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North America's tipping culture is increasingly oppressive

“It’s an urban myth that servers don’t make a lot of money.”

by Vanmala Subramaniam
Jun 27 2017, 10:46am

Stacey (not her real name) works at a popular after-work bar in Toronto’s financial district, patronized primarily by high-earning “suits,” as she calls them — lawyers, bankers, insurance brokers, and money managers — many of whom spend up to $500 on an average weeknight out.

Stacey used to be a legal assistant at a top law firm in the city, but quit because she felt severely overworked, vastly underpaid, and saw no future. Being a server, she says, wasn’t her dream job, but it “more than pays the bills.” The restaurant Stacey works at pays her $10 per hour — she makes roughly $300 per day in tips on a 10-hour shift, which works out to a hefty hourly wage of $40, a long way from the $18 per hour she made at her old law firm job.

Sure, many servers don’t make as much as Stacey, sheerly because there are only a certain number of expensive bars and restaurants in a city. But as gratuity expectations grow, so does the annual income of servers — that’s a good thing, but the problem is, it all comes at the expense of the consumer.

A decade ago for instance, 10 percent was an acceptable tip — 15 percent if the service was impeccable. Now, anything less than 15 percent is considered inappropriate. For good service, 20 percent is the norm. In more expensive restaurants, patrons are sometimes expected to tip up to 25 percent on the total amount of their bill (taxes included).

The pressure to tip well, it seems, has become more of a cultural obligation, rather than a measure of good service. Perhaps then, it is time to consider an alternative model that benefits all parties — restaurant staff, restaurant owners and consumers.

Why are tipping expectations increasing?

“There’s always this urban myth that servers don’t make a lot of money. But the average server in Ontario makes $17 to $18 an hour in tips, above their minimum wage,” says Bruce McAdams, an assistant professor at Guelph University’s School of Hospitality, Food and Tourism Management.

McAdams argues that the growing expectation to tip above 15 percent is partly due to this myth, and the idea that the more you tip, the better your service will be. But, according to a survey of 160 restaurants conducted by McAdams and his colleague Michael von Massow last August, that really isn’t the case anymore.

“There was a strong initial consensus among participants, both managers and servers, that tipping ensures good service. This appears to be aspirational. When pressed, respondents perceived there to be little correlation between the service experience and the size of the tip,” wrote McAdams and von Massow in their 2016 study.

“To a degree we have seen that people feel like okay, the person next to me is tipping 20 percent, I guess I have to tip 20 percent too. More and more people start doing it and you are shamed if you aren’t tipping enough,” von Massow told VICE Money.

“Technically it is supposed to be optional, but now you have your server staring at you when you punch in your tip percentage in the debit machine. You feel bad and guilty if you do not give a big tip.”

Social pressures aside, credit card and payment processing companies like Visa and Moneris stand to gain the more you tip, says McAdams. “Roughly two percent of your overall bill goes to the credit card company, if you’re not using cash to pay. In fact, if you notice, prompts on credit card machines start at 15 percent, so they kind of don’t give you the option of tipping less than that.”

Square Up, the mobile point-of-sale device that enables any small business to process credit card payments without a traditional credit card machine recently released data on the average tip across Canada. Vancouverites seemed to be the most generous, averaging at 16.47 percent. In Toronto, the average tip hovered at the 14.6 percent mark.

“The sheer fact that this information is out there can also be blamed for this culture of over-tipping,” says McAdams. “There’s this idea out there that you should do better — 15 percent isn’t enough, look how generous other Canadians are. The concept of “better service, higher tip” is completely lost.”

Toronto-based personal finance expert Shannon Lee Simmons tells her clients, especially those who earn low to average incomes, to “give what you can if you feel like you got good service.” There’s really no need, she says, to feel ashamed if you’re tight for cash and can’t do a 20 percent tip.

Simmons believes tipping averages have increased over the last five to 10 years because wages in service industries like the restaurants business, have stagnated.

“Many of my clients are in the service industry and their wages haven’t changed. Tips are a crucial part of how they make their living. I typically see people budget 15 to 20 percent in tips for dining out.”

Tipping creates inequity

As part of their research, McAdams and von Massow found that tipping actually creates vast inequities in the restaurant business, between servers like Stacey who work front-of-house and directly receive a 15 to 20 percent tip from restaurant patrons, and the cooks and dishwashers in the kitchen.

“We discovered that the proportion of tips shared with front-of-house staff was greater than that of back-of-house staff,” says McAdams. In fact, they also found that there were restaurants in which a bigger proportion was shared with back-of-house staff, but they were the exception.

When you, as a consumer, pay a tip, that amount should, in theory be shared with everyone who contributed to making your meal appear on your plate. That concept is called a “tip-out”.

McAdams and von Massow’s research showed that almost 40 percent of servers agreed that tipping out is a fair concept because “other add value to the service experience.” More than 10 percent, however, felt that they’d rather be paid less and be allowed to keep their tips instead of sharing it with the rest of the staff.

“We have created a significant inequity between front and back-end staff, and that’s not something that’s in the interest of anyone, especially restaurant owners,” says von Massow.

What if tipping was eliminated?

Tipping was born in Britain back in the late 1800s. Customers usually gave a “coin or two” before they sat down for a meal to ensure good service. This practice quickly moved to North America, where tipping was usually seen in low-end diners full of female servers. In the 1950s however, the culture changed. As more and more people started travelling (especially by air), the demand for travel magazines that explained local customs burgeoned.

“These travel magazines would advise people to tip 10 percent when they dined at American restaurants. That’s when it really started becoming a norm,” claims McAdams.

Ironically, tipping barely exists in the U.K. any longer. Leaving a 10 percent gratuity is considered generous. In fact, when restaurants tried to add a discretionary service charge to bills, they were stopped by the British government, whose philosophy is that consumers do not have to tip when they eat or drink out.

Workers in British restaurants get paid a fixed hourly income and, for the most part, are permanent employees, meaning that their employer has to contribute to a nationwide pension plan (like CPP) and unemployment insurance (EI). Serving is seen more as a career in U.K. and Europe, rather than a temporary stint, only because of the permanency attached to a job with benefits.

McAdams argues that that is a superior system. Businesses and consumers, would be better off without tipping, he says. “After 25 years of being in the food business, I’ve realized what an incredibly messed up system we have when it comes to tipping.”

It’s a controversial notion indeed, especially in a culture where tipping is such an entrenched social norm — fail to tip adequately, and you could be publicly shamed.

A 2016 Angus Reid survey that polled 1505 Canadians found that Canadians are largely sympathetic towards the income of restaurant servers, and would like them to get paid well. 46 percent of respondents were happy with the status quo of tipping, and 40 percent wanted a fixed service charge, in addition to restaurant owners increasing the basic wage of their workers.

Where do restaurant owners stand on tipping?

From the point of view of restaurant owners, eliminating tipping is obviously profitable. Say you dine out and tip 20 percent on a $100 bill. You, as a consumer are clearly willing to pay $120 for the food and experience. But $20 goes to the server (and perhaps kitchen staff) — the restaurant only gets $100. So, if tips weren’t in the equation, the restaurant could increase prices up to 20 percent, and gain a bigger share of the profit pie.

But, no one wants to be the first to get rid of tipping, says McAdams. “They will lose all their best servers, and they are afraid of building the cost of tipping into their price, if they are the first restaurant to do that.

Moreover, some restaurants are not keen of getting rid of the tipping model because paying their staff higher wages costs them more in payroll taxes. “They want to be sure they can recover the additional costs, and that will translate into higher food prices,” says von Massow.

Business owners, especially in the food industry, operate on razor thin margins, says personal finance expert Simmons. “The increased cost of labour from eliminating tipping would almost certainly result in higher prices.So actually, you could look at tipping as a way to give consumers the choice to pay the higher fee, rather than baking the additional labour costs into higher prices.”

But McAdams and von Massow vehemently believe that tipping culture in North America is doing a disservice to every party, even servers.

“Sure, servers get paid more, but they are likely to spend more since they make a bulk of their salary in cash. It would be much more beneficial to them to get a higher wage, with basic benefits. It’s also an easier sell if you’re looking to borrow money from a bank, or take out a mortgage.” says von Massow.

“People will get over tipping really quickly,” says McAdams. “It’s better off for consumers, for kitchen staff, and it will force restaurant owners to pay their workers a fair living wage.”

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