STACEY VANEK SMITH, HOST:
Hey, everyone. It's Stacey and Cardiff. And this is THE INDICATOR from Planet Money. So we recently got a question from a listener - a very interesting but also a very pointed question.
ANU: Stacey and Cardiff, hi. My name is Anu (ph). I'm 23 from Boston, Mass. And I'm, of course, addicted to THE INDICATOR. OK. So my question is, why do we as a society still tip? And how can we stop? To me, it's one of the most aggravating economic mysteries - a horrible social convention that no one ever questions. Thanks so much. Bye.
CARDIFF GARCIA, HOST:
And this, we figured, was a question worth devoting a whole episode to. So we used Anu's question as a reason to call an expert on the psychology and economics of tipping. Yes, there is such an expert.
VANEK SMITH: Anu, it is a great question because we are just tipping everywhere now - at restaurants and bars, in taxis and Ubers and Lyfts and when you get a haircut - even in coffee shops now.
GARCIA: We're being, like...
VANEK SMITH: It's out of control.
GARCIA: ...Nudged towards, like, that 20 or 25 percent - middle percentage every time you buy...
VANEK SMITH: I know.
GARCIA: ...A cup of coffee.
VANEK SMITH: So, Anu, today on the show, we answer your question. And, you know, we also had a few of our own.
GARCIA: We did, especially because there are actually some really troubling aspects to tipping. And we wanted to talk about those as well.
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VANEK SMITH: The tipping expert we called is a man named Michael Lynn. He's a professor of consumer behavior and marketing at Cornell University's School of Hotel Administration. And Michael has published dozens of papers on, basically, everything you can think of related to tipping. And so our first question to Michael was, why does the U.S. have such a strong tipping culture? And why is it so much stronger than the tipping cultures of other countries?
For example, in the U.S., a restaurant can legally pay its servers less than minimum wage because the servers' tips are expected to push that wage above the minimum. And, you know, also, we just tip more in the U.S. than they tip in other countries. Michael says he is actually not sure why the U.S. stands apart in this way.
MICHAEL LYNN: I just don't know. I have looked at why nations differ in their tipping customs. And there are some predictable findings. Countries whose populations are more outgoing and extroverted tend to tip a greater number of service providers. And they tip larger amounts.
GARCIA: And as to Anu's question of why we still tip so much in the U.S., Michael says that it has to do with the status quo and, specifically, how hard it is to break away from that status quo.
LYNN: Because once you get started on tipping, competitive forces make it almost impossible to go back.
VANEK SMITH: Here's what Michael means. So the existence of tipping allows restaurants to pay their servers less. And because restaurants pay their servers less, they can also charge lower prices on their menus. And customers, you know, really like lower menu prices.
LYNN: Believe it or not, consumers, when they evaluate the expensiveness of a restaurant, look at menu prices. They don't take into account the fact that they do or do not allow tipping. And so a restaurant with 15 percent higher menu prices and no tipping is going to be perceived as more expensive than a restaurant with slightly lower prices, but they expect tips.
GARCIA: Now, this does not seem rational because customers will pay the exact same overall amount in those two restaurants. But Michael says that's just how customers often decide which restaurants they like better. In one of his recent papers, Michael looked at Joe's Crab Shack, a chain restaurant. Twelve of the restaurants in the Joe's Crab Shack chain got rid of tipping for a while and raised their menu prices to make up for it so they could still pay their servers just as much. And then most of those restaurants eventually had to go back to tipping.
LYNN: I was able to download Yelp and other online ratings of Joe's Crab Shacks by location. And what we observed is that when they eliminated tipping, their online ratings went down. And when they got - brought tipping back, their online ratings went up.
VANEK SMITH: Michael says these findings are consistent with other research. And so you can see why restaurants find it so hard to end tipping and to raise their menu prices. They don't want to lose business to other restaurants that continue to allow tipping.
GARCIA: Yeah. And Michael says he did find one exception to this rule. But that exception is just high-end restaurants - restaurants that are already expensive and where the customers just aren't as sensitive to those higher menu prices. They were planning to spend a lot of money at these restaurants anyways, so they may not even notice that their $50 steak is now $60 or whatever.
VANEK SMITH: Don't even look at the menu prices.
VANEK SMITH: This is, like, market price.
GARCIA: All other restaurants, though...
VANEK SMITH: (Laughter).
GARCIA: It seems to matter.
VANEK SMITH: But we also wanted to ask Michael about tipping as a social convention because that, of course, is part of tipping, too. And, you know, is this convention as horrible as Anu, our listener, thinks it is? So let's start with this. Tipping seems to be designed to reward good service. So the better the service, you know, the higher the tip. But is that what happens in real life?
GARCIA: Michael says, no, not...
VANEK SMITH: No.
GARCIA: ...Really. Only a tiny amount of the tip is actually related to the quality of the service. In fact, the amount is so small, Michael says, that in one survey, only about half of waiters and waitresses themselves thought their tips were related to their service.
VANEK SMITH: Most of the average tip, Michael says, is just determined by the social expectation that people feel to behave in a certain way. Everyone else leaves, you know, a 15 to 20 percent tip, so you leave a 15 to 20 percent tip. That is just the way we do things.
GARCIA: Plus, you don't want to, like, feel guilty...
VANEK SMITH: No, I know.
GARCIA: ...If you know that a server's going to be - that a server's income is based on the tip. You don't want to be the jerk who just doesn't leave the right tip.
VANEK SMITH: I know. But, you know, as Anu hints in her question, there are other things that are really troubling about the way tipping works in the real world.
LYNN: I found that waitresses who rated themselves as more attractive got better tips. Blonde waitresses got better tips than brunettes. Slender waitresses got better tips. And waitresses with larger breasts got larger tips.
VANEK SMITH: Oh, America.
GARCIA: Yeah, that's depressing.
VANEK SMITH: America, oh. This is not new information, I suppose. But it is surprising hearing it packaged in this way.
VANEK SMITH: But there is also other research that has supported the idea that places where workers rely on tips, you know, for a high share of their incomes, those workers are exposed to more sexual harassment. And in another survey, Michael found something also extremely disturbing.
LYNN: I found that black servers get lower tips than white servers, even for comparable levels of service.
VANEK SMITH: I just - I...
GARCIA: Yeah, it's bad.
VANEK SMITH: Yeah.
GARCIA: And we can now turn to Anu's final question, which is, if restaurants don't have an incentive to end tipping themselves, what could possibly end it? One possibility, Michael says, is through the courts. And here, it's kind of complicated. But he says that tipping seems like a neutral practice. But if it does have the effect, for example, of paying black servers less than white servers, then maybe it could be declared unlawful by courts because of its discriminatory nature.
VANEK SMITH: Michael says he's spoken to a lot of labor and employment lawyers about this possibility. For now, he says, it seems like a longshot, both because it's not clear whether that argument would work in court and also because, he says, there just need to be more studies on this racial gap issue to confirm that it does exist, also, to determine how big it is and what might be causing it.
GARCIA: Yeah. And the other possible way to end tipping that some people have proposed is just for the law to stop allowing restaurants and other businesses to legally pay their tipped workers less than the minimum wage. And, in fact, some states have done that.
LYNN: Look. In California and Washington state and a couple of other states, there is no tip credit. Those waiters and waitresses get the regular minimum wage and get tips on top of that. And I've done - I've got the data. And I can tell you that servers in California make, basically, the same tip percentage as servers in Texas, even though the minimum wage is vastly different across those two states. I mean, it - I'm not 100 percent sure you can kill tipping.
VANEK SMITH: So Michael thinks tipping is here to stay, at least for now. And that is probably not the answer Anu wanted. But we are still very glad you asked the question. Thanks for writing in.
GARCIA: Yeah, and same to all our listeners. We appreciate it. We like hearing from you.
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GARCIA: This episode of THE INDICATOR was produced by Darius Rafieyan and edited by Paddy Hirsch. Our fact-checker and intern is Willa Rubin. And THE INDICATOR is a production of NPR.
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