Apparently, when it comes to tipping for good service, Americans have a serious case of alligator arms.
A new study from CreditCards.com concludes Americans “are worse tippers than before Covid-19”.
The study points out that U.S. adults haven’t followed through on a pandemic-era pledge to become better tippers after seeing so many people out of work, or working part-time just to get by.
Earlier studies from CreditCard.com showed that one-third of Americans say they would be more generous with tips in a post-pandemic marketplace, but the new study shows the number of consumers who “always tip” fell from 77% in 2020 to 73% in 2022.
Maybe they’re using rising inflation as an excuse.
“Inflation is cutting into consumers’ purchasing power and a tight labor market has left many service industry businesses understaffed and struggling to provide top-notch customer experiences,” said Ted Rossman, senior industry analyst at CreditCards.com.
On the upside, many more Americans tip than those who don’t. CreditCards.com has the receipts.
- 73% of consumers always tip.
- 14% tip most of the time.
- 9% tip sometimes.
- 4% never tip.
There’s more, too: according to the survey, men are slightly more generous tippers, with men having a median tip rate of 22% of total cost, versus 20% for women. But women tip more and in greater numbers in areas like personal grooming and with delivery services.
Why Are People Tipping Less?
So why are Americans throwing nickels around like manhole covers when it comes to tipping? Nobody seems to know for sure.
“The results of the CreditCards.com study track well with a similar survey by Square that shows a spike in tipping during the initial shutdown of 2020 and Christmas, but a gradual drop as restrictions were relaxed,” said Andrew Latham, a certified personal finance counselor and managing editor at Supermoney.com. “It's not easy to establish causation in these types of surveys, but it does seem like inflation and perhaps the view that service workers no longer deserve hazard pay has cooled down the generosity of Americans.”
Part of the issue is simple common sense.
“The more money you have, the more likely you are to be a generous tipper,” Latham told TheStreet.com. “That would explain why older people tip more than younger people who generally have lower incomes.”
Inflation, which has often been described by economists as a tax on the poor, is definitely not helping.
“Inflation has caused the average U.S. household to spend $5,200 more this year for the same basic services it purchased last year, which represents a 15.6% wage cut for families in the bottom 20 percentile for household income,” Latham added. “Consequently, I can see why households who are struggling to make ends meet may feel like they can't afford to tip like they used to.”
Another way of looking at the data from this survey is to see it as a generational change in Americans' perspective on tipping.
“Millennials may be the worst tippers according to the survey, but they are also the generation that is most likely to be in favor of increasing wages (and prices) and doing away with tipping altogether,” Latham noted. “One solution that would avoid all the confusion that surrounds tipping is to switch to a fixed service charge that is set by the business and customers can choose to tip above the service charge if they are blown away by the quality of the service.”
Labor Distortions?
As the service sector winds its way through a period of thinned-out, overworked employees, consumers may be less likely to reward what they view as insufficient service.
“Labor shortages make it increasingly more difficult for understaffed and overworked employees to provide good service, which reduces tips, which subsequently reduces staffing as people quit to find employment where they can earn a living wage,” said Andrew Duffy, CEO and Co-founder of SparkPlug, an employee incentive management platform for retailers and restaurants. “It’s a vicious cycle that ultimately ends up hurting everyone – customers, employees, and businesses alike.”
A key to modernizing the nation’s labor economy is the elimination of tipping or at least the elimination of the widespread belief that tips should be provided in return for “quality” service, Duffy noted.
“If businesses refuse to eliminate tips, consumers need to start thinking of them as a necessary, fixed input to ensuring that service employees earn a living wage,” he told TheStreet. “Ultimately having every business simply raise their prices by 20% and pass the additional margin on to the employee would be vastly preferable, but this would require collective action on a massive scale to accomplish.”
