The Finch Formerly Known As Gold

14 August 2005

Your 15 percent is up

A few days back, Steven A. Shaw argued in The New York Times that restaurants should abolish the practice of tipping:

Customers believe in tipping because they think it makes economic sense. "Waiters know that they won't get paid if they don't do a good job," is how most advocates of the system (meaning most everybody in America) would put it. To be sure, this is a seductive, apparently rational statement about economic theory, but it appears to have little applicability to the real world of restaurants.

Michael Lynn, an associate professor of consumer behavior and marketing at Cornell's School of Hotel Administration, has conducted dozens of studies of tipping and has concluded that consumers' assessments of the quality of service correlate weakly to the amount they tip.

Rather, customers are likely to tip more in response to servers touching them lightly and crouching next to the table to make conversation than to how often their water glass is refilled — in other words, customers tip more when they like the server, not when the service is good. (Mr. Lynn's studies also indicate that male customers increase their tips for female servers while female customers increase their tips for male servers.)

Isn't it just possible that we'll like the server if the service is, by our reckoning, "good"?

A response from a server, posted at waiterrant.net:

While it might be true the patron's tip is based on how much they personally like their server, Shaw's position would remove the customer's monetary feedback entirely. Plus, water always seeks its own level and greed is rampant among restaurant owners. Sensing profit, restaurateurs will establish a service charge but start paying servers a flat hourly rate, thereby pocketing the difference. This obviates the consumer's ability to reward the server. You'll understand what I mean if you've ever shelled it out for a wedding reception. The establishment charges an 18% service charge on top of the bill but only pays its waiter between $10-$15 dollars an hour. Where does the rest of that money go? Right into the owner's pocket! Now you might say that's the way it works but hold on! There's a restaurant in NYC that adds a "service charge" of 18% for parties of six or more. The waiters pocket that money. However, when the Christmas season arrives and the restaurant starts booking multi-thousand dollar office parties — they switch the servers to a flat hourly rate and keep the difference. That's cynical and greedy. And that's exactly what will happen if every restaurant in America adopts a service charge.

Far from improving a customer's dining experience the service charge will ruin it. Why? Because if waiters are making an hourly wage they won't care what kind of service they give. And, since waiters will definitely be undercompensated they won't be happy and what will that do to the "emotional connection" patrons have with their server? It will destroy it — making customers miserable and causing experienced servers to leave the business in droves. The best way for a restaurant to make a waiter loyal and happy is to pay him or her well through tipping. In this age of corporate layoffs and CEO overcompensation do you think any young person (the usual age cohort for waiters) buys that nonsense about long term compensation after they saw their parents' loyalty to companies like Enron and Tyco so richly rewarded? They don't and they want their money now. Why? Because a lot of us can take care of ourselves.

I'm not sure I believe that service will go straight to hell if the wait staff is put on a straight wage, or on salary, but I'm more inclined to accept this version of the story. And as an experienced eBay buyer (over 300 auctions, nearly 200 won), I'm a firm believer in immediate feedback.

(For those who care: My standard tip is between 20 and 25 percent, rounded to the nearest 50 cents. Substandard service earns the canonical 15 percent. Service beyond the call of duty opens up the wallet considerably.)

Posted at 12:35 PM to Common Cents , Worth a Fork


Tipping is a practice that allows a business to pay its employees far less than they would otherwise earn in exchange for the possibility that the customer will have enough sympathy to hand out free money. Servers are hesitant to give up tipping because they love the feel receiving cash handouts. In reality, the practice of tipping is holding them back while the restaurant benefits.

[Link to Mr Squire's own post]

Posted by: William Squire at 9:01 PM on 14 August 2005

I liked your feedback-loop idea, but do you really believe that every last waitperson from Bangor to Bakersfield is evading income taxes?

Posted by: CGHill at 9:25 PM on 14 August 2005

McAlister's restaurants (all right, so they're not far from fast food, but they do serve tables, so) do straight wage and the service seems fine in my limited experience. On the other hand, I've been told about a group that got such shoddy service at one Goldie's that they reduced their tips until the restaurant reacted -- by putting a "manadatory" tip on their check.

In other words, I'm not entirely sold by the feedback argument in practice.

-SS-

Posted by: Stephanie Stults at 10:29 AM on 15 August 2005

My own base tip is in the 15% neighborhood, but I usually stray well into the middle ground between it and 20% -- but a full 20% or more is high praise from me, and less than 15% is a serious rebuke, very rare.

Can't recall ever deliberately stiffing anyone, but I've been sorely tempted at times. And I once tipped one guy just over 10% in the last five years.

And it's largely because I can remember when 10% was a decent tip that I'm resisting the inflation that's pushing the standard tip toward 20%. The cost of living may have gone up over the years, but so has the cost of dining out.

Posted by: McGehee at 12:57 PM on 16 August 2005