« Freakonomics Radio

190. Should Tipping be Banned? (Rebroadcast)

2014-08-07 | 🔗
It's awkward, random, confusing -- and probably discriminatory too.
This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
This podcast dynamically inserts audio advertisements of varying lengths for each download. As a result, the transcription time indexes may be inaccurate.
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But if I guess listeners this summer, we are putting out encore versions, also known as reruns as some of our most popular episode from the past year. To this one is called, should tipping be back and we like this one, a lot you may also like it. We may hate it or you may have Your own tipping story to share, in whatever case, feel free to leave a car. And on Itunes or drop us align at radio at for economics that gun I love? It I say the word tipping. What do you think, I think give discomfort discomfort for whom a further tipper? For me, I don't like to Tipp chippings.
Clippings things unpleasant. Now it's not that you're, an ungenerous person. I find you quite generous, and I I just don't like social interaction so much, and I don't like the idea that I'm not sure how much too tipper what's fair, what's right and it leads me in the exact opposite direction whenever there's someone who's doing a job that deserves to be tipped her that socially, we think should be kept its hours. My inclination to not let them do their jobs always want to carry my own bags in airports or in hotels and how they can serve my own food at the restaurant but but good I'll go right in the kitchen and make my can I say something by you sure let her go ahead. So I was. I was good temper tie her with W.
Man, you throw the money around gone out of style and embarrassing around here is so embarrassing man we get in some car some Sudan to take us fifteen minutes from one place next. New flash and twentys number I'm happy from the w, and my see this is free economics, radio, the pot cats that explores the hidden side of everything. Here's your host Stephen governor. So Steve, let my free economic spreading co thinks I'm a grotesque cheaper for the record, I believe he's exaggerating. But yes, I do routine.
Tip people who work hard for a living specially when they're not getting paid all that? Well, that said, I agree with Leavitt. The tipping can lead to discomfort can be confusing. Why do tip a hotel doorman, but not the person behind reception desk? Why do you tip baggage handler at the airport, but not the flight attendant? How much is enough for a tip? How much is too much? if you're on receiving end, how do you get the biggest tips? This is a question that everybody has an opinion about. We talk to people all over the country who work for Turkey my name is Tanya. I'm a server and I've been Minneapolis Minnesota Johnny, glowing, I'm a valet Christa? Listen. I've been bargaining for over a decade I'm a breeze coffee varies a server server. Sarah Danny's, Herr Stylus, Barbara Claim is haberdashery. I've worked many job for tips as a breeze, sir.
Bar tender- storm. My name is irish screen and I'm stripper you know is really interesting is. If you see somebody smoking there, you are going to be a good temper. The older, the fatter than better get a guy, looks like a bomb and turns out to be poor guy and you get a guy. It looks like a millionaire and you want to appear thing. Black holders from American Express ten to fifteen percent. I understand get rich by being frugal, but that doesn't fly and look at their shoes issue. The shoes shoes can say a lot. Shipping is an idea that economists traditionally have a hard time with. Why should I
give more of my money to some one else, on top of what I've already paid for a meal or ride to the airport and what is a tick, exactly be attacks the alchemist we needed to find someone who could answer? All of our two in question. My name is my clear and I'm a professor at the corner hotel school. I do research mostly on tipping behaviour, very Why does Michael Lynn find tipping so interesting? In his words, its hope, not only because it is widespread, but also because it an expense that consumers are free to avoid, and how big is this Hence I haven't done it recently with the most up to date records, but approximately forty billion years Tipton, the United States,
forty four zero forty billion dollars a year. Yes holy cow, I'm clicking around here. I see that the budget for NASA is under twenty billion, so we could build two NASA's tipping. So that's it pretty. Astonishingly, large amount of money for what is essentially a voluntary financial transaction. Yes, I think so yeah Wind has written fifty one papers on tipping behaviour. Here's one title are christian, slash religious people, poor tapers, the answer that is yes, relatively speaking, there's another paper: sweetening the till the use of candy to increase restaurant tipping. Yes, Michael Lynn found that candy correlate with higher tip as you can probably sense. By now. Lynne has studied all sorts of fact: that may or may not influenced if we could we could almost do. This is a sort of
lightning round if you're comfortable, giving short answers talk to me about how tipping areas based on the following factors? Let's start with attractiveness of the server attractive waitresses, get better tips than the less attractive waitresses, men's appearance, not so import. Ok, and what about em a waitress verses, a waiter generally hard to say in general, I would say, waiters- get better tips from women than men. Waitresses get better tips for men and women, And what about? Let's say among women, hair color blonde is better than Brunetta, red or no, yes, blondes get better chips. Then brunettes slender women get better tips, then heavier women, large breasted women, get better tips than smaller, but still women. Surprisingly, at least in the studies, I've done women in their thirty skipped, better tips, then either younger or only women.
So. A skinny good, looking big breasted woman and her thirties is gonna, get big tips. I would simply replaced word. Skinny was slender slender, a slender good, looking big breasted woman and her thirty's gets bigger. Color me shocked. I have to say yes I have tried using my feminine wiles before and with mixed results when I Billy made an effort at that intended to work. You now flashes smile and email here, and you make up, has done even if you're sweating, like a pig flung his errand make then you'll be all right. I pretended to be french for a while, and I put zones is accents exists and I said those from France and I have We need full light on six March
send our love is better. I got so tiring. Now I was exhausted. It works, though so how does Michael didn't know what he knows: wealth he studied tipping, since he was a great students but first study I didn't. Shipping was outside of an eye. Hop then, as now, he looks for as much data is eaten cat Even today, he'll still stand outside a restaurant interviewing customers, as they leave asking them questions about their perceptions, dining experience how much their bill was, how much they tipped some of it. Having servers, keep records of their customers. Putting their size Tipp amount and grace, but a lot of it is either online or telephone interviews with customers asking
about their general habit? Tipping habits and tendencies This is unrest, rob servers since they taken about seventy percent of all tips in the. U S, the server customer relationship begins the minute you sit down introduce yourself by name. In some remote mechanical kind of way that says high on my copy, your server, but if you can genuinely have a conversation with that table in as a part of that introduce yourself by name, that's, Well, let's hear you introduce yourself the right way, because the way you just said it is the way I hear a lot and I have to say it doesn't make wanna cosy up and dump it twenty in his pocket. That's true, please understand I'm. I'm no longer waiter, but the reason I didn't get good tips when I was a waiter as I'm not the most social policy people. So I'm not sure I can do it right now,
come on, I think I'll. Let you know if you go up to a table and go hide. My name's MIKE I'm gonna, be now see it's starting to sound mechanical. I dont know how you do especially for having they do it over and over again with eyeing the graphical that's interesting. Even the tipping sage cannot master the game. This is accomplished what what else? What are the other habits or traits or tricks that a server can do generally to increase? You said it looked a little bit of a touches. I'm getting a lot of a touch is not so good, although I did do study where I had a server touch customers and either count one one thousand to one thousand, remove his hand or touch and count one one thousand to one thousand three one thousand for one thousand and then remove
Obviously the counting was meant to be meant silent yet, but the point is that for second actually seems like a long time, and it turns out that he got higher tips and both condition. It didn't matter how long as long as he touched as long as is she has limits. Where was where was he touching them on the shoulder when he went to deliver the check at the end of the meal I mean critically advance the job, but at this job you I definitely touch me, go on outlook on the shoulder. Often when there's a big party- and I need to like Lena unnoticed tap on the shore when my boyfriend, who is also server, we worked together for many years at the same place. He would bend down. You know, but I was so that was a rare thing today was a girl
I've never been one of those people that does you know that, like tribe, leaning down and talking to people or touching people, I just could never quite get into that rhythm engaging client. And his much older, and he wants a sort of make sure you're, ok, you're, going in the right direction, your life and and he's taken. Fatherly approach to you at the end of a dance at the end of a champagne room. You know you might touch his shoulder and to thank you sweetie in and ask him if he wants to take care of you and they always flash a really big smile, because we don't you're not getting any. What about you know. Sometimes server will write the little know you now thanks or a smiley face, Sir, what not as that order that work. Yes, We faces have been shown to increase tipps of waitresses, not of waiters, drawing other picture
like a son, increases tips, squatting down next to the table or pulling up a chair and sitting at the table. If there's room will increase to em when they increase by Hamas. Are we talkin in one study the server got a dollar more per table when he squatted down next to it, and it turns out. This was one of my former students. I asked him: what do you do to get better tips to go? So? Will I squat down and I said you really think that helps his response was sure I know it. Does I asked We'd be willing to test his fury, he said sure, so he agreed to randomly assign is tables to conditions. He would squatter, not squat and sure enough. He was right with those tables he did not squad at. He got it, our last saw it costs money to help me to reserve. But I put him as an author on the paper. Is a small compensation
clearly there are all sorts of little things that can nudge Tipp up or down, but forget all those little things for a minute. What about the big issue? How good is the sir the conventional wisdom says that good service springs a good tip and vice versa. True, not true as my colleague first off, I've done a lot of research looking at the size of tip and how it relates to the customers, perceptions of service quality men, consistent. Finding is that there is a relationship. People do Tipp more the better the service they get, but that relationship is very weak. It's a
relational are the average correlation is point to that means about four percent of the very ability of the differences in the percentage tips left by different dining parties can be explained by their service rating so apprise, astonishingly, low is net not just a little bit. Yes, it's astonishingly low. So it's absolutely the case that too sir, not strongly related to service, as you would expect absolutely. I believed that that's got to reduce the incentive value of tipping. Having said that, though, yet even Oh the actual relationship between tips and services, low servers, think there's a relationship and that's enough to motivate them to deliver. Good service
That's surprising is not how weak the relationship is between service and tipping Maybe we shouldn't be so surprised. He reminds me of some the research on altruism, if you ask people why they give money to a certain cause, they'll talk about how meaningful the clauses, but if you look at the actual numbers, you see that the cause takes a back seat to doing the ask like Michael Linz research on tipping. It turns out that a pretty blonde woman has advantages collecting charity to so a lot of our behaviour that we may think is because of reason ex. They actually have a lot more to do and reason
Why coming up on economics, radio, an argument for white tipping is just bad. We found that even after controlling for these other things, We still find this positive relationship with between tipping and correct. Thanks to Pennsylvania, lottery, scratch ass, pennsylvanians or scratching their way to fund, and we new games every month, big top rises and said, enchants drawings excitements, always in order, so try, Pennsylvania, lottery scratch offer your ticket to fund and get yours today. Keep on scratching, must be eighteen or older. Please play responsibly benefits older pennsylvanians every day, economics, radio, is supported by zipper. Creator businesses have had to be flexible this year from working remote. We too pivoting their business models for long term survival. If you are in charge of hiring for your business. These pay bits of made your job even more challenging. Thankfully,
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for thirty. Thirty from W and Y see. This is for economics, radio, here's, your host Stephen Governor, Michael Lynn, is a scholar of tipping at Cornell. He's examined just about every little thing that can affect tips. Some of his most interesting research looks at how people different racial and ethnic groups tip
get tipped. What can you tell us about race of the timber? So there's you know waiters talk about that certain racial and ethnic groups- and I should say national groups always tip in a worse than others. What do you know about that? Blacks, Tipp less than whites in this country? There are more likely to leave without tipping at all if they do leave a tip, it's on average, a smaller amount. There are more likely to be flat shippers and not to percentage of the bill. It's partially a little bit mediated by socio economic status, that is, blacks, also have lower education's in incomes in this country than whites and people with higher.
Incomes in education's tend to tip more. So that's part of the reason, the black stip last, but it's only a tiny part. What's it what's the other part? What do you know about why that is? Then I can tell you it's not exclusively an issue of service discrimination because I find even controlling for the customers, perceptions of service quality, blacks, tube, less than whites. The most powerful explanation is that it is a difference in perceived injunction, descriptive, tipping norms, who I didn't understand that right in front of norm as the norm about what you should do. Ok and a descriptive norm is a norm that describes what people do. Do I say: ok, what I found is that flax in this country only about a third of them. If you ask how much are you expected to tip in a restaurant context only about a third of blacks, Wilson,
to give an answer in the fifteen to twenty percent range icy and that compares how to whites? Two thirds of whites, interesting it makes Hence that social norms vary from group to grew bright, so I guess it's not so surprising in some way. That's right, it's not completely surprising, but What surprising to me is knowledge of the injunction norm explains only about a third of the black white difference in tipping when I include differences in descriptive norms cause, I could know oh yeah you're supposed to fifteen But nobody really does at Rio now without being aware of the engine of norm, but having a different perception of what the descriptive norm is and it turns out that there is also a black white difference in perceptions of what people do. If I take both of those perceptions of the injunction an descriptive norms, I can account for about half of the black white difference and well what speed
on that I'm stopped. I mean I untested everything I can think of. If any of the list. Have ideas have an email me because I'm looking for areas too, you know to test next that's facing so foresaw. What is your email, W M L, three at Cornell Don T? Do you They call me Jack rabbit from Zagreb. I am annex I guess. My name is the bet. Morgan and actually I'm a host at a restaurant. Basically because I may not speak if all blacks. We have a mindset of the fact that whatever we do internet service, we didn't pay. So a tip is basically a gratuity which is an extra in. I guess another culture
They see it as a form of of income. I know, for example, when I talk to some people that are not at all why nobody comes a restaurant tipping. They always presume the fact that where they don't make any money, so the tip is all account save you a different attitude. It you're added, I mean I'm not saying that black people have bad attitude, but if you don't, you know, you can make good tips. If you have a good attitude, I don't care if you're, black or white or whatever. If you have a bad attitude or not good tips? What about differences in tipping for black customers toward black verses? Wait servers both groups, blacks and whites, will Tipp a white, there were more than a black server and that's even controlling for perceptions of service quality. So a black customer will Tipp a black server less than a black customer will Tipp await server. Yes, all else being equal yeah, it's fun
say? What can you tell us about other racial or ethnic groups? Asians Latinos immigrants, verses, you know on and on all every habitats on the data on other ethnic groups is more mixed. There are several studies finding that Hispanics Tipp less than whites, but there's any showing no hispanic white difference in tipping. I haven't yet teased apart. What's going on, why am I getting it sometimes and not others, and the same thing is true with Asians. I do have some, Eddie showing that Asians Tipp less than whites. Other studies showing that they do not the one thing I can say for certain is that the asian White differ. Even when it does exist is very fragile that, as I can control for things like sex education, income in it disappears. The
spanish white, when it exist, is often robust. I can control for education income in still there, but I don't find it is consistently, as I find the black white difference with all groups once you control for come if you can men verses women as customers, who tips more general there's. No sex difference is that right. Yeah and even the sex of server sex of customer interaction we ve talked about previously, it has been observed, consistent, enough for me to say it's a real effect, but it's not universal. You don't always find out of icy. What about the age of the customer had it had all their customers tended to place there also more willing they'd based their tips on service quality, a little bit more than younger people whom so let me yet you obviously, no so so so much about this strange but common practice of tipping. If you could rewrite the custom,
rewrite the social, more aid, which is obviously impossible, because it arrives over a lot of time with a lot of people participating in it. What would you do? How You make tipping more either sensible or directly related to the things that should be related to, and so on. You know, I think I would outlawed yeah and it might be illegal as it is because of the race of server, a fact that we had previously discussed its conceive? You you can make the argument shipping is a condition of employment that has an adverse impact on a protected class, so it's discriminate. This discriminatory, and the Supreme Court has ruled that even neutral business practices that are not intended to discriminate if they have the effect of adversely impacting protected class are illegal and so
it's not inconceivable to me that there will be a class action lawsuit on the part of ethnic minority, waiters and waitresses, claiming discrimination and in terms of employment and its conceivable. That tipping might be declared illegal on a basis you're talking theoretically Ursus a movement that actually exists. Oh, I know of no such lawsuit right that in existence buddy, it's I've talked, Not our I've lost touch, and it's not hard for me to imagine. I've talked to warriors, including people specialise in labour and employment law and I've gotten mixed opinions mean some of those lawyers have said: no, the courts would never go there. Others go no. That is a reasonable theory of the law. That's plausible. I think it is plausible, my four, but take a good look at our case. If a server came to us and in May that complaint
just in sorts is a lawyer and outlining Golden in New York City, he represents employ, please in class action discrimination cases he sued some of the biggest restaurants in New York for shorting employees on the Tipps. They deserved, if his firm were to take on a discrimination case. Like Michael Lynne has proposed sorts wordpress. The two lines of August first would be desperate impact analysis. The purpose desperate impact analysis is to eliminate with the Supreme Court calls headwinds policies that make harder for racial minorities or other people, another protected classes, to succeed with desperate impact. You dont have to prove that discrimination is intentional. It's a proxy for discrimination, the ideas if there is a disproportionate impact on a particular group here it would be african, american or non white servers. Then the plaintiffs have made the first showing
we need to make their case and the second argument. The second step, then, is the employers burden, meaning its after the employer to prove that tipping is a business necessity not accustomed. But a necessity that SAM return. I come to you and say: look, I know what you do. I know who you represent and I want to avoid. I want to avoid unfairness and also up my business prosper. So let's say I calculate the average tips in my restaurant and its twenty percent, and I hate the fact that weights f member a earns. Fifty percent more than wait staff workers, Z because waits network or a happens that these attributes that, for whatever reason, get alot of tips pooling is complicated for whatever reason, let's just say, I dont want to do I'll bet, complications and it's gonna say on my menu to my clientele, we're getting rid of tipping because its inefficient, sloppy and potentially discriminatory average tips here were about twenty percent
and therefore we're just going to ban tipping and instead raise our prices, twenty percent, but I don't see any problem without from liberal perspective and in fact that may be the best way for restaurants to enslave themselves from liability, Now you may know that some restaurants in the- U S, have already eliminate tipping they use and automatic service charge. Instead, if customers want to, they can Tipp. On top of that service charge, one restaurant San, Diego called the Lincoln. He has gone so far as to ban tipping. If you leave extra money on top of the Winkies eighteen percent service charge, that money will be given to charity J Porter owns the lingering he thinks tipping is absolutely ridiculous if tipping had ever been invented- and you we're starting a restaurant. Would you you
tipping as the way to compensate your best in place. Your most important employees, all your employees, would that be the system that you would pick in a vacuum to compensate your team, and I think the answer is clearly because it's a stupid system that are so so why not? Why not? Do it the right way, even if its little scary Now, if you live or travel outside the United States, this entire discussion on leaving a tip and restaurant might seem ridiculous much of the work operates on the simple premise of the service charge or fixed price. No Tipp expected the. U S is empirically Tipp crazy in the. U S, we have thirty one different service professions being Tipp. That's Magnus tourism in
Canada. We have twenty six or twenty seven, which is the same in India, in the Netherlands. We have fifteen than we have in Norway, Sweden and Denmark. We have between five and ten Torvus and teaches entrepreneurship at the Harvard Business School in Japan. We have four. And in Iceland we have zero, gets where tourism is from yes nicely so that's on the exact opposite end of the spectrum, from the U S, which is a country where tipping is most prevalent now. Why was he comparing tipping in countries, But what does this research show? Well, if you're, looking, yet another reason to hate tipping, listen to this, the more tipping you see in a given country the more corruption you generally see in that country as well. Here's how we came to that conclusion,
so we started by collecting information about tipping, and so thirty, three different countries and in thirty three different service profession these are waiters hairdressers de taxi driver. Nurse and so on, and we also looked at the levels of corruption in these countries. Looking at how they scored on the corruption perception index, which is Sir publicized by transparency international running. Simple correlation: we found that there is a positive relationship between those two which could have been four four Many different reasons are, but we then control for a number of other factors, such as GDP, the culture in a country in general, homicide rates and other measures
worse off, our legal enforcement and this relationship stayed significant. In other words, we we found that even after controlling for these other things we still find, is positive relationship between tipping and corruption. Why in the world would this be was torture, surprised also- I was not us- rise as many others. I started this research because I had an inkling that there was this dark side of tipping in the? U S, we have a strong norm for tipping, and so, if you're up upstairs being and and law abiding citizen. You are very low. We'd be also a good tipper. Because that's what norms? Tell you and you are also likely to avoid corruption, but across countries we see a different pattern,
where these norms that encourage tipping, which is a form of informal payment for services. May a leaking over into other forms. Exchange which are not as positive and not socially beneficial as tipping. So in the end, Steve whether it is right to dislike tipping his knee, even if he is not right for all the right reasons. I don't like to Tipp clippings clippings unpleasant. As I said earlier, it's not that Levitt is ungenerous. It's just a tipping is to fully to win, too confusing. Why two caddies? So when I play golf, I'm extremely generous with
is she having. My tipping is rubbed off on you. Frankly, because when we met you didn't Tipp you and Tipp anybody. You had barely but a restaurant, but I'd like to talk to people. Sadly I just let you do the tipping Cosette was easier, but but you have different strange to me every time you get into a car that takes you from someplace to another, and we often do and were on road. You tipped the guy, which I think is a terribly Williams. I I am an indifferent, equal and work for the entire year. I do not Tipp anyone ever no mention of it and in what I've taken to doing now is there's a car service. I use a lot to get to the airport, and so what I did instead of ever tipping, I just set up. Chief cash to this this car service- and I said, will you just give it to the drivers according to what you think would be, for I am sure that was distributed equally, robot equally, but I will say, they're getting action of the dry. Let me rephrase I'm sure that was distributed at all, and
gas comes to like the guy one person at a car company. Guess that's how you did it have money, so I called up the I call up the car come. He said I would like to give this money, and the woman's had Daphne send it right to me, and I thought it would never be distributed. But what I will say is that the reaction from the driver has been really really positive- and I sometimes won't see these drivers from month to month- enables say how thankful and grateful they were that I made this generous gift. I think it really is really worked so much better because the heart about shipping is what you do, have the right change and then you get us. I am really sorry ties unknown. I, I really think think it's the duty of an adult in a tipping society to like pre think, that's like why when I go to a lake. If I go away with the family for Gonna vacation somewhere, we're gonna be staying in the hotel. I like load up on the rate denomination bill cause. I feel like here's. What I feel like I want to reward the people who are working hard weather.
Not they really deserve it because already working hard, and I figured that probably most of those people that I come into contact with in that situation, hotel car, whatever are being underpaid for what they work in that's my view, maybe I'm wrong. Maybe I'm naive made them a bleeding heart, but that's the way. I feel I think, that's nice, that you were that you worked at heart, but I hadn't worked hard on other people, But let me just say this: as in Chicago a few weeks ago, go out to work with love it I got picked up at the airport by car. In car service it let it use, it turns out that my phone rang and was Levin. So I said, however- and the driver says that's let it that's my boy, Steve Levitt, so pair
let it strategy works, just grab a pot Gus listeners, since we first release this episode that no tipping restaurant in San Diego has closed, but it does seem, like the note, movement is gaining momentum. Several France round the country have abolished tipping choosing instead pay their employees a flat wage out of the menu prices The media has also taken note shortly after we put out this episode. There's all kinds of coverage from the BBC and Sleet Esquire Fox NEWS asking whether shipping has reached. Perhaps a yes, a tipping point next week on the show. What do a bunch medieval nuns. The address with an heroic spirit, took a razor and with it cut off or knows have in common with Bo Jackson. You drag me if you want, you can wasted wrapping acid. I promise you that they both cut off their nose
despite their face, it's an encore presentation of our episode about spite that's next time on freak number three do freak anomalies. Radio is produced by W and my c and d their productions. Our staff includes David Herman Gregg, resolves ski credit cards, hurray, Lamb, Susie Luxembourg and Chris Ban in if you are more free comics radio. You can subscribe to our part cast on Itunes or go to for economics, dot com, real fine lots of radio, a blog, the books and more.
Transcript generated on 2021-03-12.