Tipflation: What It Is and How It Is Changing Tipping Culture in America

What Is Tipflation?

Tipflation refers to the increased rates that people are now expected to tip at restaurants and for other goods and services.

Pre-pandemic, it was common for people to tip servers 15% to 20% based on the service received. Since then, that range has varied when faced with a preset tipping screen at many types of businesses, including for services that people didn’t typically tip for in the past. These tipping screens can result in people feeling pressured to tip larger amounts than usual. Even so, people tipped less on average after the COVID-19 pandemic.

Key Takeaways

Tipflation refers to the increasing amounts of money that people are expected to pay in tips for goods and services rendered.
Tipping has a long history, beginning in Europe as early as the 15th century before being brought to the United States in the 19th century.
The pandemic increased the amounts that essential workers were paid in tips and, along with inflation, spawned the spread of tipping to businesses where no tip was previously expected or given.

Tipflation Causes

During the pandemic, some people began tipping more than the customary amount to support essential workers, such as those employed in restaurants and food delivery services. In subsequent years, businesses have encouraged increased tipping rates by implementing digital payment systems with screens that display preset tipping recommendations, often starting at 20%. Payment systems like Square receive a cut from each transaction, including the tip. Therefore, systems like Square make more money when bigger tips are encouraged.

In addition, inflation has caused prices to rise across many industries. Because tipping is usually based on a certain percentage of the total cost of a product or service, the cost of a tip naturally increases when the price of that good or service goes up.

The History of Tipping

While there is no clear origin of tipping, records show that it was practiced in Tudor England between 1485 and 1603. At the time, guests would tip the servants of their host for taking care of their needs during their stay. In the 19th century, boxes labeled “to insure promptness (TIP)” popped up in English coffeehouses and inns to encourage customers to tip for quick yet good service.

Upon their return from visiting Europe, affluent Americans began to tip as a way to show their experience with the practice across the pond. There are those who say the increase in low-wage labor following the Civil War helped spread the custom of tipping.

Tipping is most common for workers who earn the tipped minimum wage, which is $2.13 per hour at the federal level as of July 2024. Some states, such as California, require employers to pay the full state minimum wage before tips. The federal tipped minimum wage, which is different from the regular minimum wage for non-tipped employees, was established in 1966.

Essentially, if an employee receives more than $30 per month in tips, the employer can pay the tipped minimum wage. Tip income is expected to supplement that wage so that workers who receive them actually make the regular federal minimum wage ($7.25 per hour) or more. If an employee doesn’t receive enough in tips to raise the $2.13 per hour to equal the federal minimum wage for untipped employees, the employer must pay the difference.

Today, tipping is the norm for many service industries regardless of whether the workers earn the tipped minimum wage or the regular minimum wage. These include restaurant servers and bartenders, drivers, delivery workers, valets, porters, hairstylists, and baristas, among others.

Tip Creep and Tip Fatigue

With the prevalence of digital payment systems such as Square, customers are seeing requests for tips pop up for a wide variety of services where a tip wasn’t previously expected. Known as “tip creep,” this includes tips for purchases made through a self-service kiosk, purchases at farmers markets, and even on donations made on GoFundMe.

This approach to tipping doesn’t sit well with all employees, either. For instance, one Starbucks worker went viral on TikTok discussing the awkwardness of the company’s new digital platform that asks for a tip when using a credit card.

The increasing number of asks for tips can lead to “tip fatigue,” wherein customers are becoming overwhelmed by the amount of tips they are asked to give. Tip fatigue leaves many consumers not only aggravated but also more resistant to tipping.

Pros & Cons of Tipping

Pros

With tips, some workers can make more than the regular minimum wage.
Business owners, particularly restaurant owners who pay the tipping minimum wage, can keep their prices down.
Earning tips encourages workers to provide their best service in order to increase their tips.
In many cases, tips are optional and customers can customize how much they tip.

Cons

People who rely on tips for income may receive inconsistent or insufficient income.
If business owners pay their workers the regular minimum wage, they may have to raise prices of their goods to compensate for the labor expense.
Consumers are feeling pressured to tip on things that they never have before, and, as a result, they may take their business elsewhere.

The Future of Tipping in America

While some restaurants are going to a no-tip policy and raising prices to compensate, it’s highly unlikely that the restaurant industry as a whole will discontinue tipping for the foreseeable future. As more businesses integrate digital payment services for products and services, don’t be surprised if you see a request for a tip before you pay your bill.

Some businesses have opted into a profit-sharing model where employees can collect part of the net income of the company. Often, this is instead of accepting tips. For example, WoodHouse BBQ in Toronto performs profit sharing every three months, and part of the company's net profit goes to each staff member depending on work hours.

How Much Am I Expected to Tip?

How much you tip depends on the service and the business. For instance, the standard in restaurants is 15% to 20%, while it’s customary to tip a few dollars for a valet or hotel housekeeper. Many workers such as restaurant servers and bartenders earn less than the federal minimum wage, so it’s good to consider tipping them.

Why Is Tipping So High Now?

Tipping amounts increased during the pandemic when customers wanted to support essential workers. Many businesses incorporated those higher rates into their normal tip requests, particularly when using digital payment systems. Also, with many prices rising due to inflation, tipping has increased accordingly since it’s typically based on a percentage of the total bill.

What Businesses or Services Is It Customary to Tip for?

In the United States, it is customary to tip people who earn less than the minimum wage, which typically includes restaurant servers and bartenders at restaurants. However, it is also customary to tip hairstylists, movers, valets, porters, delivery workers, and drivers.

Recently, tipping has become more common for baristas, childcare, and hotel workers. With the rise of tipping options appearing on many payment screens, tipping is becoming an option at many types of businesses never previously seen.

Is It Rude Not to Tip?

Most manners experts say you shouldn’t skip the tip for restaurant workers unless their service is abysmal. (If you have a gripe with the food, discuss it with the manager.) But there are several scenarios where a tip is not required.

You shouldn’t tip professionals who are paid a salary—lawyers, teachers, plumbers, cable techs, and such. Tips for open bar events are usually covered by the event host, so there’s no need to ante up there. And despite those ubiquitous payment screen requests, it’s OK not to tip for counter service, as people who work as baristas and cashiers are usually paid a wage.

The Bottom Line

Tipping is a way to show appreciation for receiving a service. However, many customers are not happy about the increase in how much they are expected to tip, or with how many businesses are now asking for tips. Because tipping is not going away anytime soon, customers should find their own comfort level to decide how much they will tip and for what services.

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