Links - 3rd March 2020 (1) (Tipping)

BBC World Service - The Food Chain, The tipping point - "‘I had a customer put a stack of $5 bills on the table and tell me: this is yours. But every time my water glass gets empty, every time there's more than two or three ashes in my ashtray, I'm going to remove one of those $5 bills. And I hated that guy. Because he was using tipping to lord it over me, and imply that I wasn't otherwise motivated to do a good job. I mean, it was just kind of demeaning the way he treated me. And tipping allowed him to do that.’
'Some of us will think nothing of throwing down a few extra coins after a good meal. For others paying a little more will be unheard of and could even be considered insulting... One restaurant in Shanghai has introduced tipping despite it not being the norm in China. Also another in New York has banned gratuity. Both did it wanting the best for their employees, but the difficulties they faced highlights some simple truths about the culture of tipping'...
‘He says that the US tipping system exists thanks to nobles of Tudor England in the 1500s.’
‘Nobles would give money and clothing and food and other gifts to the household servants. And then when visitors came and stayed at the manor, they would also give gifts to compensate them for the extra work that their visit entailed. And from there, people started giving tips in taverns and commercial eating places. Ultimately, it spread to the tipping that we know today. And it came to the United States in the late 1800s. When Americans would go abroad and encounter this custom of tipping and brought it back with them.’...
‘Seven out of the 10 lowest paying jobs are in the restaurant trade. And of those seven jobs, four of them are tipped. Of course, the story is somewhat different in high end restaurants in big cities.’
‘I helped pay my way through school waiting tables and bartending. I was making more per hour than my managers… why would anyone want to be a manager? You make more money per hour, certainly, in frontline working for tips.’...
‘I have people who have been floor managers in other restaurants coming to me and say, look, I don't want to be a manager anymore. I just want to be a bartender.’...
‘Attractive waitresses get better tips than less attractive waitresses, whites get better tips than blacks. And that's true, even if we're controlling for service quality’
‘A stat I find particularly maddening was that if a girl wears a flower in her hair, she can expect 17% more tips on average’...
‘If we don’t tip for good service, what are we tipping for? Michael thinks it could be to do with guilt.’
‘The anthropologist George Foster argues that we tip occupations where we're concerned about the server’s envy. Tipping in most languages around the world translates to drink money or money for drink. And he argues this reflects the origins of tipping in eating and drinking establishments. And what he said was that customers in bars and taverns, who are having a good time, are concerned that this waitstaff who are serving them are not having a good time and are envious of them. They may take it out, they could spit in our drink or do other things. But also, we don't like people to think badly of us. And the customer leaves this money to say, hey, yeah, I'm having a much better time than you right now. But you know, don't take it out on me. Don't envy me. Here's some money so you can have a good time later’"

Why Does Tipping Still Exist? (Ep. 396) - Freakonomics Freakonomics - "LIST: Some people argue that tipping goes all the way back to the Roman era. And some argue that it was the 17th century in England. But either way, tipping ended up coming to the U.S., roughly, in the 18th century. And there was actually a lot of resistance. So you had people like Mark Twain saying, “we pay that tax knowing it to be unjust and an extortion.” And you had The New York Times, in 1897, writing that tipping was the “vilest of imported vices.” And even in 1915, in America, there were actually six states that abolished tipping. And they abolished it because they viewed it sort of like Twain did, as kind of a social-pressure way to extort money...
Once you look more closely, you’ll see there are a lot of weird things about tipping. Why, for instance, is it now customary for casual restaurants and coffee shops even to ask for tips on takeout orders? Or think about going to a nice hotel. A porter carries your suitcases to the room; it takes about two minutes, and that’s his job — and yet we usually tip him, even though he doesn’t ask. Now think about the person who cleans your hotel room. There’s often a little envelope in the room to leave a tip for the housekeeper. Do you know how often that envelope is used? One study that was conducted in an “upscale, independent” hotel showed that for every 100 nights spent there, tips were left on just five of those nights! And cleaning your room takes a lot longer than the two minutes to carry your bag. It also means dealing with the mess you left behind.  So why does the housekeeper not get a tip, while the porter does? A couple possible answers: the housekeeper is usually a woman and the porter a man; probably more important, she’s invisible; he’s standing right there in front of you. Still, it’s weird. Here’s another weird one: why is it that you’re always expected to tip a taxi driver but, when you use a car-service app like Uber, you’re not? Oh, hang on. That’s how it used to be...
Meyer is a zealot for great customer service — he likes to say his business is hospitality as much as it’s food. But he does not like the idea of tipping as a means to induce hospitality.
MEYER: The theory has always been, in the tipping system, that the only way I could possibly get someone to be nice to me or to bring my food promptly is to create a scenario in which they know that I will either punish them if they don’t or reward them if they do...
LYNN: Both groups, blacks and whites, will tip a white server more than a black server. And that’s even controlling for perceptions of service quality... You could make the argument that tipping is a condition of employment that has an adverse impact on a protected class. And the Supreme Court has ruled that even neutral business practices that are not intended to discriminate, if they have the effect of adversely impacting a protected class, are illegal...
LIST: The riders who have a five-star rating, they’re more than twice as likely to tip than riders who have a 4.75 rating.
And what kind of passenger has five stars?
LIST: They’re punctual, or they’re nice in the car, they’re giving respect to the driver...
But, there aren’t that many of them — just 1 percent of Uber riders. So who are these generous souls? What kind of person is most likely to tip an Uber driver? For starters, they’re most likely to be male.
LIST: A man is about 19 percent more likely to tip than a female rider.
That’s an interesting finding — especially because it’s the opposite of what John List’s own research shows about charitable giving.
LIST: Women consistently, across the entire distribution, give more money to charities than men do... The world of charitable giving tends to have a lot of social pressure. And what the literature also has taught us is that women are much more likely to change their behavior in the face of social cues... riders from lower-income areas tend to tip less...
DUBNER: You also write that tips tend to be higher during very early morning hours, between 3:00 a.m. and 5:00 a.m., and that these hours have a disproportionate percentage of airport and business trips. What it calls to mind to me is, those trips may be being expensed and may not be coming out-of-pocket, and maybe people are more generous with tipping if it’s not their own money.
LIST: I think you’re exactly right. I think those can be expensed. What you also find, though, is that tips tend to be high on Friday and Saturday evenings. So this is the going-out-to-eat-and-party crowd.
This may or may not mean that the consumption of alcohol makes people more generous. The Uber data cannot answer that question. So: draw your own conclusions. But there is one huge conclusion the Uber data seems to point to: most people, when given the option to tip, do not tip! And when they do, it doesn’t have much to do with the quality of their experience...
LIST: Hard accelerations matter. And if you have more of those, you receive less in tips. Hard braking matters. If you have more episodes of hard braking, you receive fewer tips... Drivers in the old cars are tipped slightly less than drivers in the new cars... drivers who change the default language [from English] — those drivers end up getting tipped much less as well... female drivers receive about 12 percent more than male drivers in tips. Now, what’s interesting, though, is that both female and male riders tip female drivers more...
Driver earnings actually do not increase on average because of tipping... when you add tipping to the app, more drivers come online, and they supply more hours. So that shifts out the labor-supply curve and just that shift alone, of course, decreases wages. But then you have tips added on to that, that make wages roughly the same as what they were before...
MEYER: I will credit Shake Shack with having inspired me to take this step in our full-service restaurants. There are no tip jars at Shake Shack, and there’s no opportunity to tip at Shake Shack. If we can make the economics work where we’re selling a $5, $6, $7 burger, why in the world can we not make this work when we’re serving you a $100 dinner at Gramercy Tavern? It just doesn’t make sense to me...
One of the biggest challenges of running a restaurant is retaining good employees. It’s a business with a lot of turnover, and turnover is bad for business. One obvious way to keep your employees is to pay them well. The waitstaff and bartenders at Meyer’s restaurants were getting paid well — thanks to all that tipping. But the same couldn’t be said for all the people who actually prepare and cook the food, and wash the dishes, and keep the place running. Meyer found that the tipped employees at his restaurants were earning about two-and-a-half times what the back-of-the-house employees made. Were they really doing two-and-a-half times the work? And the pay gap between tipped and non-tipped kept growing...
MEYER: We were seeing more graduates from the Culinary Institute of America, Johnson and Wales, the Institute of Culinary Education, applying for dining-room positions than I had seen in my entire career...
The pay gap between cooks and servers also created ill will, and led to high turnover in the kitchen.
MEYER: I increasingly saw this divide growing and growing and growing between the compensation possibilities between tipped employees and employees that did not legally qualify to make tips.
What does Meyer mean when he says that kitchen workers don’t “legally qualify to make tips”? Because you’d think one easy solution to this problem would be to simply pool the tip money and redistribute some of it to the kitchen workers. But you can’t do that... one restriction of the tip credit is that it applies only to employees who spend at least 80 percent of their time in a customer-facing role. So a restaurant can pool their tips and distribute them among the waitstaff, bartenders, and hostesses — but not the kitchen crew...
MEYER: This is not a professional way to treat people. Tipping in and of itself, I don’t think fosters the professionalism that we’re looking for in our industry. If you think about every industry where tipping happens, it’s often not a full-time career. I don’t tip my airline pilot or my lawyer or my teacher or the person who’s interviewing me on their podcast. That’s a profession...
MEYER: When we started Hospitality Included, in the aggregate the front-of-the-house employees of The Modern were making somewhere around $22 an hour. And today that number is about $25 an hour. Believe it or not, a cook, in the aggregate, in 2015 was making just over $11 an hour. Today they earn $16.50 an hour. So that’s a serious hike... Whenever we’ve converted a restaurant, we would experience as much as a 30 to 40 percent turnover in our legacy staff, and I completely understand why that is. Because the way that you got a raise in a tipped house was to have stayed at the restaurant longer than anyone else, which meant that you got the lucrative Thursday, Friday, Saturday night shifts, and it may have taken you six or seven or eight years to earn that schedule...
LYNN: Look, when I started doing research on tipping, I thought tips would be strongly related to service quality. But what I found was that about four percent of the variance in tips left by different groups can be explained by their ratings of service quality... About half of the servers in this country will say that they think their tips are moderately-to-strongly affected by the service they leave. They’re wrong when they say that, but they believe it. And because they believe it, tipping in fact does provide an incentive to deliver better service for at least half of the servers in this country...
Waiters and waitresses think their service significantly affects their tip, even though the data shows it doesn’t; but because waiters and waitresses think it does, they act as if it does. And Michael Lynn found a similar dynamic from the customer side.
LYNN: Tipping increases customer satisfaction. Customers expect service to be better under a tipping system, and that can bias their perceptions...
So Michael Lynn’s research suggests that Danny Meyer’s no-tipping revolution will have to wait even longer. But Lynn’s research did identify one category of restaurant that’s ready for the transition.
LYNN: And that is really upscale restaurants that replace tipping with higher menu prices."
Yet today, so many Americans love tipping so much and can't imagine life without it (or that life could be better without it). Clear example of status quo bias (combined with American exceptionalism)
Surprise surprise - homo economicus doesn't exist

How much Americans tip in every US state, ranked lowest to highest - "States that have recently voted more Republican have also tended to have higher average tips than those in more liberal states.Americans tip 16.4% of a check, on average, according to a study from Square that measured credit and debit card transactions from over two million vendors in July 2017 to find how much people tip in each US state... People also tip differently depending on where they live. According to Square's research, five of the ten states that tip less than 16% are in the Northeast.The state with the lowest tip average, Hawaii, paid 14.8% of the check, while the place with the highest tip average, Idaho, paid out 17.4%."

The American Tipping System Makes No Sense - The Atlantic - "Why are we still crowdfunding worker salaries when tippers so clearly do not know what the hell they’re doing?The history of tipping isn’t well documented, but it’s thought that aristocrats in England kicked the whole thing off when they started leaving hoteliers a little something extra on the way out. The practice then spread to the rest of Europe and the United States in the 1700s. While Europe’s political revolutions in the 19th century mostly did away with the custom, tipping persisted west of the Atlantic. Gratuity took hold in U.S. restaurants and barbershops and shoeshine stands and everywhere else where American customers could be made to feel, briefly, like a pampered aristocrat... [On Uber] Women get higher tips than men, and younger women get the highest tips. (Men tipping younger women accounts for most of the difference between male and female tips.)... The notion that tips are a reward for excellent service is, then, a fallacy. And that fallacy reflects some very American ideas about motivation and money.In Europe, the birthplace of Western aristocracy, countries have moved away from a practice that once denoted class differences. Today, servers across that continent are paid living wages and don’t rely on crowdfunded generosity.The United States, founded as a rebuke to the old world, has allowed a de facto aristocracy to bloom in our country, where low taxes on the rich, combined with meager welfare for the poor, lead to income inequality reminiscent of a feudal state. Tips are a tiny part of that big picture. But they’re a perfect representation of the philosophy that underlies it: Tipping survives because of the notion that industriousness must be coaxed from individuals through constant threat of their immiseration."

Tipping in the UK | Plan your Trip | Visit Britain - "In Britain it is quite normal to tip taxi drivers and it's customary to round the total fare up to the nearest pound...
Although you don't need to tip a delivery person when they drop off your food, an extra pound or two will always be appreciated. If you're in a restaurant a service charge is sometimes added to your total bill, which you are expected to pay. If nothing is added and you are happy with the service you've received, a tip of around 10-15 per cent is standard...
If a porter takes luggage to your room for you, it is customary to tip them approximately £2. If you decide to order room service you can leave a tip at your own discretion.
If you get a haircut while in the UK it's polite to tip the hairdresser approximately 10 per cent. If a junior member of staff washes your hair it's nice to give them a couple of pounds too. If you are in any doubt approximately 10 per cent for any good service you receive, will always be appreciated in Britain."
Oops

How much should I tip? The etiquette of service charges and gratuities | Money | The Guardian - "are you even sure what a tip is? According to the Department for Business, Innovation and Skills (BIS), which drew up the voluntary code on tips, diners are often confused by the distinction between service charges, tips, gratuities and cover charges. A service charge, according to the code, is an amount added to your bill before it is given to you and is almost always based on a percentage of the bill. If it is “discretionary” or “suggested” you are free to make the payment or not. A tip, or gratuity, on the other hand is a voluntary payment given over and above the amount of the bill (and, believe it or not, any service charge) as a “personal reward” from you to waiting staff.Usually, tips are left in cash, whereas gratuities are payments made electronically through a card terminal. The less commonly seen cover charge is a fixed charge per customer that is usually mandatory. Mandatory charges must be stated on tariffs or, in the case of restaurants, menus. Cash tips are paid to individual employees, while credit card tips are paid to the restaurant. When it comes to the “service charge”, the situation remains opaque. That money is classed as part of the eatery’s income, to be used as the restaurateur sees fit. According to the British Hospitality Association, there is no legal requirement for it to pass on any of the service charge, in full or part, to the waiting staff. What’s more, the service charge delivers a double blow, as while many employees do not benefit from it directly, its presence on a restaurant bill puts off many diners from leaving a cash tip on top (many simply think it is the same as a tip)."