Tipping Has Changed Amid Pandemic

• A monetary tip is an incentive for workers within the service industry like restaurants that provide good service to customers.
• Due to the pandemic, numerous businesses have begun allowing customers to tip their workers how they see fit.
• When giving a monetary tip, it can be difficult to determine how much to give. Below is some information that will help guide your decision-making in this process.

A monetary tip is an incentive for workers within the service industry, such as a restaurant or hotel, who provide good service. When employees provide exceptional service at a sit-down restaurant, they receive a higher compensation after giving the total bill to the customer. Also, delivery drivers are considered an intermediary between the restaurant and the person receiving the order. Generally, one would leave something extra for the delivery drivers when using food delivery services such as UberEats or DoorDash.

Many service industries across the United States believe tipping is expected. The rule of thumb is to leave between 15 to 20 percent when at a restaurant and tipping the servicer. However, due to the current economic conditions, the tipping guidelines have been slightly altered.
 

With a rising number of establishments putting customers under social pressure to compensate their workers, the consumer is left in a dilemma, do they stop tipping to save money or continue but have less money left over for themselves?
 

Research on the Tipping Experience

At the beginning of the pandemic, many non-essential workplaces were out of work, and those who continued to work were considered frontline workers. Due to the sympathetic nature of the situation, cultural pressure was formed to tip these employees.

The Stanford Graduate School of Business analyzed millions of New York City taxi rides in a study, and it was determined when a customer is presented with three tipping options, it typically results in an 11% jump in the extra pay received by the worker. The study shows when customers are presented with these compensatory options, they face the cultural dilemma mentioned earlier, resulting in a higher bonus for the taxi driver. 

Percentage of Tippers per Generation

A survey conducted by CreditCards.com studied what percentage of each generation tips. The table below shows the percentage of each generation who always tips, depending on the employee’s place of work. 

The survey conducted by CreditCards.com shows Baby Boomers are the ones who are the most likely to leave money for a worker. Regardless of the worker’s occupation, the table above shows the older generations are more probable to leave a tip for the workers than the younger generations.

Although the younger generations do less tipping than the older generations, the study showed millennials typically pay the server more when they decide to leave some money for them.

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Benefits of More Establishments Allowing Tipping

With an increase in the amount of money consumers put aside for the tip jar, there are two main winners of this outcome, employees and employers.

Employees

Employees are the first group of people who would benefit from an increase in the amount who leave money for them. As their hourly wages are typically not sufficient to accommodate basic living expenses, these workers rely on the money received from customers to help them make ends meet. 

Therefore, per the study, as the compensated amount for the worker has increased, this allows them to pocket some of the money and have more disposable income, which can be used to create generational wealth. 

Employers

The employers are the ones that determine the wage of the employees. As a result, because people are giving higher amounts, they do not necessarily have to raise the employees’ wages, saving them money. 

Also, another benefit that occurs from the customers’ increased compensation is the fact they receive more money from service charges. These charges are usually added to the bill, and typically, the customer does not notice initially. As a result, some customers are unaware of the additional charges, and it has allowed employers/establishments to make more money. 

Cons of More Establishments Allowing Tipping

Though there are many short-term benefits to creating pressure on the customer to tip, the main long-term effect of this implementation is the possibility of receiving less compensation in the future. Due to an increasing number of businesses expecting tips from customers, some people have begun experiencing tipping fatigue already, meaning they are tired of being obligated to give money to workers everywhere they go. 

Tipping fatigue can lead to some customers valuing their money more, resulting in fewer tips. Although customers are becoming accustomed to paying the higher amounts now, that feeling can change at any time. Therefore, if they begin thinking the tip expectation is too high, they may stop paying tips altogether or, at the very least, reduce the amount they tip, hurting the employees who are reliant on them to make a living wage. 

Inflation

As the inflation rate has risen to its highest level since 1990, it has caused the cost of living to increase. As a result, the higher inflation rate has decreased the disposable income levels of some. Consequently, they may refrain from tipping as consistently as before since they wish to retain a similar or higher level of disposable income.  

Although businesses are trying to optimize their chances of receiving as many tips as possible, the short-term gains do not outweigh the potential loss they will carry in the future. 

Are You Obligated to Tip?

Regardless of the pressures put on customers by society and businesses, you are not obligated to tip. Employees are getting paid for the work they are doing, and if the service is ordinary and nothing special, then a tip may not financially make sense. On the other hand, if they go above and beyond and provide exceptional service, it could be considered justified. If you do decide to tip, it can be difficult to determine the correct amount, but the following section will go over how much to leave, depending on the setting. 

Adjusted Tipping Guidelines

With more businesses having a tipping option, it is important to know how much to give to workers, so you are not paying too little or too much. The Emily Post Institute has many tables on its website that discuss various social settings and the standard tipping amount. For your convenience, below is a condensed version of the table, containing only the main social settings.

Although the Emily Post Institute’s table helps a great deal in determining the substantial amount to tip, one key factor to remember is the amount you give depends on your disposable income. 

The Money Wrap-Up

If you have low disposable income, do not feel pressured, or obligated, to pay the typical amount. When tipping, the important thing to remember is to give money that you do not need. As everyone has varying levels of disposable income, some can give away more than others, meaning service workers will receive a sufficient amount at the end of the day.

Therefore, if you think you cannot tip 20 percent at a sit-down restaurant, then that is okay, and try to give as much as you feel comfortable giving to the service worker. 

Tipping has been a staple in the service industry for a long time. However, with many more businesses allowing tipping to take place, it can become a tedious deed of spending more money than you have to. Hopefully, the information mentioned above will help you in determining when and how much to compensate each service worker you interact with.

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