Tipping & the post-COVID economy

By Mrinalini Keskar, ‘22

Graphic by Mrinalini Keskar

In a post-COVID world, American customers grapple with choosing between maintaining the meaning of tips or providing an adequate wage to service workers. 

It’s estimated that annual tips in the U.S. food industry total 47 billion dollars per year. For most servers and restaurant workers, tips make up a large portion of income. 

Junior Claire Williams, who works at a coffee shop, says she usually receives tips with each order.

“I get $10 more than the minimum wage with each paycheck usually, so I get like 25 dollars an hour,” she said. 

In the U.S, tipping has been seen as a sign of gratitude towards service workers, especially to those in the food service industry. In other countries such as those in Europe, it’s not customary to tip in restaurants, regardless of the quality of service.

However, historically the act was considered ‘un-American.’ Tipping has roots in wealthy members of society offering gratuity for those who served them. Because of this history, some argued that tipping went against America’s democracy.

“Tipping was blamed for encouraging servility and degrading America's democratic, puritanical, and anti-aristocratic ethic,” an article from NPR mentioned.

“Some saw tipping as creating a servants’ class, part of a society where the tippers looked down upon the service providers,” according to a journal article published by The Journal of Economic Perspectives. 

I spoke to Upper School Economics teacher Mickey Del Castillo about economic changes and tipping.

“The United States has emphasized tipping as a way of reflecting the kind of service that we believe a person is giving us,” he said. 

Del Castillo then went on to talk about the changes that have occurred, in part due to COVID. 

As COVID-19 spread across the U.S. and globally during early 2020, some service workers were deemed ‘essential’, such as those working in grocery stores and healthcare workers. 

“I do think over the last two or so years specifically, because we initially had a breakdown into quarantine, and we were relying on people in the service industry to still do their jobs, that there was this reflection on their importance a bit more. So we see now that there is a different attitude towards those who work in the service industry and the work that they do,” Del Castillo said.

However, in this he noted a sense of expected altruism of the customer. 

“I do think there is a kind of hidden negative side to tipping,” he said. “It reflects how wages have been stagnant. I think that people who are tipping understand that people in the service industry are not earning enough, so it falls upon the shoulders of the consumer, to have some level of altruism, or economic benevolence towards individuals who’ve had to work under extremely difficult circumstances.”

In July of 2009, the United States federal minimum wage was raised to $7.25 per hour, and since then has not changed. 

‘Real wages,’ or the value of the money earned adjusted for inflation, have barely budged. 

According to a study by Pew Research Center ,“The $4.03-an-hour rate recorded in January 1973 had the same purchasing power that $23.68 would today.”

“[Tipping] is a supplemental income that people rely on in these industries, because of the stagnant wages that come with them performing these tasks. Tipping has become a reflection of how businesses are not providing high enough wages for those in the service industry,” said Del Castillo. 

When we tip large amounts of money, is the responsibility of giving service workers fair wages being pushed into the customers’ hands? As wages remain stagnant, the question of who should take on this weight remains. 

Meanwhile, technology like Square strongly encourages that customers provide a tip, no matter the service provided.

Block Inc., known to most as Square, is a San-Francisco based company devoted to digital payments, mostly for small to medium sized businesses.

In a survey conducted by Software Advice, which is referenced in an article on Square’s Editorial blog, it’s mentioned that “Close proximity to a cashier while entering a tip” increases the customer’s likelihood to tip. Results of this same survey indicate that the customer’s likelihood of tipping is also increased if they were required to press ‘No Tip.’

These results are acknowledged by Square and the businesses using the technology, which leads to customers feeling awkward when required to choose a tipping option with an employee and other customers waiting in close proximity. 

However, even so, tipping is subjective.

“I have had some really bad experiences in the past with tips,” said Williams. “Like people hitting on me, and then I don’t reciprocate, and they don’t tip me at all.”

Williams also noted that she works with an all-female staff except for one male, and that he is tipped significantly less.

“Only one other guy works with me,” she said. “He doesn’t get tipped as much as we do, I’ve noticed.”

With a pandemic-induced weak economy, the future of tipping remains uncertain. 

“I’m hoping that in the future that those in the service industry won’t have to rely on tips and will be paid better base wages, so that they can do their jobs without worrying about a 15 to 20 percent, or even less dependant on the consumer that they are interacting with,” said Del Castillo.

“Eventually, because of the ubiquity of technology and how we pay for things, I’m hoping that tipping won’t be a reality. That there’ll be greater transparency in how those in the service industry and those who rely on tips, are actually acknowledged for the work they do, and that can be baked in the prices that the consumer pays,” he concluded.