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Gen Z and millennials are terrible tippers: CreditCards.com

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A man demonstrates the use of a DipJar, an electronic version of the tip jar found in coffee shops, on the counter of an Oren's Daily Roast in New York February 13, 2013. With a quick dip of their credit cards into the sleek machine, grateful customers are able to leave a pre-set tip (generally $1) for baristas. DipJar, a tip jar that takes plastic, located in six stores, is just one high-tech innovation seeking to make up for declining gratuities as people pay for small purchases with credit or debit cards. Picture taken February 13. To match Your Money RETAIL-SERVICE/DIPJAR                      REUTERS/Carlo Allegri  (UNITED STATES - Tags: BUSINESS SCIENCE TECHNOLOGY)
REUTERS/Carlo Allegri (UNITED STATES - Tags: BUSINESS SCIENCE TECHNOLOGY)

Gen Z (ages 18-24) and millennials (ages 25-40) are the worst tippers of all age demographics, according to a new study published by CreditCards.com. The study found that “Zoomers” and millennials are the least likely to always tip for services compared to older generations. 

“I think it's especially relevant now as we continue to dig out of COVID,” Ted Rossman, senior industry analyst at CreditCards.com, told Yahoo Finance. “Because the service industry workers that we're talking about, I mean, these were largely the sectors that just got crushed over the past year.”

Just 56% of Zoomers and 58% of millennials said they always tip servers at sit-down restaurants, compared to 80% of Gen Xers and 88% of baby boomers. Additionally, 40% of Zoomers and 44% of millennials said they always tip food delivery people, compared to 65% of Gen X’ers and 75% of boomers.

The data followed a similar trend throughout the generations for various other services including hair stylists/barbers, taxi/rideshare drivers, hotel housekeepers, coffee shop baristas, and takeout food workers. The study, conducted by YouGov plc (YOU.L), surveyed a total of 2,573 adults.

Income affects tipping

The survey also found that 84% of higher-income households (annual household income of over $80K) who go to sit-down restaurants always tip the waitstaff, versus 77% of middle-income households (annual HHI between $40K and $80K) and 65% of lower-income households (annual HHI under $40K). This may help to explain the age breakdowns, as older adults generally have higher incomes.

“We see a really strong correlation between income and tipping,” Rossman said. “So I do think that Gen Zers and millennials will become better tippers as they age. That's something that we've seen in other areas of finance as well.”

With the hospitality industry being among the hardest hit during the pandemic, 35% of survey respondents said that they plan to tip more generously moving forward. However, when CreditCards.com conducted the study last year, 42% of respondents said the same, and there was no significant change in tipping throughout the pandemic to reflect this in the data, according to Rossman.

As for the implications these tipping behaviors may have on employment levels within the hospitality industry, Rossman said that some are arguing that the noncompetitive wages offered to tipped workers may be a contributing factor to the current labor shortage.

“This part’s more anecdotal, but we have heard stories of people that left the service sector because the jobs basically disappeared for so many during COVID,” Rossman said. “And, you know, some people didn't really feel the incentive to go back, whether that was financial or whether that was more of a personal kind of lifestyle choice. I mean, we see employment in the leisure and hospitality space is still down 2.2 million jobs.”

Other findings

Rossman said that people in general are willing to spend or tip more freely using debit or credit cards in comparison to cash. According to him, this may be somewhat tied to human nature as the psychology behind parting with actual cash is often seen as “more painful” than digital money. With the pandemic catalyzing a shift to contactless payment methods, Rossman said that this could yield a positive or negative for tipping in the long run.

In the case of gig workers—people working for services like Uber (UBER), Lyft (LYFT), and DoorDash (DASH)—Rossman believes that many people may neglect to tip these workers well or at all because they think delivery fees or the majority of the cost of the service actually goes to the worker, which it does not.

“I think especially with gig workers, there's often a disconnect between what the customer thinks the workers are receiving and what the worker is actually receiving,” Rossman said. “And I think if people really knew how much or how little that person was getting paid, they might be compelled to tip better.”

Going forward, Rossman suggested that there may be structural changes occurring that may be compelling younger generations to tip less, or not at all.

“I do think that some young adults think it's really unfair that businesses in some respects, you know, get away with spending less on salaries, and then hope customers make up the difference,” Rossman said. “That is a perception that I've heard from a number of young adults.”

However, Rossman noted that lower income still remains the primary reason that younger people do not tip as well as older cohorts.

“And the thing is, though, that for better or for worse, right now, it is the system. And it's hard to rebel against that,” Rossman added. “Because if you tip less, you're not really hurting the business, you're hurting that hard working person who then is making less.”

Thomas Hum is a writer at Yahoo Finance. Follow him on Twitter: @thomashumTV

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