According to Bankrate’s 2024 Tipping Culture Survey, 59 percent of Americans have a negative view toward tipping. The most common sentiment is that businesses should pay their employees better rather than relying on tips (37 percent).
Tipping has evolved into a hidden surcharge, allowing businesses to pass on the responsibility of paying their workers to customers. For example, Starbucks introduced a tip prompt for credit and debit transactions in late 2023, with about half of customers opting to leave a tip, as reported by CNN. This shift has made tipping more prevalent, even in unconventional settings like self-checkout machines at airports and pick-your-own farms.
Despite the option to decline tips, many customers feel pressured to tip due to pre-entered tip screens, leading to feelings of annoyance and frustration. With rising prices and inflation affecting their purchasing power, Americans are increasingly questioning the necessity of tipping.
Inflation is a key factor
The rising cost of living has impacted tipping habits, with only 67 percent of diners always tipping at sit-down restaurants, down from 77 percent in 2019. As businesses face inflationary pressures, they are grappling with higher expenses for rent, utilities, wages, and materials.
While the federal tipped minimum wage remains at $2.13 per hour, many states have implemented higher minimum wage standards for tipped and non-tipped employees. However, these increases in wages have led to job losses in certain industries, such as the fast-food sector in California.
Donald Trump’s proposal to make tips tax-free, if implemented, could have significant consequences, including reduced government revenues and potential exploitation of workers through lower wages.
The future of tipping
Despite the challenges and controversies surrounding tipping, it remains a prevalent practice in the service industry. Companies are leveraging technology to encourage tipping, while also using tips to supplement workers’ wages. The debate over the fairness and sustainability of tipping continues as the industry evolves.
However, it’s important to consider the consequences of your desires: I wouldn’t want a base salary of $2.13 per hour that relies on the unpredictable generosity of my customers for my livelihood.
If you have any inquiries regarding credit cards, feel free to reach out to me at ted.rossman@bankrate.com and I’ll gladly assist you.