WEBVTT - Is Our Tipping System Gratuitous? 0:00:02.040 --> 0:00:07.000 Welcome to brain Stuff from how Stuff Works, Hey, brain Stuff, 0:00:07.080 --> 0:00:10.680 Lauren Vogel bomb here. Why do restaurants use tipping? Is 0:00:10.680 --> 0:00:13.480 it a reward for good service? Studies show that tips 0:00:13.560 --> 0:00:16.000 don't go up or down significantly based on the quality 0:00:16.000 --> 0:00:21.120 of service. Does tipping attract and retain better wait staff? Not? Really? 0:00:21.800 --> 0:00:23.520 Is it a bribe so the waiter won't spit in 0:00:23.560 --> 0:00:26.119 your soup the next time you come? Probably depends on 0:00:26.120 --> 0:00:29.520 the waiter. In most countries, a service charge is included 0:00:29.520 --> 0:00:32.600 in the bill. However, in America, instead of an upfront 0:00:32.680 --> 0:00:36.000 service charge, diner's hand over fifteen or more of the 0:00:36.040 --> 0:00:38.520 price of the meal to the server at their own discretion. 0:00:38.960 --> 0:00:42.440 It's not required, but it is customary. But this seemingly 0:00:42.479 --> 0:00:46.920 generous practice has some unpleasant hidden costs for starters. The 0:00:46.960 --> 0:00:50.040 existence of tipping allows restaurants to pay servers a federal 0:00:50.159 --> 0:00:53.120 minimum wage of two dollars and thirteen cents an hour, 0:00:53.760 --> 0:00:57.520 so waiters in most states basically live and die by tips. 0:00:58.080 --> 0:01:00.480 The result is that tipped workers are twice is likely 0:01:00.520 --> 0:01:02.920 to live in poverty and depend on food stamps as 0:01:02.960 --> 0:01:07.920 other workers. Then there's the opposite problem. In stronger restaurant markets, 0:01:07.920 --> 0:01:10.800 like big cities, the existence of tipping means that waiters 0:01:10.800 --> 0:01:13.400 in busy restaurants end up making a lot more money 0:01:13.400 --> 0:01:16.120 than neque cooks and dishwashers, who get paid a fixed 0:01:16.120 --> 0:01:19.479 hourly wage while working just as hard. Add to all 0:01:19.520 --> 0:01:22.199 that mess the fact that America's tipping system is rooted 0:01:22.240 --> 0:01:25.720 in racist hiring practices that emerged after the Emancipation when 0:01:25.720 --> 0:01:29.040 white business owners were trying to avoid paying new black employees, 0:01:29.400 --> 0:01:33.920 and tipping comes out looking decidedly ugly. So when does 0:01:33.920 --> 0:01:36.600 it make sense to abandon tipping in favor of raising 0:01:36.640 --> 0:01:40.000 restaurant prices so that all staff is paid fairly or 0:01:40.120 --> 0:01:44.120 would customers bulk get that? Sarah Clifton is a mathematics 0:01:44.120 --> 0:01:47.280 professor at the University of Illinois who specializes in modeling 0:01:47.319 --> 0:01:51.280 complex social behaviors. In a recent paper, she created mathematical 0:01:51.360 --> 0:01:55.520 models of two hypothetical competing restaurants, one with conventional tipping 0:01:55.560 --> 0:01:59.240 and one without. The paper was published in the February 0:01:59.680 --> 0:02:02.920 issue of Chaos, a journal from the American Institute of Physics. 0:02:04.120 --> 0:02:07.480 The key variable in Clifton's models is the average tipping rate. 0:02:07.800 --> 0:02:09.919 Tipping rates have been creeping up of the past few 0:02:09.919 --> 0:02:14.000 decades from ten percent to fift and now close in 0:02:14.080 --> 0:02:17.680 major US restaurant markets. Clifton's models are designed to be 0:02:17.760 --> 0:02:20.600 as simple as possible, with every player in the system 0:02:20.720 --> 0:02:24.360 motivated purely by monetary gain, meaning that when cooks are 0:02:24.360 --> 0:02:26.920 paid better, they're more likely to stay, meaning that food 0:02:27.000 --> 0:02:29.919 quality goes up. When waiters are paid less, they're more 0:02:29.960 --> 0:02:34.040 likely to leave, decreasing service quality, but eventually the waiters 0:02:34.080 --> 0:02:36.760 would return if diners flooded the restaurant because of the 0:02:36.760 --> 0:02:40.239 food quality, which would presumably mean more profit and higher 0:02:40.240 --> 0:02:43.640 wages for all. What Clifton found was that when the 0:02:43.680 --> 0:02:46.760 average tipping rate crosses a certain threshold call it the 0:02:46.800 --> 0:02:52.079 tipping tipping point, restaurants will make more money by abandoning tipping. Unfortunately, 0:02:52.200 --> 0:02:55.760 Clifton doesn't have enough real world data to calculate exactly 0:02:55.800 --> 0:03:00.799 what that magic tipping point is. Dozens of end restaurants 0:03:00.800 --> 0:03:03.200 across the United States, led by New York chef and 0:03:03.240 --> 0:03:07.400 restaurant tour Danny Mayer, began experimenting with no tipping policies. 0:03:07.880 --> 0:03:11.000 These trend setting restaurants either increased MANU prices by an 0:03:11.000 --> 0:03:14.200 average of twelve to fifteen percent or included gratuity in 0:03:14.200 --> 0:03:17.400 the final bill. That way, the restaurants could distribute the 0:03:17.440 --> 0:03:21.040 earnings more fairly and pay everyone a fixed hourly wage, 0:03:21.600 --> 0:03:24.679 but this plan was not popular with the public. Michael Lynn, 0:03:24.800 --> 0:03:28.000 a professor of consumer behavior at the Cornell University School 0:03:28.040 --> 0:03:31.960 of Hotel Administration who researches tipping, reported that online customer 0:03:32.040 --> 0:03:35.160 reviews of no tipping restaurants went south when those no 0:03:35.280 --> 0:03:38.560 tipping policies were instituted, and we're worse when tips were 0:03:38.640 --> 0:03:43.240 replaced with service charges. Lynn said, people hate service charges, 0:03:43.520 --> 0:03:45.760 and if I increase my menu prices, They're going to 0:03:45.800 --> 0:03:48.360 think I'm more expensive, even if the combined bill is 0:03:48.400 --> 0:03:51.600 no different. In other no tipping restaurants, it was the 0:03:51.640 --> 0:03:55.440 waiters who revolted. At Bar Agricole in San Francisco, servers 0:03:55.440 --> 0:03:58.000 were used to making twenty five dollars to forty dollars 0:03:58.000 --> 0:04:00.920 an hour, including tips, while the hitchen staff was only 0:04:00.960 --> 0:04:04.160 making thirteen to twenty dollars an hour. When owner Thad 0:04:04.200 --> 0:04:07.840 Woggler decided to ditch tipping, his cooks and dishwashers were psyched, 0:04:07.960 --> 0:04:11.760 but the serving staff kept leaving for more traditional restaurants, 0:04:11.800 --> 0:04:15.400 so Waggler like lots of other pioneering restaurant owners switched 0:04:15.440 --> 0:04:19.520 back to the normal tipping scheme. Clifton, our mathematician, feels 0:04:19.560 --> 0:04:22.919 that these restaurateurs were simply ahead of their time. She said, 0:04:23.200 --> 0:04:26.000 when restaurant owners get rid of tipping too early, as 0:04:26.040 --> 0:04:29.000 we've been seeing with some really nice restaurants, they sometimes 0:04:29.000 --> 0:04:32.160 have to reinstate it because it's not profitable that would 0:04:32.200 --> 0:04:36.279 conform with what customers want. Her model indicates that casual 0:04:36.320 --> 0:04:39.359 restaurants should actually make the move before fancy ones, because 0:04:39.400 --> 0:04:41.680 the point at which the tipping rate becomes profitable would 0:04:41.720 --> 0:04:45.239 be lower for them than in the high end places. However, 0:04:45.600 --> 0:04:49.120 Joe's Crabshack, a decidedly not high end chain, tested the 0:04:49.160 --> 0:04:53.200 waters in late when eighteen of its restaurants abandoned tipping. 0:04:53.839 --> 0:04:56.640 Although customers were essentially paying the same exact total for 0:04:56.640 --> 0:04:59.880 a meal as they were when tipping was allowed, said 0:04:59.880 --> 0:05:02.960 they didn't like the no tipping policy. According to restaurant research, 0:05:03.480 --> 0:05:06.119 customers said they didn't trust management to share the money, 0:05:06.279 --> 0:05:08.799 and they felt it took away incentive for good service. 0:05:09.440 --> 0:05:11.600 Joe's dropped the no tipping policy less than a year 0:05:11.640 --> 0:05:15.000 after it started, after losing eight of its customers. During 0:05:15.040 --> 0:05:19.279 the trial, so Americans themselves haven't reached the tipping tipping 0:05:19.320 --> 0:05:23.040 point yet. In the meantime, restaurants will likely keep experimenting 0:05:23.040 --> 0:05:26.760 with various tipping policies until they find one that keeps customers, waiters, 0:05:26.839 --> 0:05:35.120 and kitchen staff all equally happy. Today's episode was written 0:05:35.120 --> 0:05:37.720 by Dave Ruse and produced by Tyler Clang. For more 0:05:37.760 --> 0:05:40.040 about the history and science of tipping, check out our 0:05:40.040 --> 0:05:42.800 episode on the topic over on my other podcast, food Stuff, 0:05:43.120 --> 0:05:45.880 And of course, for more on this and other depressing 0:05:45.920 --> 0:05:49.359 but important topics, visit our home planet, how stuff works 0:05:49.480 --> 0:06:01.120 dot com.