Has U.S. Tipping Culture Reached a Tipping Point?

With more venues than ever soliciting tips, University of Houston professor and hospitality attorney Stephen Barth weighs in on the factors driving the trend and where it may be headed.

By Kelsey Kosh

The United States is notorious for its tipping culture, and today it seems as though more and more businesses are asking customers for gratuity. Consumers have reported feeling pressure to tip workers more than ever before, including at fast-casual restaurants, coffee shops, auto repair shops, retail stores and even medical offices.

A recent survey of nearly 12,000 adults by the Pew Research Center showed that 72% of Americans feel they are being asked to tip in more places than they were five years ago. And consumers are largely unimpressed by the practice. A similar survey by Bankrate found two-thirds of Americans think negatively of the tipping system, with 30% saying it is “out of control.”

Several factors may have converged to spawn this tipping evolution. The advent of digital payment systems has made asking for tips easier and less awkward than ever: A simple flip of a screen with suggested amounts displayed — usually 18–25% — is often all an employee needs to solicit a tip. Plus, the added social pressure of an expectant employee watching as a customer makes their selection creates a psychological element of shame that motivates tipping.

There are also some leftover effects from the pandemic, during which many workers and businesses relied on tips to survive.

“People became very generous during COVID,” says Stephen Barth, an attorney and hospitality law professor at the University of Houston’s Conrad N. Hilton College of Global Hospitality Leadership. “During COVID, more places expanded the tipping model, and that trend has continued post-COVID.”

Barth says the practice has stuck around in part because it relieves pressure on employers to increase minimum wages and because workers have come to expect these tips.

Gratitude or Expectation?

Tipping proponents argue gratuity is a reward for a job well done or excellent service provided. Urban legend suggests the word “tip” originally came from the longer phrase “to insure prompt service” more than 175 years ago.

Though 77% of Americans believe service is a major factor in determining when and how much to tip, Barth argues that, even historically, tipping culture has never solely been about service. Its roots are more insidious.

In medieval Europe, tipping was essentially used in a servitude style for workers who did not earn wages. When it was brought over to the United States during colonization, that practice continued.

“In the U.S., [tipping] got its start in the post-Civil War and Reconstruction period, when employers were hiring people of color and not paying them wages,” Barth says. Back then, this practice happened primarily in the railroad industry. “It was essentially an extension of slavery.”

The first federal minimum-wage law was introduced in the mid-1930s, requiring salaried employees to be paid at least 25 cents an hour. “But there was no minimum for tipped employees,” Barth explains. Many employers continued hiring workers and paying them solely via tips. “It was really an unfortunate abuse or exploitation of labor,” Barth says.

The tip-credit wage has become a way to relieve employers of the pressure to increase wages. “It’s really a subsidy for employers,” Barth says. All but 14 states have done away with the tip-credit wage and set their own minimum earnings for tipped workers.

Roughly 30 years later, Congress passed the tip-credit wage, which set a federal minimum wage of $2.13 per hour for tipped employees. Employers get a credit toward the minimum wage, such that if employees earn enough tips in a pay period to make $2.13 per hour, employers owe them no additional wages. If, however, the calculated hourly wage falls below $2.13, employers must pay employees the difference, which, as Barth notes, is rare.

When the law passed in 1966, the federal minimum wage for non-tipped workers was $4.25 per hour. According to Barth, the intent was that the minimum wage for tipped workers remain at 50% of the federal minimum wage for non-tipped workers.

Today, that would place the tip-credit wage at $3.62, but the amount has not risen at all. “The restaurant lobby has always gotten the remaining federal tip credit wage to remain the same,” he says.

Then, and now, the tip-credit wage has become a way to relieve employers of the pressure to increase wages. “It’s really a subsidy for employers,” Barth says. All but 14 states have done away with the tip-credit wage and set their own minimum earnings for tipped workers.

According to Barth, research suggests this may be good for workers. “Where tipped employees are paid a regular minimum wage or higher, plus their tips, the poverty level of those employees is about half of what it is where the federal tip-credit wage is utilized,” he says.

Illustration of a hotel bed with a card that says "Tip Here" with a QR code

The pressure to tip service workers is more prevalent than ever before, including at fast-casual restaurants, coffee shops, hospitality services, auto repair shops and even medical offices.

In addition to its benefits to employers, Barth argues that modern tipping is based almost entirely on the size of the bill, not the quality of service. This is evidenced, he says, by the suggested tip amounts listed at the bottom of receipts.

“There’s just this expectation from restaurants and their employees — and it really has grown into a sense of entitlement — that people are going to tip that amount of money,” Barth says.

Some leaders also believe the tipping business model disproportionately rewards servers over cooks for their impact on a restaurant’s success, as back-of-house employees cannot be tipped.

“Some of those servers are walking out with $600 or $700 in four hours. … Even if the line cooks are making $20 per hour today, how is that equitable? You can’t reconcile those two things,” Barth says.

“If we put the true cost on the menu, I think it’s better for everybody,” Barth says. In this sense, he argues, tipping is essentially a hidden fee in eating out.

The cook arguably has more to do with the restaurant’s success and guest experience too. “People will often come back if there is poor service. Very few people will come back if there is poor-quality food,” Barth notes. Some restaurant owners, including Danny Meyer, the founder of Shake Shack and Union Square Hospitality Group in New York, have refused to structure their business model around tips for front-of-house workers.

To eliminate tipping, Meyer raised menu prices and front-of-house wages. This creates not only greater equity between front- and back-of-house workers, but also a guaranteed income for servers and bartenders.

“If we put the true cost on the menu, I think it’s better for everybody,” Barth says. In this sense, he argues, tipping is essentially a hidden fee in eating out.

“It’s part of the cost of going out to dinner, but you don’t really think about it when you look at the online menu,” Barth says. Not many restaurateurs, however, are able to sustain Meyer’s model on the industry’s notoriously low margins.

Not yet a tipping point

Though consumer sentiment seems to suggest growing frustration with the evolution of tipping culture, Barth is doubtful much will change.

“If you would have asked me this just before COVID, I would have thought we would have reached that ‘tipping point,’ and then it just exploded during COVID,” Barth says.

He also notes that because the government is very reactive to lobbying pressures, a change in the law is unlikely. “I don’t see us doing anything with tipping in the near future,” he says. “I think you’ll continue to see everybody asking for tips. It’s probably embedded deeper than ever today.”

He does say that, with the prevalence of social media, it’s possible to reduce the societal pressure to tip. “I think people are going to have to watch a lot more of Brené Brown’s TED Talks around shame, and get over it, and not tip because they feel like they have to,” he says.

“People are going to have to watch a lot more of Brené Brown’s TED Talks around shame, and get over it, and not tip because they feel like they have to.”
Stephen Barth

This is especially a possibility for situations in which the provided service is minimal. For example, people may eventually stop tipping at bakeries, where the cashier simply reaches into a rack and removes a baked good for the customer. “I think people will continue to tip in the general full-service space, especially in the states with the [tip-credit] wage,” Barth says.

Barth also views President Donald Trump’s plan to remove taxes on tips as unlikely to be executed. “I just feel like that was thrown out there as a last-minute ploy to get votes,” he says. “I would be shocked if anybody tried to do that, because it would clearly exacerbate the inequality between the front of the house and the back of the house.”

A better solution, Barth believes, is to price goods and services at a fair wage and be more transparent with that pricing.