Mr Meyer is going against a trend that started in America just after the civil war. Tipping first caught on in Europe, where guests in fancy British houses would be threatened with gravy on their breeches if they failed to tip the footman. It spread across the pond as American holiday-makers returned to show off exotic European fashions. Once employers responded by slashing wages, workers worked hard to make sure they got their tips. In 1918, 100 waiters were arrested for poisoning the soup of prominent anti-tippers.
WOULD you like a smile with your burger and fries? That will be 15% extra. These days anything less in America will earn you either shame or a pointed question from an irate server. But on October 14th Danny Meyer, head of Union Square Hospitality, a restaurant group, announced that he would put an end to tips in his eateries. This will not affect his customers’ wallets; prices will rise to offset the banned tips. But it is good news for America.
Today, tipping is entrenched. According to the Economic Policy Institute, 4.3m Americans rely on the generosity of tippers to scrape a living. The idea seems like a good one. If the customer knows best, then who better to monitor and reward the performance of the servers? Without a tip on offer, waiters might be reluctant to fetch endless glasses of tap water with a smile.
But the system is flawed. Tips are paid after the service is provided, allowing opportunistic stinges to scarper, free-riding on the generosity of others. Society tries to stop this by imposing a strong social norm on diners—tip much less than 15–20% and either be engulfed with shame, or face disapproval from your date. But this strong social norm undermines the original rationale for tips as a way to incentivise excellent service. Studies of tipping have found that diners do part with more cash when they feel they have been better served, but not much. A study from 2000 found that differences in customer-service ratings accounted for only 1-5% of the variation in dining parties’ tips. So much for performance-related pay. A country like Japan, where tipping is seen as rude and the service is excellent, shows that you don’t need to tip to be well-looked-after.
Mr Meyer’s motive for scrapping tips was the bind they put him in when
setting pay. Laws limit what greedy managers can siphon off for
themselves, but also the extent to which chefs and other back-room
staff—who play just as big a part in the meal waiters do—can share the
customers’ cash. No wonder there are chef shortages in New York.
Managers are right to demand to set pay as they please.
As well as not taking their motivational duties seriously, customers reward waiters for all manner of arbitrary things. Studies suggest that tips are larger when diners are presented with a good weather forecast, when the bill is presented on a tray embossed with a credit card insignia, when their waitress is blonde, and (as found in France) when she is wearing a red top. A recent study found that attractive servers earned $1,261 more in tips per year than unattractive ones. Worse, tipping is a vehicle for customers’ prejudices to infiltrate into pay. Gender and race influence the size of tips; black servers are tipped less, and a study in 2011 found that for anything less than “exceptional service”, women’s tips were smaller. Even if tipping does lead to better service, letting discrimination sneak round the law is wrong.
Americans are caught in a nasty cycle of low pay justifying tips and tips justifying low pay. It is time to break out. Restaurateurs are best placed to lead the way. Laws passed in the 1900s to ban tipping were repealed as they were unenforceable. And a diner’s lone act of defiance will only sap the income of the hard-working waiter. Servers scared of being stiffed can take comfort from the knowledge that Mr Meyer banned smoking in his restaurants long before a general prohibition was passed. And who knows, customers might even find the human service sweeter when it does not have to be bought.