Americans are being asked to tip more often and in more places than ever before: at fast-food counters, at auto repair shops and car washes, even at self-service grocery stores. That has upset many customers and divided employers and employees.
The situation could soon get even worse. Both major presidential candidates from the major parties have adopted proposals to eliminate income taxes on tips, a move that would effectively “subsidize” them and encourage more businesses to rely on them.
“unfair”
Economists from across the political spectrum rejected the idea of taxation, arguing that it is unfair – as it favors a group of low-wage workers, although it may have unintended consequences.
Even informed workers and the unions that represent them are cautious, concerned that in the long run this policy could lead to lower wages.
But the debate itself makes service workers a politically powerful force.
The spread of tipping in recent years has been partly a result of strong demand for workers.
Americans’ anger over tipping and… the restaurant owner’s insistent gaze
An electorate worth attracting
The candidacies of the two US presidential candidates suggest they see the country’s roughly four million tipped workers as a constituency worth appealing to.
“People are finally listening and recognizing that these workers are important,” said Saru Jayaraman, president of One Fair Wage.
“Tipped workers have never seen their needs met in any way by any presidential candidate. Ever!”
Jayaraman not a fan of the idea of tax exemption, although she is optimistic that the attention to the issue may lead to policies that he considers more important. One of them is repeal the minimum wage, which allows companies in some states to pay workers as little as $2.13 an hour; if they receive enough tips to reach the full minimum wage.
But it’s far from clear whether the rapid changes in the tipping landscape will benefit workers in the long run. Some workers already say they’re seeing their tips fall as more customers resent being tipped all the time — a finding supported by hard evidence
There are also evidence that some companies are using tips to avoid larger pay increases.
With tipping now embedded in industries where it was not previously the norm, more workers will be hurt if customers start refusing to tip.
“The more your salary depends on tips, the more precarious your life is”said Amanda Cohen, a New York chef and restaurateur who is critical of tip-based pay.
A decade ago, Cohen led the abolition
Banned tipping at his vegan restaurant in 2015. Instead, he raised wages for all the workers in your restaurant – whether waiters or cooks – while increasing prices from the menu to cover the above cost.
His example was followed by other restaurateurs, such as Danny Meyer, a New York restaurateur;
Cohen Meyer and colleagues argued that the tipping system was problematic for several reasons. It was inconsistent,with waiters never being sure how much they would earn from one shift to the next. It was also unfairwith tipped workers earning significantly more than hourly cooks in the kitchen.
And it abounded in opportunities for racial bias, sexual harassment, and other forms of discrimination and mistreatment.
But the anti-listing movement never gained ground, with the onset of the pandemic destroying any momentum it had.
The situation reversed after the pandemic ended, because when restaurants and other businesses began to reopen, they faced severe worker shortages. Restaurants and cafes that did not allow tipping lost employees to competitors that did.
For customers, however, the constant requests for tips — which they either pay or find themselves in the awkward position of refusing — can be exhausting, said Liz Wilke, head of payroll management company Gusto.
How generous are you feeling today, Liz? It’s an uncomfortable question you ask yourself five times a day,” he concluded.