The Online Tipping Outrage

The latest outrage cycle was started by April Glaser in Slate who is outraged that some online delivery companies apply tips to a worker’s base pay:

My first DoorDash order is probably my last because, as journalist Louise Matsakis put it on Twitter, “I don’t believe that a single person intends to give a tip to a multibillion dollar venture-backed startup. They are trying to tip the person who delivered their order.”

You will probably not be surprised, however, that Slate is also outraged at tipping.

Tipping is a repugnant custom. It’s bad for consumers and terrible for workers. It perpetuates racism.

But one way for a firm to get rid of tipping is to guarantee a payment per delivery. Many delivery workers may prefer such a system because tips are often perfunctory and therefore from the point of view of the worker random or they vary based on factors over which the delivery person has little control (e.g. worker race but also the customer’s online experience and whether other workers got the pizza into the oven on time). In other words, the no-tip system reduces the variance of pay. Moreover, it won’t reduce pay on average. Delivery workers will earn what similarly skilled workers earn elsewhere in the economy whether they get to keep “their” tips or not. The outrage over who gets the tip is similar to complaining about who pays the tax, the supplier or the demander.

There are exceptions. In some industries, such as bartending, the quality of the service can vary dramatically by worker and tips help to reward that extra quality when it is difficult to observe by the firm. In these industries, however, both the workers, at least the high quality workers, and the firms want tips. If the firms themselves are removing tips that is a sign that they think that the worker has little control over quality and thus tips serve no purpose other than to more or less randomly reward workers. Since random pay is less valuable than certain pay and firms are less risk averse than workers it makes sense for the firm to take on the risk of tips and instead pay a higher base (again, with the net being in line with what similar workers earn elsewhere).

In short, a job is a package of work characteristics and benefits and it’s better to let firms and workers choose those characteristics and benefits to reach efficient solutions than it is to try to move one characteristic on the incorrect assumption that all other characteristics will then remain the same, to do so is the happy meal fallacy in another guise.


Plus, reportedly, 28% of orders are "tasted" by the delivery person.

Saw that too but I was dubious and dug around. I think the respondents were A) saying that in some cases canceled orders and or change-orders result in occasionally consuming the unwanted meal and B) yes...they are occasionally stealing a French fry. It's not like they're actually biting into your sandwich, but it's still a gross breach nonetheless.

All in all, it really is another indication that the convenience economy makes consumers dumber.

The survey says 28% of delivery people have ever tasted an order. That's gonna be far less than 28% of all orders.

The IRS taxes the tips that server's get, based on a percentage of their billings, not on the actual tips received.

Yes, but that may mean a windfall for a server who makes more than the assumed amount in tips.

That doesn’t match my experience. Waiting tables in the mid-nineties, servers and bartenders were advised that claiming less than 8% of your sales would make is more likely that you would be an audited. Some servers and bartenders thus chose 8% of sales to report as their tipped income, even though their actual tips were higher. But this only worked in places where customers primarily paid in cash.

Every restaurant I worked at informed you that, by law, you were supposed to claim 100% of your tips, and required to claim 100% of your credit card tips, minus tip-out (the share paid to bussers, food-runners, bartenders, and greeters). By the mid-aughts cash was increasingly rare as a form of payment, which meant that almost all tips were claimed.

After a supreme court case in which a restaurant owner was held liable for the taxes on unclaimed tips, the gig was up, and managers would “have conversations” with waiters and waitresses who were claiming less than 100% of credit card tips plus a minimum of 10% of cash sales.

Lots of us also recognized that if you ever wanted something like a car loan it was better to have a higher reported income, and to just be honest about it.

Almost no one I’ve spoken with who works in the restaurant industry and works for tips wants to move away from tipping—witness what happened in D.C. recently. Since tipping is a percentage of prices, server’s wages go up when prices go up—kitchen labor wages don’t. This is a source of conflict in restaurants; the back-of-the-house employees resent the fact that front-of-the house employees make more money. Servers see attempts to replace tipping with service charges as a naked move by restaurant owners to take some of their wage gains and redistribute them to the back of the house staff. They are right too:

Just curious about that last point.

Is this just the redistribution from top earners to lower rung earners in a microcosm? After all, it's not perfectly clear that all that is driving the tip is the quality of the server and nothing to do with quality of the food or drink served.

my grandfather used to tip me just for being me...

The bartender example also includes collusion and corruption; the customer pays the bartender but little of that makes it into the register for the company.

A comparison with non-tipping cultures might make sense too. But I think in all cases the pay is more than what we see in the USA service industries that depend on tips.

Last, can we really say it's a purely internal, firm-worker relationship in terms of compensation and product or is it really a more complicated joint production process where some of the product is produced within the firm and some outside the firm by the person compensated with the tip?

What is the similarity between tips and commissions? What about various equity based compensation for workers & management? Seems like one might draw some parallels among the three.

"But I think in all cases the pay is more than what we see in the USA service industries that depend on tips."

That's an extraordinary claim, do you have a citation?

"After all is said and done, it is estimated that bartenders take between $45,000 and $73,000 annually, thanks to their tips."

I thought it was common to cut regular customers' bills a bit, with part of the savings rolled into an unusually generous tip.

That was very poorly stated. I'm not suggesting that in the rest of the world where service jobs do not expect/depend on tips is greater that what is paid in the USA.

I was thinking from a relative pay view. In the USA the tipped profession don't get a hourly pay like jobs with similar skills but not generally receiving tips. My experience is that in the rest of the world where tipping in not used, those jobs do receive a similar pay.

Maybe an example to be clear.
Job A - non tipped anywere
Job B - some places tip an expected form of pay, other places no tip
Job A and B are similar skill sets and market factors

Where tipping is expected/used
wage Job A >> wage Job B

In non-tips cultures
wage Job A ~ wage Job B

Tipping is a repugnant custom. ... It perpetuates racism.

Wearing a tie is a repugnant custom. It perpetuates racism.
Keeping a cat is a repugnant custom. It perpetuates racism.
Listening to Bach is a repugnant custom. It perpetuates racism.
Cycling to work is a repugnant custom. It perpetuates racism.

Happily, shooting each other in large numbers every weekend isn't a repugnant custom and doesn't perpetuate racism.

"shooting each other in large numbers every weekend isn't a repugnant custom and doesn't perpetuate racism."

this is what nekked barnie sanders&narrative public radio call "nonviolent" drug crime!

You know what is actually pretty racist... playing up drug traffickers in Baltimore that are only really shooting each other over drug deals (note: the war on/over drugs is retarded on all fronts) while playing down people randomly shooting innocent children at a garlic festival simply because they are disgruntled.

Please do go on about the rats in Baltimore though.

And BTW, I enjoy tipping. It’s like giving a random gift to someone that, in all likelihood, will probably appreciate it more than I need it. Drop a overly generous tip at the next opportunity and sneak a peak at their face lighting up. Worth every penny.

Oh yeah... and when people say something like tipping is racist, just laugh at them for being dumb and move along.

Not that we should be happy about either, but there were five homicides in Baltimore on Saturday and Sunday. "Baltimore" is clearly a much worse problem than "mass shootings", but mass shootings get way more press. That does seem unbalanced and in part politically motivated. Just to throw out some additional and maybe unrelated considerations: The "bad guy" in one case is politically unpopular and in the other case cannot be criticized so you can only talk about one of these issues in public. Most people can avoid Baltimore but can't avoid being in public, so one of these things makes them feel vulnerable and not the other. Finally, acknowledging one thing is bad does not mean nothing else is bad.

Anyway, Baltimore Homicide Tracker link:

I don't know about politically motivated. The fear of mass shootings is generally due to how random they are: people can imagine being being victims when they are out and about minding their own business and there doesn't seem to be any precautions you can take.. If you're afraid of Baltimore crime you stay out of Baltimore, especially the crime-ridden areas. and that solves that.

Plus many inner city homicides are bad guys shooting other bad guys. Not mentally ill white people (it's always white people) shooting first graders in their Connecticut school or peaceful worshippers in their temple. The latter is simply worse.

somebody just stepped in a couple big poopy piles of sophistry
u sed-
"If you're afraid of Baltimore crime you stay out of Baltimore, especially the crime-ridden areas. and that solves that."
1. the problem is not "the fear" of shootings the problem is the actual shooting
2. avoiding baltimore does not "solve" the problem of the highest
murder rate in the country!

Fair points being made by many here... but many are missing the key distinction.

It’s one thing if something bad happens to you when you know full well what you are getting into (drug trade), it’s another when innocent people are getting smoked by some random with an ak47 as they are at a festival with their family.

How much of Baltimore’s problem could be solved if we eliminated the black market for drugs? 75%? I don’t know, but a lot.

It’s not about race... i.e. the rat infestation (which is what that dog whistle implied)... it’s about drugs.

The other is arguable more sinister because it involves the innocents.

But as I said, fair points have been made.

harvard? student- do you and naked barnie sanders really believe that making heroin cheap/free in baltimore (highest murder rate and very high opiate addiction rate) is gonna reduce baltimores problems by 75%? - how exactly do you see that working?

My Lord,

The over-reported mass shootings mainly involve white victims, while the Baltimore and inner-city shootings mainly involve black and brown victims.

Ergo, gun control is racist.

"Over reported" LOL, you're a real sweetheart.

And while they mainly (?) involve white victims, they always involve white shooters. Gun control is anti-racist.

Whites are 40% of the perpetrators of mass shootings. I'm not sure what you're arguing, but the perception that it's all about white males might be because of the kind of gun control people want to advocate for. It's more about beating up on a certain kind of person than about actually doing anything about gun crime.

See Table I:

That stat basically counts when criminal shoots up a rival gang or a bank or something. When some student or adult nutjob grabs a gun and starts shooting up a place of worship or a Las Vegas concert or a garlic festival or a's always a white guy

this shooting a couple days ago doesn't seem to fit your always a white guy narrative

That's the felony category. The public category is right next to it in the table and it gives the same answer. The white rate is slightly higher in that category, but not much, and it's lower than the white share of population.

I note that lower down in the table it says these things are almost always same-race victims, so the idea that it's predominantly white victims is also wrong. I grant you, that's definitely the impression CNN leaves you with, though.

looks like you conflabulated this part of your sociology narrative-
"And while they mainly (?) involve white victims, they always involve white shooters"
according to
-Between 1982 and May 2019, 62 out of 111 mass shootings were initiated by white shooters.

you also said mass shootings" mainly (?) involve white victims"
according to the guardian
"A new analysis of 358 mass shootings in America in 2015 found that three-quarters of the victims whose race could be identified were black."

See what I wrote above. Those stats include when one criminal shoots a few other criminals. Those types of incidents are disproportionately minorities.

The deranged nutjob who takes an arsenal somewhere peaceful and starts randomly shooting up the place....always a white guy and you know this.

"The deranged nutjob who takes an arsenal somewhere peaceful and starts randomly shooting up the place"

you are describing a typical driveby shooting in an african American neighborhood
your "always a white guy" sociology narrative is reductive sociology bullshit

That's gang stuff and you know it. Inner city crime is tragic, and innocents get killed all the time when gang members fight it out. But that's not the nutjob who grabs 2 assault rifles and goes to a school/church/synagogue/concert. You know exactly what I mean.

it is intellectually lazy & dishonest for you to exclude gang mass shootings from non ganmass shootings when they both meet the definition of mass shootings.
like this one for example last week
mass shootings are not defined by the mental health of the shooter, the type of person shot, the type of weapon used or the motive of the shooter.
mass shootings are defined by the number of people shot!
your "always a white shooter" theme is a false sociology narrative.

You may want to actually look at the paper I cited. Your race ideas are wrong even when you confine it to mass shootings that occur outside of the immediate family and outside of the commission of another crime. I.e., the classic public mass shooting is disproportionately _not_ a white guy thing.

I grant, that is not the impression you are left with if you rely on most of the press.

mebbe david brooks&
is fos and not everthing can be looked at accurately
through a "racial lens"1

1 yet another new &stupid sociology buzz phrase

david brooks & are f.o.s.
(not is f.o.s.)

So there's been a ton of non-white shooters of schools and synagogues and Vegas shows and college campuses and we only hear about the white ones? Dubious.

I guess there are terrorist type mass shootings, like the one on that army base a couple years back, and VA Tech was an Asian if I'm not mistaken. Can't think of any others. All the mass shootings that come to mind from Columbine on down, white guys.

Perhaps the bias is yours? You managed to look at a table clearly showing the information you were ostensibly interested in, and yet you still came away believing in your mistaken prior.

Good luck.

are mass shootings "that come to mind" considered a
valid sociology metric?
that's not actually how non sociologists quantify mass shootings!

Over at Overcoming Bias (Robin Hanson's blog) he was asking if we should worry more about mosquitoes than global wars. Seems we might typically worry more about global war than mass shootings so by his argument mosquitoes should still be of more concern to people than mass shootings.

We need to be more worried about do-gooders doing damage. For example, the fell do-gooders that got banned DDT thus consigning tens of millions to ravages of malaria and other dreaded diseases.

It's OK. They were mainly black Africans who count less than song birds - Silent Spring.

Do-gooders not only do damage. They are racists.

Do-gooders can be misinformed and whatnot... but it’s funny to see the Bible quoters blowing it. Does not St. Paul himself say do not be conquered by evil, but conquer evil with good?

If you are gonna write that off (which was the heart of Jesus social message), well then just stop thumping your bibles because you are a cafeteria bible follower.

Picking and choosing.

DtB isn't a Christian at all, he's an idiotic partisan old white guy. Your posts here show you to be a true Christian, and I salute you. DtB is all about hate.

not racist at all.
one does not need to" play up" baltimores murder rate it has been the highest in the nation for years and the violence obviously does not just affect drug dealers.

the postmodern sociology model that says
speech is violence
violence is speech
&heroin dealers are social justice warriors
is mostly bullshit

Not only weekends . . .

In other news, this week the Baltimore police commissioner was mugged at gunpoint.

It perpetuates David Brooks columns/tweets ...

"""Cycling to work is a repugnant custom. It perpetuates racism."""

But only if you're all trying to get there first.

I don't like to order from all these new independent delivery services popping up because they make the tip mandatory. I argue this isn't a tip - it's a few. However, since I don't often carry much cash, and, when I do, it's usually a $20 bill from the atm, it's not easy to tip(or give to homeless panhandlers, for that matter). I'll just pick it up myself.

But it can be a bit of a pain to choose a route without homeless panhandlers.

It's pretty straightforward I think as the tipper. I elect to tip the individual based on perceived or actually delivered service quality. If said transaction is not actually resulting in that incremental payment going to the individual who provided the marginal service, why bother?

How do you know the tip goes to the person providing the great service?

In many places, tips are pooled, especially when work is "socialist", ie, any server seeing an order ready to be served acts to deliver the order immediately rather than letting the order cool while the server takes orders from others in their section.

Send, the person taking the order is seldom responsible for the food being prepared well and delivered to the table to all while hot, etc. A good manager can recruit and oversee a kitchen and server staff that delivers great service, even with individuals not up to standard, yet.

And I've had bad service in spite of heroic efforts by a server. In one case, we were misbilled, but the owner refused to even talk with us after the server took our complaint to them. We explained to the server the excess charge was coming out of his top, and advised him to seek employment elsewhere. And we all agreed we would never return.

Right, in this case the human reaction flows from a problem of information dissymmetry.

"Hey, I gave that tip to the guy, not the company."

It looks like deception.

You can be up front with a "choose what you pay" program, and noting that it comes with a guaranteed wage. But we know that is different than this sneaky stuff.

Anyway, online millennials are clued in, and know now to tip cash.

> Anyway, online millennials are clued in, and know now to tip cash.

Exactly. The best tips are unreported. The Boss can't take a cut of what he doesn't see.


The boss being both the restaurant manager and the state and federal tax authority.

I don't like it when businesses offload quality control on me as a consumer. They should manange their own quality control like every other business. You don't tip the bank teller, the cashier, the mailman, and many other service jobs. They all have managers who make sure quality stays at a certain level. Why don't these other people do their own job and stop making the consumers look out for quality of service.

Interestingly, that second Slate link is from 2013, and starts out this way - 'When wealthy Americans brought home the practice of tipping from their European vacations in the late 19th century, their countrymen considered it bribery. State legislatures quickly banned the practice. But restaurateurs, giddy at the prospect of passing labor costs directly to customers, eventually convinced Americans to accept tipping.

We had it right the first time. Tipping is a repugnant custom.'

In light of the fact that tipping, particularly in the way it is used in America, has pretty much died out in Europe, one wonders whether wealthy American vacationers returning from Europe in the 21st Century will cause another cultural shift, as the age of aristocracy died out in Europe after a series of brutal wars and revolutions.

We agree in policy albeit not in facts.

Tipping does not shift labor costs from employers to customers. It is economically irrelevant whether customers pay employers and employers pay workers, or if customers pay workers directly. This is similar to the economic irrelevance of statutory tax incidence.

There may be some small differences in bargaining power between worker/customer and employer/customer when it comes to prices, but that relative difference would be difficult to measure and highly variable.

With tipping, employers transfer RISK to the workers. Employers get a fixed wage bill while workers get the variance of average tips. To the extent that tips adequately measure quality of service, this could be a good indirect management tool to eliminate information asymmetry and good for customers who can incentivize good service. But as I say in a later comment, tip pooling, social pressure, and deadbeat customers all erode the regulating qualities of tips.

That's high on theory.

We really don't know how restaurant and server returns would look without a long running RCT, with time for new use patterns to emerge. I don't know, unless there has been a cross-national comparison of similar class restaurants?

Personally, I don't like tipping because as others have noted, it is inefficient, and I don't know where it goes.

I took some people to a chop house recently. The menu said they would automatically add 18% for a group our size. When the bill came the server said they hadn't, it was up to us. I paid about that anyway, $125. How was that split? Who knows.

'We really don't know how restaurant and server returns would look without a long running RCT, with time for new use patterns to emerge.'

Well, in Germany, restaurant staff working full time have health care, a legal minimum of 24 days paid vacation, and are paid a guaranteed wage, like any other employee with a contract.

Makes you wonder how many American restaurant staff would refuse such terms of employment.

I suppose if we concentrate on the middle of the market, it's obvious that the German framework gives restaurant staff *far* more life security.

Not just the middle - those are the same terms of employment for someone working at McDonalds also.

That's really smart and fair. Pay people the same, regardless of the job they're actually performing. Econ 101

'Pay people the same'

They are not paid the same, they merely have the same rights/obligations in terms of health care, and the same right (when full time employees) to 24 paid vacation days.

Or do you think that 'terms of employment' actually means nothing but pay? It doesn't, at least in Germany, where a McDonalds worker is not as well paid as someone working at a Michelin Guide starred restaurant, even if their basic terms of employment are legally the same.

'Econ 101'

Sounds like socialism 101, something that was junked in part of Germany at the end of the Cold War. Of course, in Western Germany, the term is soziale Marktwirtschaft or social market economy - maybe you should read a bit about it - 'The social market economy (SOME; German: soziale Marktwirtschaft), also called Rhine capitalism, is a socioeconomic model combining a free market capitalist economic system alongside social policies that establish both fair competition within the market and a welfare state. It is sometimes classified as a coordinated market economy. The social market economy was originally promoted and implemented in West Germany by the Christian Democratic Union (CDU) under Chancellor Konrad Adenauer in 1949. Its origins can be traced to the interwar Freiburg school of economic thought.

The social market economy was designed to be a third way between laissez-faire economic liberalism and socialist economics. It was strongly inspired by ordoliberalism, social democratic reformism and the political ideology of Christian democracy, or more generally the tradition of Christian ethics'

Well, apparently Germany is not as progressive as I've been led to believe. Sad!

You are new at this - as long time commenters know, Germany is a socialist hellhole. Traurig!

Any country that doesn't provide life security for McDonald's workers deserves whatever label people want to attach to it.

Clearly, you didn't bother to read about the social market economy, which essentially sees its role as being able to provide 'life security' to everyone.

Clearly, it hasn't been effective.

Actually, Anonymous2, I oppose "equal pay" because I think in all situations someone is working harder, or smarter, than someone else, and that person should earn more.

Management can have problems in that regard, but it is management's responsibility .. for worker retainment if nothing else. And I think they're going to have more insight than a restaurant patron with less than 5 minutes exposure.

Pay waiters a million dollars a year, then they'll have all the life security they could want. Effin' genius.

Why would anyone think something so blatantly stupid?

Ah, right - this is the MR comments section.

You're implying that German restaurant workers have those benefits simply in the absence of tipping, which is not the case. They have those benefits because that is their condition for employment (most likely, because the German government mandated it on their behalf). Whether or not tipping on top of it is customary is irrelevant.

Actually, I was not implying, but directly stating, that American style tipping is not found here, and that the terms of employment are the same for all workers, without tipping playing any particular role in Germany at all.

And who knows? Maybe wealthy Americans in the 21st century will bring back current European customs that will be adopted in the U.S., just like in the past.

So what was the point of stating that, other than the usual "It's better in Germany" routine?

If the issue were merely dollars transferring from one person to another, that would likely be the case in well-run establishments.

However, there are a few complicating factors.

First, there's the "well run establishment" issue. Not all are. Not all managers deal with tips the same, or even fairly. Some tips may not go to the employees at all in poorly-run establishments; talk to any long-term server and you'll hear horror stories of this kind.

More significantly, however, is whether the employee reports the tips or not. A cash tip can easily go directly into the employee's pocket, without ever going through the restaurant (or any other accounting structure). And how many servers keep meticulous records of the tips they receive? The answer is somewhere in the vicinity of "none". This means that a large portion of tips are untaxed, which has economic significance (anything times ten to the ninth becomes significant, as my old minerology professor used to say).

There's also incentives. Tipping incentivizes prioritizing those who you perceive will tip better (regulars or those who look like they have money, generally). This is very different from incentivizing uniform service, the way open pricing would. Again, there are economic consequences to this, especially in today's world of online reviews.

I'm sure there are other economically relevant concerns in addition to those; those are just the low-hanging fruit.

Tips are a way of increasing revenue. People can be guilted/tricked into tipping when they wouldn't pay if the price were included in the product itself. How that increased revenue gets divided up varies, but the idea is that the pie between the worker and business gets bigger due to psychological effects on the customer.

Also, lots of tips don't get reported to the IRS, so that's another pie increase.

Bingo. Most waiters want to maintain the institution of tipping exactly as is. They won’t tell you it’s because of guilt-tripping and tax evasion though. Tips are a sort of welfare for those who perform tippable work, and that in itself is a good thing (welfare tied to work). The issue is that it’s asymmetric. Blondes get more than brunettes, and the specific professions we tip seem arbitrary. Moreover, rich teenagers working for “the experience” don’t need the tips.

If the IRS comes up with novel enforcement mechanisms (like requesting per-waiter revenue data), it can reduce the “tax subsidy” of tipping. That would allow for the possibility of a market solution. Restaurants on the margins that only allowed tipping because of the subsidy would consider banning it. If customers like that, they’ll reward the restaurant with more business. In the long run, no restaurant will keep tipping because of the “guilt trip” effect if the tax subsidy goes away. Consumers will choose the restaurant that doesn’t guilt trip them, and competition will erode guilt-tripping opportunities.

Addendum: If tipping goes away, welfare spending should go up by the estimated amount of tips that went to low income people (of course, a majority). By shifting welfare to the government, we would eliminate a moderately large distortion (DWL) on dining out.

"...welfare spending should go up by the estimated amount of tips that went to low income people (of course, a majority)."

Is this true? I seriously doubt it's the case when you look at household income (the more relevant factor). I know a lot of people who have worked for tips--my wife did for a while, as a massage therapist--and none of them would be considered low-income. Mostly they were high school/college kids (and therefore dependents of their parents) or were married (and therefore were not reliant on a single income). Obviously this may not be the majority of cases, and certainly isn't universal; however, it's sufficient to make me, at least, question whether your statement is actually true or not.

The tricky part is it's definitely true when you include the lower middle class. However, they don't get welfare. You're right to point out that my magnitude assumption might be wrong. The point stands that we need to come up with an estimate and make it clear that a reduction in tipping won't result in a drop in the aggregate welfare of an economic class. "Welfare" in this context, beyond foodstamps, could include investments in declining areas of the country where the middle class was hit. Not only would this commensurate increase in welfare spending be the right thing to do, it would also counteract claims that eliminating tipping is contemptuous towards the poor.

I agree that tipping is a repugnant practice. Many countries in Europe don't have it. Gratuity and tax are included in the menu price. Before one suggests that this is a "mandatory tip," while that is transactionally true it is economically false. The questions of relevance are whether customer, worker, and employer are satisfied with the market exchanges.

The article gets things wrong though because tips are presumed to go to the worker, not management. Whether rational or not, we have preferences over who we give gifts to.

Tips are often pooled which dilutes or eliminates the rationale of rewarding good performance.

Tips often go unreported as income.
Tips are often the result of social pressure.
Some customers never give tips.

Customers can still give praise or complaints to management in a way that is more direct and less vaguely passive aggressive.

Menu prices would be transparent.

Solve for the equilibrium. We would be collectively better off and more fairly treated if we ended this practice. The next question is how to do it.

Part of the outrage comes from feeling deceived: when I tip, I assume that the tip will go (in whole or large part) to the worker. I further assume that none of it will go to the company (bosses shouldn’t garnish the tips, even if some of the tip pool will be paid out to other employees). If a company has designed a very different compensation scheme and then called it “tipping” to lure consumers into participating, it is acting dishonestly. Whether the appropriate reaction to that dishonesty is a slew of outraged articles on the internet is another question. But to say merely that it is better to let workers and firms choose the package of work characteristics and benefits they find mutually agreeable misses the point.

You do know that in many states the first 7 or so dollars a waiter makes on tips every hour goes to the restaurant, and not for him, right?
That's because the "minimum tipped wage" has to be covered up until the standard minumum wage by the restaurant if the waiter doesn't make enough in tips to get to it.

So if everyone stopped tipping, waiters would just get minimum wage, and all that story about "waiters minimum wage" being is BS.

"So if everyone stopped tipping, waiters would just get minimum wage"

Almost all waiters would be paid quite a bit more than the minimum wage.

"You do know that tips go to the restaurant because the restaurant pays them to the waiter" has to qualify for some sort of commenting hall of fame.

This is it. The customer expects the tip to go to the driver directly, and the practice is deceptive by construction. People felt it was deceptive because they had reasonable expectations about how tips work in the rest of the economy. The problem is not necessarily the practice it is that it was not clear to customers and they were justifiably upset.

OP (Alex T) knows this, and is just being an edgelord.

Tabarrok: "a job is a package of work characteristics and benefits and it’s better to let firms and workers choose those characteristics and benefits to reach efficient solutions . . . ." Do the firm and workers bargain for the "efficient solutions" or does the firm dictate them? It's a (libertarian) fantasy that firms and workers have equal bargaining power. As for DoorDash, what's the point of the tip? Because the deliverer was fast? How would one know? Because the food is still warm? The entire concept makes no sense since there really is no service being provided by the deliverer that would be improved with a tip: the deliverer either arrived at the right address or not with the food intact.

Restaurants/bars have varying (and sometimes complex) models for distributing tips. In one model, the total tips are added up and divided among the staff based on a method already determined by the staff or as dictated by the restaurant/bar. The method might be for an equal or unequal distribution among the wait staff, the kitchen staff, and the bussers. Without some method for sharing, the kitchen staff and bussers would be excluded - does a customer ever tip the kitchen staff or the bussers? As to the method chosen, I would tend to favor the method chosen by the restaurant/bar with input from the staff: the restaurant/bar has an interest in providing the best total experience for the customers (so they come back) while the staff (especially the wait staff) may not have a collectivist view of the service provided to the customers.

I don't use food delivery services, so I have no tipping experience with deliverers. I do use Uber. As we know, the tip is determined by the customer after the ride. I typically provide a small tip in one of the increments reflected on the app. If the driver does something extraordinary, I will give her a cash tip in addition to a post-ride tip on the app. What's extraordinary? If I am going to friends for dinner, I might ask the driver to stop at my favorite wine store on the way. The tip is to compensate her for the extra time (not distance because the distance is essentially the same). Since I know I will ask her to stop, I make sure I have cash for the tip.

One might observe that the complexities of a tipping culture might be inefficient as compared to the alternative, the alternative being no tipping and reasonable compensation and benefits for workers. That's my tip.

I have an mental image of an economist vainly trying to point out to customers rushing by him to get in on a advertised sale for $10 (with $3 service fee hidden away) that the empty store beside it selling for $11 is a much better deal.

Humans are not homo economus and framing can make a *huge* deal as to how much someone is willing to pay or work for.

Some company strategies are built around the idea of exploiting our expectations and implicit understandings, and if humans are vulnerable to it, I have no trouble naming and shaming such companies.

The economic benefit of a little extra freedom isn't worth the steady progress towards a society based on exploiting every cognitive chink in human behaviour.

I agree, extraordinarily. Would you mind if I shared this and credited you?

You are welcome to share it - no credit necessary.

Mercatus autism-spectrum cases cogitating over courtesies they will never understand any more than a color-blind man appreciates a flower garden.

See, this right here is my problem with tipping. It SHOULD be a courtesy--something over and above expectations. However, that's not what tipping is anymore. At this point, tips are not only expected, but actually demanded by people. They can be come hostile if you don't give what they consider an appropriate amount. I have seen servers berate people for not giving a high enough tip.

If tipping were optional, I'd agree that it's a courtesy and, while I generally disagree with the practice, I could see value in it. But because it is mandatory (either in fact with automatic gratuities, or in practice as is usually the case) it's not a courtesy, it's a fee. And I consider it discourteous in the extreme to not be upfront about costs. In most industries, that's called fraud.

If you are aware that tipping is all but mandatory then you should never be surprised at the additional cost. It's the same with sales tax, which is rarely included in the listed price for items.

You assume that I approve of hiding sales tax. I do not. I believe that all costs associated with purchasing a product should be included in the price.

The problem with including sales tax in the price is that it lets the government off the hook. People ought to see how much the price of their meal (or whatever they are buying) consists of what they are paying to the state.

It's trivial to mentally include the price of tips, taxes, etc. when you are looking at the menu. You want to tip 20%, double the price of your item and move the decimal one place to the left. As I said, if you already know you are going to pay it then it's very much upfront, you just aren't willing to think about the math.

So what you're saying is that it's fine to lie about the price if 1) doing so makes people aware of taxes in some vague way (never mind that this isn't done with gas, so it obviously can be done) and 2) you personally don't find a problem with doing the math.

I find neither argument compelling.

Who's lying about what? If it costs me as a restaurant owner $50 to provide a steak dinner to a patron, that is the price. I can't control how much the state decides to tax the patron on top of that, and to turn that $50 into $55 or whatever gives my product the appearance of a poor value while hiding the cost of the tax itself.

You might argue that the tip covers what would otherwise be a cost of business included in the price (which is true) but again the practice is universal enough that you should know what it costs (not to mention that it varies by patron and is still voluntary, strictly speaking).

No one's ever demanded a tip from yours truly. I very seldom encounter service in establishments so deficient that I'm inclined to stiff them. (I've encountered horrid cab drivers, but not in the last 30-odd years).

Your experience is vastly different from mine. I've been in multiple establishments where my wife and I were completely ignored, to the point where we had to track down the manager to get someone to take our orders or deliver our food. Apparently late-20s/early-30s married couples don't look like they tip well. Which was funny, because usually we go out to eat after I've been working on a jobsite and have made a great deal of overtime, and therefore can afford to tip fairly well and are looking to enjoy ourselves. We've also observed servers become hostile towards customers who don't tip well enough--never violent, but definitely unprofessional. Never happened to us, but that's because we both are fairly adept at identifying such behavior and shutting it down early.

A color-blind man can still enjoy the smells of a flower garden and the sounds of the birds it attracts. He can delight in the sight of children laughing after being surprised by a butterfly.

The black-belt autists that run in rationalist and economics circles and say shit like "And no drugs and no alcohol should go without saying" in the course of meticulously detailing their boring-ass, joyless lives ( are beyond hope. And they wouldn't have it any other way.

Beat me to it - the pleasures of a garden are not merely, nor exclusively, visual. Which makes one wonder how often some here ever enjoy a garden, particularly a well tended public one. Such as this example -

"courtesies they will never understand"
"A Caning for Mercatus Employees", "Mercatus autism-spectrum cases"

It is easy to fall into the trap of considering autistic people "the other" in the anthropological sense, almost as if we are an entirely different people. I myself have fallen into this trap in the reverse. The issue with this is that it can quickly lead to dehumanization; like "savage" cultures, autistic people are so different that we can ignore the usual courtesies when interacting with them.

I do not think it is unfair to call your comment discourteous to autistic people, to Mercatus Employees, and to Alex Tabarrok (ironic, given the subject). There's no evidence that autistic people can't understand courtesy (quite the opposite), and making such a claim about a group of people without evidence is impolite. I don't think you meant to be discourteous; the title is a joke and the bit about autistic people is merely conveying the degree of difference you feel. But I do think it goes to show that you would benefit from remembering that we are one people, and far more alike than we are different; we both have feelings, and care about people, and so on, and for those reasons, it's best to be more cautious before making negative comments about others.

In the past two years, I traveled at length in New Zealand and Iceland.

Neither country has a tipping tradition. Tips are not expected for normal service; only for out-of-ordinary service. The service I got in both countries was exceptionally good and friendly. We don't need tips to run an economy. I prefer we got rid of tipping and just paid people decently.

Both countries have very few black people. "Racism" has nothing to do with it.

We have to have a culture that prizes politeness and friendliness; maybe the USA does not have that kind of culture. And we need a culture that allows employers to fire service employees who don't perform.

' And we need a culture that allows employers to fire service employees who don't perform.'

So, the concept of at will employment is unfamiliar to you? In at will employment states, an employer can fire service employees for no reason at all. Apparently, this is a major part of economic liberty, of the variety favored by those associated with private policy institutes such as the Mercatus Center.

I've not been to New Zealand or Iceland, but I have been to lots of places in Europe and I'd say with some confidence that the service-orientation of American workers is quite a bit higher than Europeans.

'and I'd say with some confidence that the service-orientation of American workers is quite a bit higher than Europeans'

You would be quite correct in that confidence, though service might be better spelled as 'servile.'

Is clockwork_prior German for "he who comments often and says nothing", or something like that?

President Captain Bolsonaro has no patience for people like you.

The racism argument is that tipping allows lower payments to black people. The fact that tipping is not used in a country where race is not as big of an issue would support that argument.

Tipping is common in Canada.

To hear restaurant workers tell it, it allows for lower payments *by* black people, who are stereotyped as bad tippers.

... delivery person has little control (e.g. worker race but also the customer’s online experience...

I see what you did there.

Query: has America's taste for "abolitionism" itself simply never died?

It helped launch a protracted civil conflict in the mid-19th century, after which the ladies' temperance leagues dropped their appeals for moderation of alcohol consumption (temperance) to quickly became staunch abolitionists and fire-breathing prohibitionists themselves (which led to an interim Constitutional ban on manufacture, sale, and transport of alcoholic beverages intended to mandate abstinence, which to this day is not strictly identical to temperance).

Women avid to promote political views certainly seem often enough ready to resort to blanket prohibition tactics once circumstances permit, as if so many exercises of human freedom disagree with them.

I clicked on the Salon article and this parenthetical puzzled me:

"(Hosts/hostesses, bussers, and food runners, who receive a small fraction of the servers’ tips, often fall short of minimum wage on some nights.)

So, they fall short in tips, but are made whole up to minimum wage by the restaurant, and so get less than the waiters usually?

On the other hand, that makes "hostess" a good job for teenagers around here, who are not allowed to serve food in restaurants that serve alcohol.

The table bussers on the other hand are uniformly immigrants with little English. The cooks tend to be as well, at least here ...

Hopefully the cook makes more than the waiter, right?

It's so hard to calibrate the outrage exactly right.

"Hopefully the cook makes more than the waiter, right?"

I think this varies. My impression is that cooks usually receive low pay for what can be a high stress job, with resultant high turnover rates. But maybe that's the market equilibrium.

A few restaurants in recent years have tried to experiment with abolishing tips (and raising their menu prices, and raising the pay that the cooks receive). There's the example that lbv cited, and a few restaurants in Portland, OR. The ones in Portland had to soon revert to tipping because the waiters/servers rebelled.

Again that could be a sign that the market has spoken and the status quo is the market equilibrium. I have a suspicion that this market has multiple equilibria, as other commenters have mentioned there are many places throughout the world where tipping is not part of the restaurant experience. (But I don't know if the cooks get paid relatively better at those places, maybe it's inherently a low-pay high turnover job.)

Why doesn't April Glaser just give cash to the delivery guy? if she is so upset and everything.

Tipping seems inefficient. On the consumer side, it disguises the real cost of the food or service you are ordering, which is not helpful. On the other side, it supposedly gives the server an incentive to provide good service, but in actuality it has more to do with the customer's culture than anything the server does. A customer may have a bad experience for a variety of reasons that the server has no control over (food quality, backed up kitchen, etc.), yet may get the brunt of the criticism through a low tip despite receiving the best possible service under the circumstances. I suppose that for some servers who cultivate a group of high-tipping regulars, tipping might be far more preferable than the alternative. And tipping is also an informal way for people to be generous under the table. But these do not seem to be efficiencies.

I can see why employers would prefer tipping, as it enables them to provide a lower base wage to servers which reduces overhead. But that means that the best servers (who presumably get tipped more) are reaping income that the business would not have otherwise paid -- resulting in less income for the business. So the real advantage of tipping from the employer's perspective is insulate the business from the reduced income that might result from poor service. But that makes it less likely that a business will know whether to fire a server or improve its product, which makes the business slower to improve, and thus more likely to fail.

Let's ask a waitress at Applebee's or a counter clerk at McDonalds who is happier with their pay?

In a no tip establishment, the staff makes minimum wage. In a tip based one, the server at least makes well above minimum wage.

The work conducted by a waitress at Applebee's and a counter clerk at McDonalds is not comparable. A McDonalds clerk can literally be replaced by a computer and increase overall efficiency; a waitress at Applebee's (at least the one my wife and I occasionally go to) can't. My wife is one of those who never seems to know what she wants to eat, and always asks the waitress, just to provide one (admittedly anecdotal) example.

A better comparison would be between the cooks, but even there the comparison falls apart. I've done fast food cooking, and frankly it's not something worth minimum wage unless it was really busy (which requires careful time management). Applebee's is a (small) step above that, but sheer variety will require more thought. Of course, those two don't tip, so that won't help.

Thinking about the evolution of this "repugnant practice" got me thinking about tipping at the grocery store.

I'm certain my grandmother never pushed her own cart out to her car at the grocery store (just as she never pumped her own gas). And she of course always tipped the person who performed these small services for her. (And had a bit of conversation, which she much enjoyed.)

About 30 years ago a grocery store called HEB, took about half my state by storm (it's a big state). I should say that HEB is a good employer, I think (it's a good store, with low prices). And at first it didn't buck the longstanding custom of having people on hand take your cart out, generally without your even asking them to. But they had a strict no-tipping policy. And I mean strict: try to hand someone a dollar or even half-dollar, and almost invariably they would refuse, "We aren't allowed." So then there was a period of no-tipping at HEB, while tipping continued at other stores. But that only lasted awhile. Younger customers were only too willing to carry HEB's policy to other stores, I imagine. Now, I judge, there is not only little tipping of bag boys at any store (except maybe by the very elderly) - that whole job, of bagging the groceries and carrying them out, has mostly disappeared. The small-chain grocery around the corner still has baggers (local teens and one longtime mentally-disabled man) but most people shop at Wal-mart (no baggers at all) or HEB. So, folks mostly bag their own groceries (well, maybe you stand idly by, three people in line behind you, as the items slide down the ramp, and wait for the checker to do it, but you should be shot) and except in cases of great age or infirmity, carry them to our cars. Of course. And I mean, it seems silly that we ever didn't! ... but also, the superstore is a less serene place than the grocery stores of the past. And one fewer job category that was fitted for anyone regardless of their capacities: like, say, one of the the 3000 people living under the overpasses here ...

I even noticed they've placed self-checkout stations in the outdoor nursery section at Home Depot. There is an attendant for now, but as she must stand (awkwardly) side by side with you at the kiosk, I think she is meant to be uncoupled from the kiosk eventually. Maybe there will be one person troubleshooting at all the kiosks.

I think it's funny that my grandmother required help carrying a dozen eggs, a package of flank steak, a #2 can of tomatoes, and a quart of buttermilk (which she actually liked to drink) out to her car, while Home Depot has never offered the littlest lady any help getting 5 40-lb. bags of crushed granite, a small tree, and 3 bags of mulch out to her car.

A lot of the new food places have dispensed with wait staff as well, substituting a counter line, though sometimes they bring your food out. Perhaps that's just as well, if there's been a weird differential between the pay of waiters and the pay of everyone else in the house.

The buttermilk (HEB and even Borden’s) these days is thin and watery, a poor simulation of the wonderful drink it used to be. Perhaps consequentially, it’s also very rare to see it as a menu item these days.

Baggers have certainly disappeared, and the checker mostly does it automatically where I live. With automatic scanners these days it is certainly faster. As a customer, I don't have access to the location of the bags so I couldn't bag my own groceries if I wanted to. Unless I go to the ALDI, where I have to pay for the bags too. (ALDI is interesting in that it's a discount grocer, but the quality is ok, and the stores are clean, but on the other hand, it's random chance whether you're going to find what you want. The selection of items in stock seems to be somewhat random. )

Where I am, the Home Depot is happy to help you load stuff in your car. You do have to ask. They won't volunteer.

They're very nice at Home Depot, and will of course help by request - but they're not wanting that to be the default, or they'd have strong young men working out in the nursery already. You'll be waiting awhile - perhaps a very long while - after the radio summons for someone to come load. (As you'll be waiting for the "guy who really knows plumbing," etc.)

Buttermilk: you are right about the HEB and Borden versions - I can't face drinking it plain, but I tried to use it in smoothies once and that can't be what my grandmother thought was so great. I make a special trip to Trader Joe's when I want to make buttermilk pies and cakes, as their version seems thicker and richer. For tang in biscuits or pancakes or whatever, there seems no reason to prefer that indifferent supermarket buttermilk - whatever it is exactly - to milk soured with lemon juice or vinegar.

"Baggers have certainly disappeared, and the checker mostly does it automatically where I live. With automatic scanners these days it is certainly faster. As a customer, I don't have access to the location of the bags so I couldn't bag my own groceries if I wanted to. "

Right, I think grocery store practices vary from city to city, and even within a city.

As with Hazel (and contra Peri), in Portland, OR the checker usually bags the groceries. And at most stores it's unusual if I bag my own.

But with some important exceptions.

Some stores have self-checkout lanes, where the customer does their own scanning and bagging.

And because it's Portland and plastic bags have been outlawed (meaning free plastic bags at a grocery store; they still have paper bags as well as plastic bags at other stores), and New Seasons stores (an Oregon version of Whole Foods, popular in Portland) give you a 5 cent credit if you bring you own re-usable shopping bag, all of that adds up to a lot of customers bringing their own shopping bag into the store. (I finally got into the habit by making sure I've got about three shopping bags in my car, otherwise I'd always drive into the store's parking lot and only then remember that I had no shopping bag with me.)

So access to the grocery bags is less of an issue, because Portlanders have brought their own into the store with them.

Usually it's still the checker who puts the groceries into the bag but customers at Trader Joes are a bit more likely to do their own bagging, I'm guessing that 3/4 of them have brought their own bag to the store. I should pay more attention and get better observational data.

This is why I'm skeptical that the American custom of tipping represents a necessary free market equilibrium. I suspect there are multiple possible equilibria, some without tipping, and in grocery stores some with customers bringing their own bags and bagging their own groceries.

Just call it a delivery charge already. I'm happy to pay it.

Set it at the rate needed to attract reliable delivery persons and pay them what is fair. Our underground economy is big enough as it is.

I'm tired of pretending that people are being nice to me because they like me when what they really want is cash. It's forced and inauthentic, not unlike the the situation with homeless people who hold out signs that say "Need help -- God bless." As if.

I’ve had bad service. Why should bad service be rewarded?

If the tip is already included, then you have to get the manager involved to take it off the bill. There are times one just wants to leave.

We start at 20% and work our way down.

Just because gratuity is included, doesn’t mean one will get good service.

Fear leads to anger. Anger leads to hate. Hate leads to suffering. Suffering leads to giving small tips. Giving low tips leads to racism.

It's ironic that startups in the gig economy, who base their labor model on independent contractors, assert more control over tips than establishments that have actual employees.

“Tipping is a repugnant custom. It’s bad for consumers and terrible for workers. It perpetuates racism.”

Looking on the bright side, it gives black people the opportunity to engage in DIY reparations by not tipping!

There is a sales tax advantage to tipping. The cost of the delivered food is generally subject to sales tax; the tip is exempt.

I'm fine with (pretty much) whatever system a company uses, but it needs to be transparent

Silly post.

I'll accept the premise when the companies start telling customers clearly that the tip goes to the company, not the driver. What do you think will happen then?

Until they do they are engaging in deceptive practice by letting customers believe the tip supplements the driver's pay.

All the way-too-clever economistic arguments in the world won't change that.

Why even allow tipping via the app if you're not going to give the tip to the delivery driver? Just don't have an option to tip. If customers want to tip, they can tip in cash.

Because the company can be sued if the drivers fail to properly report their taxes.

No, because delivery persons (especially for whole foods) just want to move along after leaving bags of groceries outside your apartment door. Neither buyer nor delivery agent wants to get acquainted. The whole business is an artificial attempt to graft a "tip etiquette" onto a delivery service.

In the traditional tipping model, the tipper assumes the role of the employer. As such, tipping affords everyone the opportunity to demonstrate that they would be as benevolent an employer as they claim actual employer's should be.

Accordingly, the fact that people who think charity is making other people do nice things also don't like tipping might be the least surprising pattern in all of human history. Very few people will embrace a tradition that serves to announce precisely how full of it they are.

The fact that you ignore the reasons presented to oppose the practice of tipping, and choose to instead insert your own psychologizing nonsense, pretty much negates your argument.

Here's a tip: learn to cook

A friend of mine delivered instacart for awhile to make extra money. She found it pretty easy, but being fifty-something she did sometimes get quite winded making her way through an apartment complex and up two flights of stairs with a couple 12-packs of soda, ready-to-eat jello, and a bag of chips. It wasn't moms of small children or invalids to whom she was delivering this bounty.

If grocery shopping is too much effort, I don't think cooking is in the cards.

I think it's part of the employer's duties to pay his employees and to check that they are doing their job.

When I travel to a tipping-country I always feel like I have to work as an accountant and a supervisor on behalf of the restaurant owner.

I just want to eat, please stop bothering me...

Millennials learn about the IRS and income tax. Even back in the 1970s, the servers had a base wage that was below the minimum wage, then tips made up the rest and maybe more. If the server didn't have tips to make their wage the non-tipped minimum wage, the restaurant had to make up the difference which happened with lunch waitresses. Raises above minimum was handled the same way. I was a cook and just got straight wages, but when I worked a busy night I didn't end up making $20/hr like some wait staff on weekends.

Next up, who is FICA and why are they taking my money.

Ah, the Happy Meal Fallacy. Why don’t we rename it “the seatbelt fallacy” and see if our intuitions still hold about the silliness of regulator-mandated bundling of goods. After all, the stated rationale for the Happy Meal Act is concerns over nutrition — a public health issue, just like concerns over driving cars that don’t have seatbelts.

Or are you going to tell us that The Free Market (blessed be its name, amen) would have mandated seatbelts if only that meddlesome commie Ralph Nader hadn’t intervened?

Or neckbelts?

The people at these Silicon Valley gig companies, like Uber, DoorDash and Instacart hate tipping. They mistakenly only see it as a tax. I believe it is better described as gratitude - something economist really don't pay much attention to except for Russ Roberts. I've worked in the gig economy for over two years now full time and it's good money. I know other people in my city who enjoy the same results. The tips make gigs a commission-style job, which a lot of people never understand.

I remember the old rule that one doesn't tip the owner: after all, he's not underpaying himself. So I undertip, but can't quite bring myself to stiff him. I should, and if he is puzzled, I'll answer that he, qua capitalist, shouldn't be laboring at all. It's infra dig, and I shouldn't notice it.

Hi, are you looking for a way to get extra money? All is easy and free.

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