Why Tipping Is Unethical

Have you ever tipped your auto mechanic for changing your oil? How about the surgeon who gave you a new knee? Or the cashier who toted up your grocery bill?

Then why does it make sense to tip your restaurant server?

man-posing-with-a-bottle-of-wine-100105600Tipping is a practice that most consumers hate. So do most of the people who depend on tips for a living wage. It makes no economic sense, does little to improve service, and raises all sorts of ethical questions. Yet it’s mandatory in most American restaurants.

Yes, you read that right. It’s mandatory. It may seem voluntary and perhaps it is legally, but in the U.S., a tip of 15% to 20% is necessary and standard. It’s built into the wage and price structure of wherever you dine and if you leave less than that – or don’t tip at all – you are docking your server’s salary. And you have no more right to do that than you have to refuse to pay the check. It’s not that big a stretch to suggest that not leaving a tip, or leaving as little 12%, is akin to stealing from the waitress.

Many people assume that a tip is optional, not realizing that servers are paid close to nothing in salary. Restaurant managers are allowed to pay as little as $2.13 an hour (vs. the current minimum of $7.25 for other workers) on the assumption that patrons will make up the difference in tips. Yet, patrons are given little information on how the tips are used. We don’t know the base salary at a given restaurant or what happens to the tip. Sometimes it is split with the kitchen staff, the busboys, or the hostess. Sometimes the restaurant even takes a cut. If you put the tip on a credit card, some restaurants deduct the credit card fee. Some don’t. You’ll never know.

Many of us mistakenly believe that tips help promote good and efficient service. Studies show it doesn’t, but a better question is why are we doing management’s job? If a waiter is under performing, it’s the manager’s job to correct him, not ours. Docking his pay is an extreme punishment—one that exists in very few other professions. Plus it’s demeaning. That’s one of the reasons we’d never tip a doctor or any other professional. Who would want their salary to vary daily in unpredictable patterns, depending in many cases on uncontrollable factors like the weather?

The tipping system also allows management to shift much of the normal business risk to employers. Servers may do well if business is booming, but if a restaurant is doing poorly, waiters and waitresses will see their wages plummet. What other business is allowed to dock workers’ wages on an off-day or for months during a recession?

And what other salary depends on the luck of the draw? Most people tip the same amount every time, but not all people tip alike. Whether a server ends up with a night full of 15 percent tippers or a night of 20 percenters is pure luck. Plus the whole percentage idea makes no sense. Does a server do twice as much work if I order a $40 steak than if I order a $20 chicken dish?

Tipping is also influenced by prejudice. Studies have shown that waitresses do better than waiters, that pretty women make more than other women, and that whites make more than blacks. Would we tolerate this kind of wage discrimination under any other circumstance? Of course not. That’s why it’s illegal.

Studies also show that waitresses are more likely than other female workers to tolerate sexual harassment from customers because they’re afraid a rejection will hurt their bottom line.

The tipping system also creates an unfair tax burden. When labor costs are shifted to customers instead of included in meal prices, which is what tipping does, sales taxes fall, forcing states to make up the difference in other ways. While tips on credit cards are usually reported as income, servers who receive cash tips are largely on the honor system, and employers have little incentive to ride herd because lower tip reporting means lower payroll taxes for the restaurant.

Tipping also obscures the cost of dining out. Studies show that consumers perceive the cost to be lower than it is when prices are low, even though they know they’re going to tip an additional amount. That may be good for the restaurant industry and the economy in general, but it’s not so great for the consumer – and it’s unfair to other businesses that don’t have the same advantage.

Unfortunately, tipping is so well entrenched in the American economy, I doubt it’s going to disappear anytime soon. A few restaurants have ended the practice, announcing that they are adding service charges to menu prices. We ought to encourage that in whatever ways we can. But until that practice becomes widespread, we’re left with the system in place, however unethical it is. What we can do is make sure we don’t make it any worse. That means giving a fixed tip no matter what the day or your mood. It’s one certain way to eliminate any unconscious bias. And at least that’s a start toward a fairer system, inadequate as it may be.



11 thoughts on “Why Tipping Is Unethical

  1. As a former waitress and bartender, I have to agree. It’s a silly system based on random factors besides merit, and mostly favors business owners. It promotes competition rather than cooperation amongst staff, and punishes workers when outside effects like weather slow traffic. Thanks for this illuminating article.

  2. The climate for tipping in restaurants is changing. In parts of Europe, tipping is not the norm. In fact, when I erroneously added a tip in a restaurant in Sweden, the management removed the tip before forwarding the check to my credit card company. In the U.S., an increasing number of restaurants are experimenting with advertising a no tipping policy, stating that they have raised wages accordingly.

    Here, i regard the tip as consisting of two components – the first is almost an entitlement – it compensates for the low base wage paid to the server. This is automatic, as long as there is no major flaw in performance. A lower than normal tip is a message that there is a problem; I generally make sure that the manager is also aware of the difficulty. The second is a bonus for superior service. Once again, this should be reported to the manager and the server as reinforcement (which, I admit, I don’t always do this.) In both cases, the message is delivered in real time.

    The message is also delivered and aggregated by sending reviews to travel sites, such as TripAdvisor and Yelp. Presumably, a significant number of patrons make choices for Saturday dinner based on these. Of course, this is of no benefit or consolation to the server.

    Wait staff are not the only service providers for whom tipping is part of the conventional economy. We tip taxi drivers, hairdressers and barbers, and hotel staff, as examples. Again, the message is delivered at the same time as the service.

    Here are two notable cases where we don’t tip. For medical services, we often don’t know the outcome of the care until a later date. By then, it’s out of mind (and would also require a separate financial action). I expect that the practice of non-tipping also is an outgrowth of fear that a poor tip might lead to poor care in the future. Of course, with the advent of satisfaction surveys, we do get a chance to indicate satisfaction or dissatisfaction. This is the analog of a higher or lower tip and has the benefit to the patient of being anonymous. However, these surveys came into being long after the non-tipping convention was established, so there is no causal relationship.

    The second case is financial management. Nearly all firms charge an hourly rate or a percentage of managed assets. The staff and client agree on a risk level, and the manager presents an estimated return over time. However, if a client’s annual return exceeds or falls short of that estimate, the overall market, or some other chosen indicator, the client does not tip the manager or get a fee rebate. Perhaps, this is because of fear that a small tip might lead to the manager not making the best choice for one’s money in the subsequent year. This is also another case where, due to market fluctuations, the outcome is generally not discernible until well after the benefit has been received or the damage done. The way one shows dissatisfaction is by removing one’s money.

    These examples suggest a hypothesis that we have become accustomed to tipping when (1) the quality of the service is immediately recognized and (2) where there is no fear, rational or otherwise, of reprisal. I’m sure there are other examples that support this and some that are contradictory. I would be interested in other views.

    • The convention surrounding tipping is indeed changing, with more restaurants in the U.S. opting for a standard service charge or higher wages built into the prices. But it’s a long way from being the standard approach.

      I think the big difference between restaurants and medical or investment services is that people in those industries are paid according to the market and tips aren’t assumed. In restaurants, tips are essential to a living wage, which is why I believe the system is unethical. It forces too many servers to go too far in acting as though the customer is always right. And as noted in the original post, it forces too many servers to pay the employers’ portion of payroll taxes, although the IRS is getting a little better in policing that.

  3. I agree with the article. I suggest replacing tipping with a straight commission-based plan in which servers receive a certain percentage of the bill. My suggestion would be to offer between 18 and 30%, plus any spiffs. A survey should be on the back of each check and the server’s compensation can be based upon how well s/he performed. During lean times should earnings fall below the prevailing minimum wage, the server will then receive the minimum wage. This I think would be a better plan than what we have now.

  4. If tipping is unethical, then for an individual to tip is also unethical? So how does one get around the evil looks and character assumptions that comes with not giving a tip, when one is doing the right thing? Is it ethically justifiable to give a tip because of these pressures, even though you are causing harm to workers?
    You suggest giving a fixed tip (which does make the system worse), but would it be a fixed amount or a fixed percentage, and what would that be? If someone gets below a certain expected amount, then she feels insulted (which is amazing, but shows the extent of expectations around tips).

    • To tip is unethical. To tip a fixed percentage is less unethical than to tip variable amounts (in general, but depends on the culture and other factors, eg in the US vs. other countries). Persons do ethical things every day and are looked down upon due to ignorance, or do unethical things which some may believe to be ethical and be lauded for it.

      It is not ethically justifiable to give a tip because of the pressures you describe, but it is a tradeoff between ethics and the blowback you would get from not tipping, including persons feeling insulted, etc.

      • I believe the tipping system is unethical, but as long as it exists, customers should tip because otherwise it is completely unfair to restaurant workers. As you suggest, a fixed amount is best regardless of the service or other factors. I could also justify a lower percentage for high cost restaurants than for low-cost establishments to limit the inequity.

  5. Pingback: Blog Post 5, June 16, 2020 – Business Ethics and Corporate Social Responsibility

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