Tip Culture In America Is Out Of Control.

#tipping #inflation #finance

Let's be honest, you're tired of tipping for every single little thing. You used to be able to go to a coffee shop, order some overpriced latte, maybe be asked to donate a dollar out of guilt to some charity you’ve never heard of, but now you’re all of a sudden staring at this tablet that the barista has flipped towards you and it’s asking you how much of a tip you’d like to leave. All while you stand there feeling awkward and confused. If that that sounds familiar don’t worry, it’s not just you. A lot of people feel this way and I’ll cover that in this video.

Tipping culture in the United States has long been a common practice, with customers often leaving gratuities to show appreciation for good service. However, the changing landscape of tipping in recent years has given rise to concerns about fairness and effectiveness. This video explores the evolving nature of tipping culture and it’s growing discontent.

A survey by Bankrate revealed that approximately 66 percent of Americans have a negative view of tipping. People think tipping culture is "out of control" as businesses increasingly encourage customers to leave tips at counters and on digital payment checkout systems. It’s being referred to as “tipflation" - the prompt for higher and more frequent tipping - and it’s created an uncomfortable interaction between customers and service providers. This has sparked questions about why businesses don't pay their employees more instead of passing those costs onto us, the consumers. But an important question to ask is, how did we get here?

Well first, we’ll have to go back to 2020. According to professors at John Hopkins School of Business, the pandemic played a significant role in altering tipping practices. During the crisis, people started tipping more generously to support essential workers who were struggling financially. Restaurants were shutting down left and right. There were lockdowns that were forcing certain people to close down their businesses temporarily which for a lot of business owners meant indefinitely. Although the pandemic eventually subsided, the habit of tipping at elevated rates persisted.

It wasn’t long before we started to see more and more payment systems and screens that turned towards customers with prompts for gratuity. This created a social pressure, leading to higher tipping rates. This "nudging" effect, which is what it's referred to according to Sean Jung of Boston University, makes customers feel compelled to tip even when it may not be warranted. It creates this social pressure and these tip screens make it seem like you have a choice, but in reality the payment system is leading you to make the choice for you. Before we knew it, all kinds of businesses started implementing these kinds of payment systems and practices. Toast, which is an all-in-one digital payment platform revealed data that these tips are about 20% on average. But why? Why were businesses that weren’t doing this before all of a sudden wanting their customers to leave tips?

Well, it had a lot to do with Inflation. The job market's competitive nature has led businesses to vie for workers by offering better benefits and higher pay. With inflation on the rise people were looking to make more money to keep up with expenses. Having customers tip more and tip more often was a way for companies to pay employees more without having to increase wages. Of course you see the dilemma here. You the consumer leaving a tip so that workers can earn more to keep up with inflation while you’re also a worker who’s trying to keep up with inflation is really just a classic case of robbing Peter to pay Paul. Only Paul is just some guy who works checkout at some low service level kiosk and has flipped a screen around on you to leave a tip for a microwavable burrito he just rang up. It’s one thing to leave a tip for someone who waits hand and foot on people. Anyone who’s worked in a restaurant knows the challenges of dealing with the general public. It’s another thing to tip someone at an airport for ringing up snacks when just a few years ago this was unheard of.

And this is having some major drawbacks. Tipping is supposed to be seen as a means to reward excellent service and show gratitude and is most commonly associated with wait staff at restaurants, but now according to that same survey from Bank Rate tips are down 10% for restaurant servers. People are experiencing tip fatigue and it's hurting the people that it used to benefit most.