at all. However, since all the payers of the bill, and their level of appropriateness within the tipping culture, will be judged collectively, strong reasons for disagreement and pressure exist. Someone who may not want to tip can be pressured to do so. If one member of the group refuses to tip, and another feels obligated to tip, a free-rider situation will occur.


There is at least one more aspect of the reasons for tipping that needs to be examined: the feeling of empowerment. Having the ability to pay for a given service, as opposed to taking care of something yourself, naturally gives one a sense of satisfaction. In a competitive society, the goal is to rise above the rest in as many ways as possible. In addition to accumulating the most resources, the prudent spending of those resources may better your standing and prestige in society in additional ways. By paying extra money to a service providing representative of a lower echelon of society, one is simultaneously reinforcing one’s image of belonging to the higher echelon, and insuring that the service provided is better than the service provided to others who paid less or no tips.


The significance of a tipping culture is great because it cements the workings of a given service industry, and has an impact on society as a whole. It allows employers to hire people essentially as outside contractors, it moves the wage increase pressure from employers and politicians to individual customers (involuntary employers) and it creates an essentially hidden, under-the-table, layer of tax in society. This creates a lower level of job security, takes away political power from the lower echelons of society, decreases the ability for politicians to put tax money to work and increases tax fraud. The tipping culture is hence a significant part of a system of voluntary payments that serve as life-support systems for problem areas of society that the state is unable or unwilling to ameliorate. Of course, the related system of charitable contributions quickly comes to mind. The United States relies heavily on charitable contributions from individual citizens in order to better the situation for millions of its citizens, much like most parts of Europe in the 1800:s. The obvious problem with such voluntary systems comes when certain fluctuations occur that affect the voluntary giving both in tips and charitable contributions.


At the present time (April 2008), the United States is in the early stages of a recession, and the financial troubles have hit would-be givers of charitable gifts especially hard. In short, certain groups who until recently perceived themselves to have a great surplus of resources, no longer consider that to be true. As a result, there is no surplus to give away, and donations dry up. In New York City, food banks are empty, and many charitable organizations are struggling. In the “financial capital of the world”, children in The Bronx are actually walking around hungry.


The larger issue is, in fact, how a society puts a floor on the living standard of its citizens. If you leave this up to tipping and charitable gifts, which is included in the category of “discretionary spending” the consequences can most certainly be dire.