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Why tipping is such a contentious issue in America

Zack Guzman
Senior Writer

To say tipping is a touchy subject in America would be an understatement. To some, it’s confusing. To others, a nuisance. And to servers, it’s a living.

I was recently reminded of all this earlier this week when a video I produced for my previous employer exploring whether it’s appropriate to tip on pre-tax or post-tax check totals was recently re-promoted with the headline “This simple tipping trick could save you over $400 a year.” It immediately went viral on Twitter, garnering retweets from politicians, comedians and New Jersey Senator and presidential hopeful Cory Booker.

The video went viral, in part, because calculating the cheapest tip you can realistically give without being considered “cheap,” is in fact the cheapest thing a person can do. That was supposed to be a joke. That’s why the piece ends with my imaginary card getting declined. Out of context, though, to servers who may have experienced getting stiffed by a diner, it might not be so funny, and perhaps just infuriating.

Admittedly, framing a discussion on tipping from the approach of how to save money on tips lacks tact. There are, of course, other ways to save money — including, as many have pointed out — eating out less. On net, however, that wouldn't necessarily be a good thing for servers, either.

Reactions to the video weighing different amounts associated with tipping pre-tax or post-tax reached a tipping point when a HuffPost contributor with a large Twitter following re-tweeted it, commenting that tipping less than 20% is equitable to “screwing over” hardworking people. From there, the original headline that mentioned a “tipping trick” and “saving money” eventually somehow got misconstrued in so many retweets as advice to tip below 15% or to not even tip at all (as a former server myself, I would never advocate for such a thing).

Importantly, the piece does not arrive at a conclusion on whether to tip pre-tax or post-tax, but it includes both sides for the viewer to make a choice. It also led to direct death threats before eventually, Booker weighed in tweeting: “Don’t do this.” Whether the “this” he was referring to was penny pinching, or tipping 15%-20%, or tipping pre- or post-tax wasn’t immediately clear. A Booker campaign spokesperson later told Yahoo Finance that his tweet stands for itself but wouldn't elaborate on the New Jersey plans to increase minimum wage for tipped workers to $5.13 an hour by 2024.

Some tipped workers get less than minimum wage

Regardless of what Booker was referring to in his tweet, one thing is clear: Many servers rely on tips to make a living.

As I led with in the original piece — because it is the most important thing to consider when discussing tipping — servers in many instances earn the majority of their income from tips. The federal Fair Labor Standards Act has allowed restaurants in certain states to pay tipped employees less than minimum wage for years. In Booker’s home state of New Jersey, for example, a restaurant can pay a server as little as $2.13 an hour.

States vary in requiring restaurants to pay tipped servers a minimum hourly wage. California and others require restaurants to pay workers $12 an hour before tips, while 17 states, including New Jersey, allow restaurants to pay servers as little as $2.13 an hour.

Restaurant worker unions and advocates, like the Restaurant Opportunities Centers United, rightfully point out that it still wouldn’t go far enough.

“Five dollars an hour is not enough to live on in New Jersey,” ROC United President Saru Jayaraman tells Yahoo Finance. Instead, the group is pushing for states to follow the likes of California and Washington in mandating at least a $12 minimum wage before servers earn any additional tips. “What we’ve been fighting for is a full minimum wage,” she said.

Some restaurateurs, however, have chosen to take it upon themselves to ensure their servers don’t have to depend on tips to earn a living wage. Shake Shake founder Danny Meyer, for example, attracted headlines in 2015 when he announced he was banning tipping at his restaurants. As he recently recounted to Yahoo Finance Editor-in-chief Andy Serwer in a soon-to-be released interview, the move was sparked in-part by an inequitable distribution of tips for front-of-house servers and the rest of the restaurant staff.

“Unfortunately, many of our colleagues — our cooks, reservationists, and dishwashers to name a few — aren’t able to share in our guests’ generosity, even though their contributions are just as vital to the outcome of your experience at one of our restaurants,” Meyer wrote in his announcement.

Paying a living wage

But that’s not the only problem that stems from essentially forcing servers to depend on tips. According to Jayaraman, ROC United surveys reveal a troubling difference in the way female servers are treated in the workplace in states that require restaurants to pay a living wage and those that do not.

“Our research shows that when you have a 70% female workforce getting essentially a $2 wage, they are forced by employers to tolerate whatever harassment comes their way to get those tips,” she said. “When you don’t get any other paycheck except for tips, you’re going to put up with other behavior that you shouldn’t have to.”

Even still, in the wake of Meyer’s attempt to ban tipping in favor of providing a standard hourly wage, some of his servers quit. Meyer reportedly said at a conference last year that 30%-40% of his front-house staff at his restaurants left following the change.

Jayaraman stresses, however, that those dots shouldn’t be connected to conclude that taking the ability to earn tips away from servers in order to pay them a living wage isn’t a negative. Research from Cornell professor and tipping expert Michael Lynn shows that tip percentages are largely determined by factors servers have little to no control over, such as physical appearance, or the socioeconomic status of the patrons being served. Tip percentages are also only loosely correlated with how much patrons say they enjoyed the experience of their meal.

“We’ve seen some workers appreciate the move we’ve seen others really resist it. Some of it is fear of change others are afraid of losing out on wages,” she said. “In general, though, all of these moves are positive for workers.”

Aside from other restaurateurs following suit, however, it’s difficult to see what might change the status quo outside of more states adopting increased minimum wage laws for servers.

‘Don’t stiff your server’

I am not an elected official. I cannot influence minimum wage laws the same way Booker and others can. Nor can I guarantee that the video won’t be posted again on some random day. As fellow business journalist Maya Kosoff notes, it’s not uncommon in today’s digital media landscape for outlets to re-share stories on evergreen topics in an attempt to generate buzz or clicks.

I can only inform, and hope that the conversation begins and ends with the fact that as it stands in many states, tips are necessary for servers to make a living.

Now that it has, I would sleep very well knowing that the takeaway isn’t whether you can technically tip less, but that etiquette dictates you should at least be tipping 15%-20%. And whether it’s fair or not, your server and the whole waitstaff in many cases, are depending on your tip.

So tip well, and please, don’t stiff your server.

Zack Guzman is the host of YFi PM as well as a senior writer and on-air reporter covering entrepreneurship, startups, and breaking news at Yahoo Finance. Follow him on Twitter @zGuz.

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