For most people, after they have enjoyed their time at a restaurant or club, pulling out $5s or $10s to give servers is a way to indicate their gratitude in appreciation for the service received. Especially in North America, it is common to find tip jars in restaurants or clubs, with the tips even going directly toward a worker’s income if they are tipped employees.
According to the US Department of Labor, if an employee “customarily and regularly receives more than $30 per month in tips … an employer of a tipped employee is only required to pay $2.13 per hour in direct wages.” However, this could lead to underpaid workers and pay disparities as the notion of tipping changes daily and is unpredictable, creating an unstable income and a lack of guaranteed minimum wage for every hour worked. Thus, these conditions allow tipping culture to impact tipped employees’ quality of life and obtainment of basic needs significantly.
The phenomenon of tipping fatigue particularly has worsened the cases of tipped employees. Nowadays, the hourly minimum wage in Frisco, Texas, is around $7.25, but many tipped employees’ incomes do not add up to this due to this phenomenon. With the increasing inflation rates, many customers stopped tipping in restaurants. As stated by Sweetly Bakery & Cafe’s owner Irina Siroktina in an article for CNBC, “since everything got more expensive, we’ve seen a decline in tipping … only around 1 in five people tip.” In the same article, Eric Plam, founder and CEO of San Francisco-based startup Uptip, said, “during Covid, everyone was shell-shocked and feeling generous … (now,) you are starting to see people pull back a little bit.” Nercya Kalino, a writer for The Peak, has resounded Plam’s thoughts, finding the significant rise in tipping during the pandemic being retracted with the contributions of tipping fatigue.
Tipping culture also allows for pay disparities based on race and sex. As history shows, tipping practices have been discriminatory, with certain races and genders being tipped more on average. Vince Dixon, a writer for Eater and a data visualization reporter, analyzed the reflection of tipping based on racial identity from 2010 to 2016. Based on the results, Asians were tipped $4.77/hour, Blacks were tipped $5.57/hour, Latinx was tipped $6.08/hour, and Whites were tipped $7.06/hour, showing significant disparities between the groups.
Overall, this culture has led to several negative consequences for workers by putting them in precarious financial situations, the possibility of wage theft, and pay disparities sourced in discrimination. To solve these issues, implementing a service charge could be of service. Instead of relying on tips, service-based businesses could include a service charge on each bill, ensuring that all workers are compensated fairly for their contributions to their work.
Works Cited
Dixon, Vince. “Why Tipping Is Bad for America.” Eater.com, Eater, 22 Feb. 2018, https://www.eater.com/a/case-against-tipping.
Jdickler. “Americans Have ‘Tip Fatigue’ — Post-Pandemic, Diners Are Less Inclined to Tip Generously for Takeout.” CNBC, CNBC, 1 Sept. 2022, https://www.cnbc.com/2022/09/01/post-pandemic-americans-are-tipping-less-generously-for-takeout.html.
Peak Web, et al. “Tipping Reminds Us How Workers Are Underpaid.” The Peak, 11 Nov. 2022, https://the-peak.ca/2022/11/tipping-reminds-us-how-workers-are-underpaid/.
“Tips.” US Department of Labor, https://www.dol.gov/general/topic/wages/wagestips.