Post-COVID “tipflation” is confusing and frustrating many Americans

By Cynthia Furlong Reynolds

“Tipping is way, way out of control,” sighs a woman meeting two friends at Panera after she has paid a twenty percent tip for a cup of coffee that she will pour herself. She echoes what many Americans are feeling: confusion about the new post-Covid tipping culture, frustration over what some economists are calling “tipflation,” and perhaps some suspicion about who actually benefits from computer-recorded tips collected before any service even begins.

“I don’t know who to tip or how much to tip anymore,” one friend laments.

“I can’t take it until you choose a tip,” the young man replied.

“He didn’t even have to move his feet to reach the pretzel and bag it,” she told her friends. “Yet the cashier at Macy’s didn’t expect a tip when she helped me return one blouse, find another in my size, and then ring it up.”

“Waiters in Europe are professionals. They work for a salary, and they are insulted if an American offers a tip,” points out Pat Winton, retired owner of an international company. “I strongly believe we should go to the same system.”

Karen McFarland agrees. “I actually had a waiter run after me to return my tip at a restaurant in the Montreal airport!”

But that would never happen here.

According to a Talker Research poll, last year the average American spent nearly $500 tipping “more than they would like”—otherwise known as “guilt tipping.”

Since the Covid epidemic, tip jars and tablet screens have popped up in businesses that never expected tips previously. This “tipflation” could be actually be undermining the five million Americans who are paid sub-minimal wages and count on tips for three-quarters of their income.

Most of them are wait staff, chambermaids, nannies, delivery drivers, and people with disabilities. And two-thirds of them are women.

This month, the federal minimum and sub-minimum wages will increase for the first time since 1991. For 23 years, the minimum wage was $7.25, and tipped workers received $2.13 an hour. Those rates now rise to $12 and $6 an hour.

But states set their own wage rates. Oregon leads the list at $16.28, with California close behind at $16. Only seven states have tried to deal with “tipflation” and poverty by eliminating the sub-minimal wages. Michigan is not one of them.

In January, our minimum wage increased from $10.10 to $10.33 per hour, with tipped employees now compensated at $3.93 per hour—and some employers can claim tip credits of $6.40 per hour for their tipped workers.

What many of us don’t know is that the sub-minimum wage reflects a long history of racism, ageism, and sexism, topped by business owners’ expectations that consumers will supplement the wages they are not paying their employees.

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An urban myth claims that TIP is an acronym for “To Insure Promptness.” But nowadays, tips and performance seldom correlate, particularly when the tip is determined before any service takes place.

The history of American tipping began after the Civil War, according to Sau Jayaraman’s book Forked: A New Standard for American Dining. European aristocrats often tipped their friends’ wage-earning servants when they performed extra services. But when the practice arrived in America during Reconstruction, railroads, restaurants, and hotel owners “reinterpreted” the practice.

Instead of receiving bonuses on top of fair wages for their services, formerly enslaved employees and women needing to work outside the home were given minimal wages, so they relied on tips to try to make ends meet. And too often the business managers skimmed money from those tips.

In the days before Covid and tablet check-out screens, tipping was a private matter, rewarding someone for quality service. Since the pandemic, however, expectations for tips have soared. Businesses that were tip-free prior to 2020 now present their customers with screens prompting a range of generous tips (with a very small button saying “No tip”) even before the customer receives any service.

And some businesses don’t leave tipping to chance. A large sign at a local spa announces the expected tip scale starts at 18 percent rises significantly to the “preferred tip.”

“I thought the $110 hourly fee would cover all expenses,” a first-time customer murmurs. When she chats with her masseuse, she learns that Meghan is paid $28 an hour, and Karen, who gives facials, earns $18 an hour. “That must leave the business owner with a hefty profit, even after accounting for overhead expenses.”

Everyone is getting in on the action. One adjunct professor observed the new way of tipping at a local high-end food truck. “After placing my order, I tried to pay with cash, but the order-taker insisted I still had to indicate a tip on a screen.” With a long line of customers waiting and watching, she felt compelled to tip and chose the lowest suggestion. Then the young man at the window studied her response before giving her order to the cook. “I didn’t think a tip was called for, but everyone was staring at me, so I caved in.”

The best tippers appear to be veterans of service jobs. “We are definitely a tip-driven business,” says Meghan, a masseuse. “For that reason, I feel responsible to do reciprocal tipping.”

“I always tip generously—at least thirty percent,” a lawyer reports. “I put myself through law school by delivering pizzas, and I know how important a tip is for people struggling to pay bills.”

And yet it’s rare to find anyone who approves of the American tipping system—or who even understands it.

“I tip by guilt,” a dentist admits. “I have no idea what tip is expected anymore.”

Increasingly more wage earners expect tips. Ryan Smith (not his real name) clerks in a cannabis shop for $17 an hour and proudly reports that he usually brings home “at least a couple hundred dollars a week” in tips.

But as Americans reach the end of their tipping point, businesses promoting tipping when their employees make more than minimum wage are affecting the livelihood of workers who rely on tips to make at least minimum wage.

“Even when the increase to $3.93 goes into effect, I’m worried I’ll fall behind financially,” says a waitress at a popular restaurant on Jackson Road. “I think that people are being asked to tip in so many places nowadays that they’re either resentful of tipping or they have less money to spend on tips here.”

A hostess in the same restaurant agrees. “I waitressed for nearly thirty years, but when I had the chance to have a regular salary, I jumped at it. Even though there are weeks when I make less money than I did waitressing, at least I have a dependable salary.”

They’re right to be concerned. A recent study by the marketing technology company Vericast reports that 68 percent of families earning less than $75,000 yearly are changing their restaurant spending patterns. In the last year, menu prices rose an average of 5.1 percent, while overall grocery prices rose 1.2 percent. Some families are “trading down” from nicer restaurants less expensive options, and others are cooking at home instead.

“I’m considering another line of work,” another waitress admits.

“I was raised to believe that everyone deserves a living wage,” says a farmer in his sixties. If we can’t afford something, we didn’t buy it. So, if I eat out or stay in a hotel, I want the people who work there to be able to feed their families. I’m happy to tip—when it’s justified.”