Consumer Confidence
Tipping Point
Your gratuity is no longer your own.



Earlier this month, a Florida restaurant called the Chicago Pizza and Sports Grille started adding an “automatic gratuity” of 15 percent on every in-house order. In staid, statist Europe, that’s par for the course. In America, you see it on cruise ships, in tony establishments run by celebrity chefs such as Thomas Keller, and in less luxe setting when parties of six or more are involved. But for a lone diner, grabbing lunch at the kind of place that puts an extra helping of vowels at the end of its name to show how much personality it’s got? Say it ain’t so! This is where real America eats. And real America does not deserve a unilaterally applied service charge on its Fried Mozzarella Sticks and Windy City Nachos!

   


Even a committed socialist such as George Orwell would be quick to point out that an “automatic gratuity” is an impossible proposition. “Gratuity” has roots in the Latin word gratutus, which means voluntary. A gratuity, or tip, is a gift or reward given freely, without compulsion. There’s nothing automatic about it.

Except of course that there is, even when it’s not described as such. Chicago Pizza introduced its new policy because it wants to ensure that its waiters earn at least $7.50 per hour. The automatic 15 percent tip is supposed to help the restaurant achieve that goal, but there’s obviously another way to generate the necessary revenue — it could simply raise prices. And it wouldn’t have to raise them much. Even if, say, Chicago Pizza’s patrons only tip five percent on average when left to their own devices, a 10 percent increase in price would generate more revenue than a 15 percent automatic gratuity — $1.55 versus $1.50.

And yet Chicago Pizza chose the automatic tips route. An automatic gratuity isn’t legally enforceable — if you don’t want to pay it, you don’t have to. But apparently Chicago Pizza believes the bulk of its customers are likelier to comply with a fake mandatory increase of 15 percent than an unavoidable price increase of 10 percent! Which says something, no doubt, about how compulsory the average person now considers the once-voluntary act of tipping.

But is it any wonder we feel this way?

There’s a tip jar on every retail counter these days. We give our spare change to baristas, pedicurists, dog groomers, massage therapists, grocery baggers — no wonder the homeless go hungry. The 20 percent tip, once the exclusive domain of the generous spendthrift, is now presented as the expected amount, even when the service is merely OK. According to The New York Post, the average New Yorker doles out $3333.79 in tips a year.

These days, the idea of not tipping is almost as impossible to comprehend as the idea of paying for news. Who does that? Crazy people? Criminals? Last fall, a pair of college students in Pennsylvania tried to settle their bill at a local tavern. Brazenly and rebelliously, they tendered $73.87 for the food and beverages they’d consumed. But they didn’t want to leave a tip, even though the tavern had thoughtfully applied an automatic gratuity of $16.35 to their tab. (The tavern presented this automatic gratuity as an 18 percent charge, but $16.35 is actually 22 percent of $73.87.) Because they’d had to get their own napkins and utensils, fetch their own soda refills, and wait for their food as their waitress grabbed a smoke, they decided a more appropriate gratuity would be zero. The tavern’s manager insisted otherwise and called the cops, who promptly handcuffed the Bonnie and Clyde duo and hauled them off to jail. Eventually, the local district attorney had to let them go. There isn’t any law against not tipping. Not yet anyway.

Things were much different a century ago. Between 1909 and 1926, six states passed laws that made tipping illegal. Restaurants posted “Tipping is not American!” signs in their dining rooms. In a republic where the waiter was the political and moral equal of the millionaire factory owner, each endowed with the same essential rights and freedoms, tipping was seen as “a hangover of Old World flunkeyism” as one New York Times editorial opined. It divided a classless society into servant and served.

But even when the practice was illegal in six states, it never fell out of favor, perhaps because it also helped servants achieve a level of prosperity few had ever achieved. A 1907 article from the Times reported that many of the city’s top waiters had earned enough money to become homeowners and landlords. One even bought a racehorse with his tips.

Michael Lynn, a professor at Cornell, has studied tipping for decades. “There is a rather weak relationship between the size of the tip and the level or quality of service one receives from their waiter or waitress," he concluded in a 1996 study. Four years later, he determined that we tip better when a server crouches to take our order or lightly touches our shoulder. In May 2010, he confirmed that we tip better when a server has large breasts.

But if tipping isn’t exactly a rational exercise, it is an ingenious and metaphorically valuable contrivance. It gives plate-schleppers a chance to act like entrepreneurs. It gave men who can’t afford dessert a chance to act like philanthropists. It imbues the players on both sides of a transaction with a greater sense of autonomy. A waiter isn’t locked into whatever limits his boss might set for him — he can partially determine his own fate. A customer can exert some power in determining the ultimate value of his dining experience.

Make it automatic, though, and tipping loses this power. Make it automatic and it also becomes easier to track, easier to regulate, easier to tax. We tip billions and billions of dollars a year, and it’s not just that the recipients of our largesse manage to avoid paying taxes on much of what they collect. The business owners who use tips as a rationale to pay their employees lower wages end up paying less in payroll taxes, too. And by keeping menu and other prices lower than they would be in a tip-free economy, tipping reduces the amount of sales tax the government can collect as well. It’s no surprise, then, that a small-government evangelist like Sarah Palin is a big tipper. If you want to starve the beast dead, earmark a tenspot for your hairdresser.

Tom Emmer, the GOP frontrunner for Minnesota’s next gubernatorial race, seems to understand this, too. In early July, he recommended that Minnesota implement a lower minimum wage for tipped workers than other workers, a practice many other states currently employ. Then he suggested that the state should stop collecting tax on the first $20,000 in tipped wages that employees make in a year. Both suggestions would divert money from Minnesota’s coffers, and in a state that’s facing a billion-dollar budget, they haven’t gone over well.

But if we’re not quite ready to embrace Emmer’s bold dream to further privatize tipping, can we at least draw the line at the automatic gratuity? • 2 August 2010




Greg Beato is a contributing editor at Reason magazine. Follow @GregBeato on Twitter.

Article photo via Manny Hernandez / CC BY-NC 2.0




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Here's a tip:
Don't make it automatic.
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