June 27, 2019

Tipping Point

Are the expectations for tips out of control — or are we just cheapskates?
By Todd VanSickle | Feb. 23, 2019

Thanks to credit cards and in-phone apps, customers today are carrying less cash than ever, yet it seems like the instances in which they’re expected — or being asked — to tip are increasing. Northern Express dips into the proliferation of countertop tip jars and screen requests to ask service industry vets who’s tipping, who’s not, how much is expected, and if it's service providers — or customers — who are expecting too much.
 
Gwyn Smith is a massage therapist and owner of Stillwater Massage in Petoskey.  She’s been in business for about four years and recently had a new client ask, “I don’t know what to do for a tip. What’s normal?”
 
Smith explained to the client that she was taught in medical massage school to not expect tips in her profession. But it still doesn’t stop people from tipping, and when she does get gratuity, it’s like icing on the cake, she said.
 
“You wouldn’t tip your dentist, or you wouldn’t tip anyone who gives you a medical service,” Smith said.
 
When she first started out working for a chiropractor, she received tips about 10 percent of the time.
 
“I don’t know if it was the environment or if it was the clientele, maybe a little bit of both,” Smith said. “But when I would receive a small tip, it was a really big moment.”
 
Now that she’s a business owner, she has closer relationships with her clients and receives tips about 75 percent of the time.
 
“I don’t expect it, but it is a nice bonus when it happens,” she said. “If a tip happens, that’s great. I don’t expect it. If it doesn’t happen, I don’t feel broke at the end of the day.”
 
After a short explanation to her inquisitive client, the client left a tip.
 
“She felt more comfortable about tipping, but after that conversation I think it would have been a little awkward for her not to tip,” Smith said.
 
In a time when more and more people are carrying less cash and paying with plastic, customers are being asked to leave gratuity more frequently. And tipping is becoming more prevalent in other industries — not just in restaurants and hotels — thanks to software that blatantly suggests gratuity on a digital screen.
 
According to an Iowa State University study, tipping has gone up more than 38 percent since merchants started implementing cloud-based point of sale systems, like Square and Shopkeep.
 
The software has made tipping more efficient than the the dusty, primitive gratuity jars that once sat almost empty on checkout counters. Now, customers don’t have to reach in their pockets for loose change or do any math to calculate the percentage needed for a proper tip. Instead, options are presented on a screen after a customer swipes his or her card. And he only has to tap to a finger on an option to show appreciation.
 
“It makes it really easy,” Smith said, who uses Square.
 
In February 2018, according to data compiled by Square, Michigan customers leave about 17.25 percent. Alaska is one of the best tippers, while California is among the worst.
 
But the question these days isn’t so much how much, but whoshould get a tip? Traditionally, restaurant servers and bartenders have been the primary candidates for tips; historically, they are paid a lower-than-minimum wage by the restaurant or bar owner, with the understanding that the quality and speed of their service is rewarded by each customer’s tips, a practice intended to align their overall earnings with their performance. The federal government classifies these workers as “tipped employees,” and depending on the state they live in, they are paid anywhere from one-half to one-quarter or less of the federal minimum wage.
 
In recent years, however, service industries where workers earn minimum wage have embraced the tipping culture and technology, too, frequently asking customers for gratuity. The act is sometimes referred to as tip shaming.
 
An online survey of 1,000 adults was conducted in May 2018 by creditcards.com.
The survey found that 27 percent of hotel customers always tip their housekeeper, 29 percent who visit coffee shops always tip, and 67 percent always tip their hair stylist and barber.
 
Smith tips her hairdresser each appointment and, on most occasions, gives more than what is expected.
 
“I will always give her extra, because I have formed a relationship with her,” Smith said, who tips at least 20 percent. “I want to make sure she knows that she is valued.”
 
However, she does have a hard time leaving a tip when she orders takeout food.
 
“That is still really gray for me,” Smith said. “Are you supposed to tip, because they really aren’t offering a service. …but I am still in a restaurant setting.”
 
She does make an exception when she knows the worker personally or has formed a relationship with them.
 
“If it’s a service industry, and I see someone is working really hard, I would tip them,” Smith said. “I don’t know where the line is between showing appreciation and being demeaning.”
 
According to a survey by CreditCards.com, patrons ages 18–37 are less likely to tip than older customers. When presented with a variety of suggested tipping options, Millennials regularly choose the lowest option and nearly one in five give no tip.
 
“I would say since I receive tips, I am more generous to give tips,” Smith said.
 
Some of her best tippers are wealthier older clients.
 
“It is like they expect it from themselves to tip,” Smith said. 
 
Hair stylist Travis Troxell has worked at Salon Saloon in Traverse City for the past five years. He said most customers leave a 20 percent tip.  The owner of the salon also receives the same amount in tips, he added.
 
“Most people tip,” Troxell said. “The people who don’t tip are high schoolers, who haven’t really learned yet, but you don’t really want to tell them either.”
 
The hair stylist considers his hourly pay a good wage, but he still depends on gratuity.
 
“Without tips, I probably won’t be able to afford rent in the area,” Troxell said, who lives in Traverse City.
 
One of the most unlikely services he has heard people tipping for was a tow truck driver.
 
“I only needed one once, but I felt bad not knowing that,” Troxell said.
 
Apps like Shipt and Lyft have taken the guesswork out of tipping for customers with an in-app gratuity option. In 2017, Uber caved to mounting demand from drivers and users to implement an in-app tipping option. Uber resisted the tipping feature for years, partly due to racism. The company reportedly sited a Cornell University School of Hotel Administration study that showed that tipping could be racially biased.
 
However, many workers in the service industry say that tipping boils down to the quality of service and attention that is given to customers, rather than looks and race.
 
“I think 90 percent of it is about service,” said Michael Nygren, who has run the Iron Skillet in Mancelona for the past eight years. “I have been a server at other businesses, and I don’t mean to toot my own horn, but I did very well with my tips, and I am not, like, the best looking guy in the room.”
 
He said Iron Skillet’s servers keep their own tips, and gratuity is not automatically added to the bill at his restaurant.
 
“Hopefully everyone tips at least 20 percent,” Nygren said.
 
The servers do share a percentage of their tips with the bussers and dishwashers.
 
Nygren said tipping is essential for keeping his restaurant in business, which he says works on a narrow profit margin. According the Michigan Restaurant and Lodging Association, most restaurants in the state operate on a three to five percent profit margin.
 
The restaurant owner helps his servers make more gratuity by offering them guidelines called Steps of Service, a 12-step guideline that focuses on basic service techniques.
 
“If people follow that, they will get a better tip. …I believe the server can make more money doing it the current way than to eliminate tipping and have a standard wage,” the Iron Skillet owner said. “I would have a harder time finding and keeping help if that was the case.”
 
The restaurant owner said there are only so many expenses he can pass on to the customer, but according to the CreditCard.com survey, about 27 percent of Millennials say they would prefer to do away with tips and pay higher prices. 
 
But Nygren is skeptical that tipping could be abolished.
 
“This is what our country has been used to for a very long time,” Nygren said. “I think it would be very hard if we were to switch over to a non-tipping system.”
 
Justin Winslow, president of the Restaurant and Lodging Association, said Michigan currently has a tip credit in place that ensures that tipped employees who make less than minimum wage are subsidized by their employees if they don’t make enough tips along with their truncated wage to equal at least the state’s minimum wage. Currently 43 other states have a version of a tip credit.
 
“We have and will continue to support a tip credit, which we believe is fundamental to the success of the restaurant industry,” Winslow said.
 
If the tip credit hadn’t been reinstated in 2018, he said 19 percent of MLRA’s members would have shut down. Seventy-six percent said they would retain their current level of employees or grow as a direct response to the tip credit being reinstated.
 
He added that Michigan’s tipped employees make on an average of $17 an hour, according to a poll conducted by the MRLA.
 
“There are some outliers, with some severs making a six-figured salary under the current system,” Winslow said.
 
Winslow tips on a regular basis including his Uber driver and Shipt shopper. Recently he had a bed delivered to his house, and it wasn’t an easy transition. He felt obligated to give a tip to the workers, even though it wasn’t a typical service that warranted a gratuity.
 
“It was going above and beyond,” Winslow said. “I don’t think it is our place or to judge who should or shouldn’t be tipped. Ultimately, a tip is voluntary by definition, and by federal law and is really the prerogative of the customer.”

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