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The Tipping Point: The Economics of Taxi Fares
- zwieback 5y agoI totally relate to "as cost goes up the default options become less attractive". I don't mind the typical options being a bit high (when did 20% become the low end??) but I'll opt out and put in my own amount when the bill is above say $20.
- paxys 5y agoI'm not even too old and remember the time when 10% was considered a decent tip (at restaurants, cabs), and 12-15% would be reserved for exceptional service. And tips were always calculated pre-tax. Now 20% on the total amount has become the default. How did we get to this?
- zzyzxxz 5y agoInflation might play a part in this. USD is worth half of what it was in the 90s.
- onemoresoop 5y agoUnless you're referring to wage stagnation, inflation should raise the bill and for the same percentage the tip should be higher on higher checks.
- chasd00 5y agothe bill has most def. been raised. Every time i take my family out ( 2 adults + 2 kids ) we're pushing $100 these days.
- nameisname 5y agoI've also noticed, and I can't say why this is, that the service or quality hasn't improved. You see the server two or three times. They probably don't write anything down and at least one plate is wrong somehow. A drink is missed. The only time I think I see a server more often is if I get a beer. They love asking me if I want a refill on those.
- krab 5y agoHow does inflation influence the tip percentage?
- kurthr 5y agoThese are percentages. Inflation is already taken into account by the price rise in the service being tipped. Maybe you mean to say that the base hourly rate was not inflation adjusted?
- nerdponx 5y agoCredit card entry screens showing 10%, 20%, and 25% as default options is probably "nudging" people to the point where bigger tips are becoming culturally accepted. That, and cultural forces in some political circles (which are fairly popular in New York) that encourage tipping to make up for what are perceived as unfairly low wages. It's an instance of people attempting to put their money where their mouth is, so to speak.
- UncleMeat 5y agoI'm not sure I've ever seen a screen showing 10% as an option. I frequently see the options 1. 20% 2. 25% 3. No tip 4. Custom tip Dark patterns.
- leifg 5y agoHere (in California) I mostly see 18,20,25 for restaurants and even higher ones in coffee shops (sometimes over 30 as the highest tier)
- darth_avocado 5y agoSit down restaurants no longer offer anything less than 20. Ironically however, fine dining restaurants (especially michelin stars) explicitly ask you to not tip, because they pay their staff well. You can still do it, but every bill comes with a disclaimer that you don't have to.
- listenallyall 5y agoNot in the US. Danny Meyer tried a no-tipping policy at at Union Square Cafe but repealed it relatively quickly.
- pishpash 5y agoMaybe. There are plenty of establishments that expect (even prod) you to tip the same high percentage when the base price is already hundreds of dollars so nobody should need pay compensation.
- vkou 5y ago> How did we get to this? We got to this because service worker wages grew slower than necessary-for-life expenses like food, shelter, medical care, childcare, education, etc. Meanwhile, many professional wages grew much faster than all of those things. This is also the reason for why many ski towns in 2022 are unable to find enough staff to keep either the resorts, or the restaurants open. Nobody working those jobs can afford to live in those towns anymore, so you get a bunch of millionaires going off to vacation in their winter dachas, only to discover that there's nobody there to cater to them.
- bpodgursky 5y agoOK, but the wages also grew slower than necessary because the income was padded by tips, reducing pressure on the business to raise wages to retain employees. When restaurant servers don't get any tips it makes steady-wage jobs like warehouses or grocery stores relatively more appealing compared to customer-facing jobs. Not a great cycle.
- vkou 5y ago> OK, but the wages also grew slower than necessary because the income was padded by tips, reducing pressure on the business to raise wages to retain employees. Tips are better for the business, because it lets them price-differentiate, and thus serve more customers. The more meals a restaurant serves, the more money it gets, regardless of how well or poorly the customers tip. Over the past 40 years, businesses had a lot more bargaining power than service workers, and have obviously optimized their operations in a way that benefits their bottom line. If you don't like these outcomes, you have a few options. 1. You can curtail business bargaining power by empowering workers. 2. You can curtail business bargaining power across the board, by raising wage and benefit floors through legislature. 3. You can curtail the rising delta between service wages and living costs, by having someone else (the middle class, the rich, corporations, Uncle Bezos, importers, ???) pay for the difference. 4. You can curtail the rising delta between service wages and living costs, by setting price ceilings on living costs through legislature. 5. You can curtail the rising delta between service wages and living costs, by bringing costs down, via creating a competing low-cost provider through legislature. ... Or you can shrug your shoulders, and just pay your 20-25% gratuity for the exact same level of service that used to earn a 10% gratuity.
- uoaei 5y ago
- CamelCaseName 5y agoMore specifically on moving the needle though, I think it was restaurants (and later, apps) optimizing their prompts to change consumer behavior.
- dorfsmay 5y agoMaybe not tipping at all would increase pressure for better labour laws and minimum wages and everybody could benefit from it rather than following some weird social norm of who gets the tips. Do you tip the cashier at the grocery store? What about the people replenishing the shelves? Why not?
- pessimizer 5y ago
- dorfsmay 5y agoAre you racist with some people but not others? Do you tip cashiers at the grocery store? It'd be really easy, why are you not doing it?
- erehweb 5y agoWorth noting that waitstaff would have a lower minimum wage than cashier or shelf-stocker, with expectation that they make it up in tips, so it's not just social norm.
- Enginerrrd 5y agoI'm early thirties and 20% is what I was always taught. 30% for personal services like haircuts/massages, etc.
- rconti 5y agoI've never heard this 30% for personal services rule of thumb.
- throwawayboise 5y agoI'm in my 50s, when I was young 15% was normal at restaurants. 20% is an easy mental calculation, so that's what I do most often these days. I round up to the next dollar or sometimes next multiple of 5 depending on the total amount of the check.
- dfxm12 5y agoI'm in my 50s, when I was young 15% was normal at restaurants. The graph at the bottom of this article may be interesting this context, it's from 2014, but it's all I could find with a quick search: https://www.epi.org/publication/waiting-for-change-tipped-minimum-wage/ https://www.epi.org/publication/waiting-for-change-tipped-mi... The tipped minimum wage hasn't changed since 1991. At around 88-89, the difference (in 2014 dollars) between tipped minimum wage and the minimum wage was 40% in 2014 it was 71%.
- UncleMeat 5y agoThe tipped minimum wage is so small that it is basically zero. If menu prices rise then that same 15% tip rises as well. Comparing the tipped minimum wage and the ordinary minimum wage is not really a complete story.
- dfxm12 5y agoI'm not trying to give a complete story (if you are interested in a more complete story, I do suggest the linked article), just context as to how/why norms around tipping can change.
- 6gvONxR4sf7o 5y agoThere’s no stigma around giving more tip than expected, and there is stigma around giving less. This asymmetry drives tips upwards over time. You might tell your low tipping friend they’re being rude, driving the bottom end up, making average higher, meaning a really generous tip has to be even higher.
- aeternum 5y agoAmericans became worse at mental math and thus 20% became more popular than 15.
- cardiffspaceman 5y agoInvest in some precalculated values and $6.66 @ 15% earns $1. And if it's all about ease, what could be easier than "metric" 10% ? /s because the ship has sailed.
- netizen-936824 5y agoJust move the decimal one place and add half of that value to itself. 15%. Ez It amazes me that people can't calculate this, even roughly. Its a tip, it doesn't need to be exact
- bee_rider 5y ago20% is one less step and doesn't require addition, although I'd call it more 'aversion to tedium' than a lack of talent.
- netizen-936824 5y agoI also feel like it may be a bit of a stretch to call division by 2 tedious, but I also do math on a regular basis so I may be biased
- bee_rider 5y agoIs it really a matter of skill? I've never really considered tipping by 15% anyway, but shift-right, halve, and add back to get 15% doesn't seem fundamentally more difficult than shift-right and double. Just more tedious. Anyway, nowadays everybody has a calculator on them at all times so this couldn't be the reason.
- late2part 5y agoI agree. However, as I've become more wealthy, I think of it as a (happily paid) extortion tax. _Fight Club_ taught me that the service class can anonymously hurt me. I strive to be overly polite and non-demanding, and tip 20%+ to be the good customer and avoid any vengeance. I'm not cynical about much in life, but with tipping, I view it as cheap insurance. Another commend focused on the difference between median wages and waitstaff wages - in my mind I tip more not because they make less, but because I have more discretionary income.
- pjmorris 5y agoOne of my old bosses would say 'They need it more than you or I do' when settling up the change after paying for lunch.
- netizen-936824 5y agoHe's not wrong, but that also has me thinking that they should actually pay their workers more
- dougmwne 5y agoIf I had such an adversarial view, I’d probably stop bothering to eat out and just slab bread around the filling myself.
- nameisname 5y agoNot to say that what you're doing is wrong or unappreciated by the people serving you but I think you're basing way too much of your daily life on a movie.
- threwaway4392 5y agoI am not even old and remember tips meant appreciation of service rendered. Now tips are requested upon payment before service rendered. In front of workers and next customers. Minimum wage subsidies passed on to the consumer through social coercion, and maybe some insurance that nobody will spit in your coffee after you pay (but do the barista and the cook actually know how much you tipped?)
- darth_avocado 5y agoYes notes can always be added on tickets and I know for a fact that a lot of people at the pos put it in.
- fyuxyctf 5y ago
- pjmorris 5y agoForty years ago, when I was a 19 year old dishwasher and I went out with my wait staff friends, they made a point of tipping 20% instead of the then-customary 10% because they knew what their servers went through and wanted to show meaningful appreciation and help their friends keep their rent paid, etc. I picked up the 20% habit from them. I don't know if what we are seeing is 40+ years of word of mouth, but I don't know that it isn't.
- dougmwne 5y agoFor the first time ever, I saw an 18% tip automatically added to the bill at a casual restaurant in Ft. Lauderdale. Party of 2 and there was absolutely no hint it would be added from the menu or server. I caught that it was there by accident because I am not in the habit of checking the receipt in detail and they were clearly trying to dark pattern me into tipping twice. From now on I will be more careful if restaurants think they can get away with that.
- listenallyall 5y agoSouth Florida restaurants have been doing that for decades. Especially South Beach Miami. They get so many European and South American visitors who don't even consider American-style tipping, so they started adding it automatically. I agree, however, that it should be much more visible, or that waitstaff should clearly state out loud, a suggested tip is already added. But I think that since 90+% of customers are vacationers and not locals, the restaurants don't feel like they are jeopardizing repeat business by not mentioning it.
- pishpash 5y agoPlaces put local service fee pass-throughs (e.g. for local pay regulations), and still expect you to tip, which is a form of double tipping. Also these states already require employers to pay tipped employees full state minimum wage before tips [1]: AK, CA, MN, MT, NV, OR, WA So no principled justification to tip in those places, unless you like to tip for every service for some reason. [1] https://www.dol.gov/agencies/whd/state/minimum-wage/tipped https://www.dol.gov/agencies/whd/state/minimum-wage/tipped
- seanmcdirmid 5y ago> So no principled justification to tip in those places, unless you like to tip for every service for some reason. While they may make minimum wage, in this day and age, minimum wage is well below what you might make otherwise at a non-tipping establishment. Tipping is still expected at restaurants in Washington state, and is still the main source of income for most servers (the minimum wage they earn is less than the tips they receive, and if it weren't for tips, they wouldn't bother doing the job for minimum wage). I'm against the requirement to tip as a way of doing business, but will do it as long as it is expected. Ideally, we'd do things more like Europe or Japan.
- cuddlybacon 5y agoTipping is governed by two separate races to the bottom: * Buying social prestige amongst your group by showing generosity. * Buying better service by showing generosity. Both these result in motivation in favor of tipping more and against tipping less. Both of these require your tips to be above average, and not everyone can be above average. What makes it somewhat tricky is that tipping to show generosity is a type of virtue signalling. And virtue signalling generally doesn't work if you admit you are doing it for self serving reasons. Since the best liars believe their own lies, our brain is resistant to acknowledging that these are the true reasons behind tipping. It prefers to pick justifications that align with the virtue being signalled.
- nameisname 5y agoI think it's much simpler than this. The more employers can get you to tip (maybe setting the machine default) the less they have to pay the employee.
- shukantpal 5y agoYeah, but they don't get to raise their prices as fast.
- milkytron 5y agoRegardless of the debate of whether tipping should be the norm, I've found that nearly all of the suggested tip amounts are generated using the after tax price. When I was young my dad pointed this out to me when it would happen on restaurant receipts, and then I'd have to listen to him tell the waiter who clearly did not care. But especially now, nearly all of the suggested tip amounts are calculated after tax is included. After seeing it done so much I think this has become the norm, and don't even check the pre-tax vs post-tax math anymore.
- dfxm12 5y agoLet's say the bill was $100. Let's say tax is 6%. Let's say your dad wanted to tip 20%. Your dad is talking to the waiter over a mere suggestion of $1.20 that the waiter has zero control over. In my experience, I'd say half the bills I get have suggested tips and of those I can count on one hand how many suggested the tip on post tax amounts. I used to give an exact pretax 20% tip, just on principle, but one day just I realized it was kind of silly to worry over such little amounts. Forget principles, the day I can't afford to tip well is the day I can't afford to dine at a restaurant.
- novok 5y agoI just go down a percentage category if the tips are calculated post tax.
- null0pointer 5y agoWhy is tipping even calculated as a percentage? It's not like the work done by the waiter is suddenly 10x harder or more deserving of reward when they're bringing a plate with a $100 dish rather than a $10 dish.
- Arnt 5y agoFirst of all, the final bill is typically larger because more dishes were brought. Second, if that is not the case, waiters are expensive places expect more, because those places are more expensive and hire better waiters who do more and better work.
- nostromo 5y agoThis article is beyond absurd. It's bending over backwards to promote how tipping is actually for the tipper's benefit. And that recommending large tips via touch screen menus is so helpful in saving them the time to do mental math. Then the author places an arbitrary value of $1 on that mental math (???) to exclaim that large suggested tips saves the passenger both time and (fictional) money! Welfare has increased by more than 200,000 (completely made up dollars) per day! Seriously, wtf, Stanford Business?
- celtain 5y agoAssuming you need to tip (and given that 97% of riders tip, it seems like you do), not having to calculate the amount is clearly a benefit. The author didn't just make up that $1 value, it's derived from the situations in which riders choose a custom tip instead of using a default option.
- LegitShady 5y ago>not having to calculate the amount is clearly a benefit. Why? Calculating a tip isn't something that has a failure state because even if you give the wrong amount it won't matter. On top of that the exercise of calculating the tip is beneficial for your long term mental acuity. I'm not sure why doing a simple calculation that doesn't benefit me and has no failure state is a benefit. It's a benefit for the tippee maybe, but not the tipper.
- celtain 5y agoDoing work incorrectly is still doing work. The presence or absence of a failure state doesn't matter, what matters is the time and mental effort you have to expend. It's not a lot of effort, but $1 also isn't a lot of money. >On top of that the exercise of calculating the tip is beneficial for your long term mental acuity. If you can honestly say that you think most people enjoy doing math, I don't know what to tell you.
- fshbbdssbbgdd 5y ago
- sokoloff 5y ago> Tip menu suggestions can “actually increase the wages of workers without necessarily making life terrible for consumers or taking money away from them,” Isn't anything that increases the wages of workers via increased tips definitionally taking money away from consumers? (If you argue that they get $1 of utility by not having to think about the amount to tip, you might not be taking utility away from them, but you're still taking money away from them.)
- dskloet 5y agoI found this confusing too. But I assume they mean you're not taking it because they're giving it up voluntarily.
- TrainedMonkey 5y ago> Donkor found that around 60% of people chose a tip from the menu, indicating that most passengers preferred not to have to calculate a tip in their heads. That assumption seems to be quite a stretch. Naively I would think that major drivers for this behavior are saving time and comparatively terrible custom tip experience. Personally I love doing mental math, but still use preselected tip in situations with external pressure. For example when there is a line of people behind me in a coffee shop or I am trying to get out of taxi fast so the driver is not waiting on me.
- kahrl 5y agoYeah. There's a leap in logic there. There's MANY unfounded assumptions in this article that steer it towards the author's predetermined conclusion.
- malshe 5y agoCan you pinpoint these "MANY unfounded assumptions" in the research paper? I read the paper but I don't see where the author is making these assumptions.
- chorizo 5y agoIt think it's telling that most customers picked 20%, the lowest on the menu. I would conclude that the menu presents a nudge towards establishing 20% as the lowest socially acceptable tip. Selecting a custom tip lower than 20% runs the risk of upsetting the driver, possibly leading to a verbal or physical altercation.
- malshe 5y agoJust to be clear, the research article has no such assumption. This is the PR person at Stanford interpreting things on their own.
- jelling 5y agoITT: people that are high wage earners in the industry with the highest potential upward mobility that want to argue about the basis and percentage of tips for people doing the work with the least possible upward mobility. Tipping, at a minimum, is social grease, and to the extent that you want it to be, redistributive economics with near zero administrative overhead.
- gruez 5y ago>Tipping, at a minimum, is social grease, and to the extent that you want it to be, redistributive economics with near zero administrative overhead. The "zero administrative overhead" also makes it massively unfair. Why does the waiter at a fancy restaurant make hundreds per night in tips, but the grocery clerk make $0?
- sokoloff 5y agoBoth took the job with an awareness of whether the job was tipped or not? I don’t see the issue; if the grocery clerk would prefer to be a waiter at a fancy restaurant, they should apply to such a role.
- elliekelly 5y agoNot every town has fancy restaurants. Most places in America probably don’t have anything much “fancier” than a chain like Outback.
- HeyLaughingBoy 5y agoEven if the fanciest restaurant in town is "Mom's Heartburn Diner," the waitstaff still expect to be tipped and the grocery clerk still doesn't.
- gruez 5y agoYeah but something tells me that someone who's in favor of "redistributive economics" isn't the type of person who thinks "Both took the job with an awareness of whether the job was tipped or not" and therefore it doesn't matter what they earn.
- 908B64B197 5y agoThe original Uber "no-tip" model was just great. For the users but the drivers as well (not getting exploited by the medallion racket). Sad to see we’re reverting to tipping.
- thebean11 5y ago> If the cost of computing an acceptable tip is around a dollar That seems more than a bit high..$1 for something that takes 10-30 seconds max, assuming you can't do it in your head and pull out your phone calculator?
- kfarr 5y agoIt may be depressingly accurate for those not great at math and really hate doing it, and it may be that the majority of people fall in this category
- deleted 5y ago[deleted]
- bitwidget 5y agoThat was a confusing point in the article for me. I thought it meant that people doing mental math would tip on average $1 more than a computed option.
- thebean11 5y agoOh you may be right..the article just dropped that number with no evidence or explanation, who knows..
- renewiltord 5y agoI don't take taxis because of this. Too hard to predict spend.
- nameisname 5y agoI do not understand why when I pick up food it asks for me a 20% tip. Maybe I'm off base but isn't, as a bare minimum, the job of someone making a pizza to make a pizza? As someone who has worked in the restaurant industry for a number of years, and been part of a chain closure because a manager was stealing tips, I do not understand why anyone would tip for pickup. As someone whose prepared the food for pickups, I can say 100% that none of us in the kitchen thought what we were doing deserved more money than the rate we were being paid.
- ramphastidae 5y agoTipping is absolutely not expected for pickups. Delivery apps shamelessly try to get you to do so, but it is definitely not normal.
- anchpop 5y agoEven when I order in person at the local Thai place (there’s no wait service, you just order and they call your name when your food is ready), the person at the counter always asks “do you want to leave a tip?” They also do this when I get coffee at Biggby. I don’t mind having the option available, but I think it’s a dark pattern where you feel pressured to say yes or disappoint the person at the counter. That said there’s one restaurant near me which uses Toast, which makes the dining experience so much nicer imo. I just ask for the receipt, scan the QR code with my phone, pick one of the suggested tips and pay with apple pay. I wish every restaurant used it