Tipping Is a Business Risk Shell Game Supported by Service Industry Propaganda
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Tipping is a Business Risk Shell Game Supported by Service Industry Propaganda James Keating Tipping is a Business Risk Shell Game Supported by Service Industry Propaganda [email protected] Abstract Just as Westerners accept fluoride, a form of toxic waste with unreliable evidence of health benefits, in their tap water, they will also accept service industry propaganda that tipping is a tradition that rewards good performance. Tipping has neither been proven an incentive for service industry workers nor a benefit to society. Early Americans opposed tipping when it was introduced over one hundred years ago. China has a flourishing service industry without gratuity. Are tips just charity for low income employees or another form of indulgence long abandoned by the Catholic Church? This analysis, through literature review, attempts to uncover the economic mechanism behind tipping. It is an analysis that avoids the trivial questions of how much to tip and how to tip. Not only is there sufficient evidence to conclude that there is no need to tip at all but evidence shows it is oppressive and shifts business risk in the service industry to those who can least afford it. 1 Tipping is a Business Risk Shell Game Supported by Service Industry Propaganda Western society has become accustomed to leaving gratuity for almost every kind of service. From the restaurant server to the taxi driver, every service employee seems to deserve additional compensation above and beyond their stated fee. Hairdressers, couriers, and even coffee shop attendants with the conspicuous tip jar in front of the cash register all seem to deserve more rewards for the service they render. There is no law in the U.S. that requires a patron to pay gratuity. There is no obligation to leave tips in a restaurant, taxi, coffee shop, or barber shop. It is a psychological compulsion, whether it be guilt or an expression of satisfaction, that drives the Westerner to leave a tip after receiving a service. In France, the customer is forced to leave gratuities in restaurants as the service charge is automatically included in the bill. (Friedman, 2002) Even worse, the tip is taxed at the VAT rate. U.S. Consumers should not become overconfident. In 2009, two college students in Bethlehem Pennsylvania refused to leave gratuity because of the bad service they received in a restaurant. The restaurant claimed that the gratuity was part of the bill and called the police. Even with the restaurant admitting poor service, both patrons were arrested and charged with theft. Six days later the charges were dropped but the case had already generated national attention and the couple later appeared on CNN. (Chang, 2009; Johnson, 2009) What is the tipping culture? Is the tipping system the apex of industrialized society and its incentive based compensation structure which motivates employees? Is it similar to sales commission? Would the service industry collapse if everyone quit leaving tips? What if there is a more logical although less altruistic explanation? Just as industry's toxic fluoride(Prystupa, 2011) is sold to local governments in the U.S. to put into tap water because it is allegedly good for teeth but really good for industry profits, tipping allegedly supports low wage employees and rewards them for service. In both cases the evidence contradicts these popular but sinister myths. The tipping culture is not a system designed to incentivize service workers and improve service quality but rather a system to oppress these workers by shifting the cost of labor to the consumer and business risk to the service employees. Tipping is a mechanism by which the service industry can justify low wages, externalize poor decision making, while lowering quality standards. It is not an equitable reward system unless the customer defines it as charity in which case gratuity provides the customer with psychological benefits. As a strictly financial or economic function it is a form of extortion using an indirect threat of bad service when the customer is already obligated to pay the advertised price. Lynn and Grassman (1990) concluded that customers tip to make a good impression on others, comply with social norms and expectations, and to maintain relationships with servers. Maintaining a relationship with the server is especially important for frequent customers. Patronage frequency impacted tip size, controlling for bill size and service in Lynn & Grassman's(1990) study. However, another study of 700 bill paying customers in 7 restaurants found that patronage frequency does not seem to impact gratuities, “either directly or through its interaction with service and bill size. “ (Bodvarsson, 1994) 2 Tipping is a Business Risk Shell Game Supported by Service Industry Propaganda Few ever question the rationale behind the gratuity mechanism in Western society. It is considered to be a traditional aspect of culture that must be religiously adhered to. It is a social custom, a rule of behavior, and a code of honor. Those not observing this unwritten rule are looked upon with contempt by service workers. Society imparts a feeling of guilt and shame upon those who do not comply. Just as the Catholic church once bestowed indulgences or remission of sins for those who would pay money to the church, society removes a persons guilt for being served by low wage employees if they leave a tip. Some leave tips because they sympathize with the service workers and feel obligated to supplement these workers salaries with gratuity. Some consider tipping to be reinforcement that ensures better service quality. Consumers' propensity to leave gratuity and the impact of tipping on service quality remain as implications for future research. Recent studies indicate that the earlier the tipping the greater the service effort (An-Tien & Der- Huang, 2007) but there is reasonable doubt as to the incentive value of tipping in restaurants. Servers are unlikely to perceive the relationship between service rendered and tips received. (Lynn & Graves, 1996) The relationship between service evaluation and tip size is too weak for tip data to be used as a performance indicator for service employees. (Lynn, 2000) Customers do not leave larger tips for better service as tipping is a function of habit more than performance evaluation. (Lynn & Sturmann, 2010) The psychological motivation for leaving gratuity is beyond the scope of this article and is a subject that deserves more investigation in research literature. Beyond the psychology of tipping is the financial and economic dimension which ultimately determines the trajectory of any business practice. After all, if tipping is a humanitarian function in society then it should be redefined as charity rather than a form of payment for service. If it is a business function then it is only logical to analyze financial and economic aspects which could potentially result in better organizational effectiveness and ultimately a higher return on investment for the service industry. Tipping results in higher return on investment but it is at the expense of customers and employees. Customers are made to feel obligated to leave a tip even though they may not be legally required to do it. Service workers are conditioned to look to the customers for their compensation rather than the industry management who pays them poverty level wages if the industry is unable to attract sufficient customers to supply a constant stream of gratuities. Many service employees receive low wages and depend on gratuity for the bulk of their income so there is always a chorus of service industry workers promoting tipping and attempting to justify a high rate of gratuity as a percentage of the service fee. Some will claim that tips should be 20% of the total bill. On the opposite side of the table, diners may claim that it should be no more than 10% of the bill. Whatever the case, there is no justification for leaving any amount for a tip. The price on the menu is the listed price and any pressure or perceived expectation of more money is false advertising on the part of the restaurant. Custom and tradition cannot be considered in a multi ethnic society or global economic context. 3 Tipping is a Business Risk Shell Game Supported by Service Industry Propaganda Tipping is a “feudal practice”(Gill, 2011), a “repugnant custom” (Palmer, 2013), should be illegal(Dunn, 2013; Porter, 2013), or banned.(Peterson, 2013) In some industries service workers are fired for accepting gratuities. Servers in restaurants, porters, hairdressers, caddies, etc. are strangely exempt from laws and social norms that affect others. The plaintiff in Jusuf v. Southwest Airlines , an airline attendant, was fired for accepting a tip from a customer. (Fair Employment Practices Guidelines, 2009) When politicians receive a tip it is called a campaign contribution, doctors receive kickbacks, executives receive perks, and strippers receive tips. When a flight attendant receives gratuity it is grounds for dismissal. The distinction between gifts, tips, and bribes is confounding. The U.S. Department of Defense Joint Ethics Regulation which governs permissible gifts for government employees defines a gift as “any gratuity, favor, discount, entertainment, hospitality, loan, forbearance, or other item having monetary value.”(Fontanna & Hickey, 2005) A bribe is defined by the Mirriam Webster Dictionary as “something that serves to induce or influence.”(2013) Tipping is a recent phenomenon in the Americas in contrast to Europe where it has been practiced for centuries. Tipping in the U.S. also faced considerable opposition when it was first introduced. After the Civil War, wealthy Americans began traveling to Europe in significant numbers, and they brought the tip home with them to demonstrate their worldliness. But the United States, unlike Europe, had no aristocratic tradition, and as tipping spread — like “evil insects and weeds,” The New York Times claimed in 1897 — many thought it was antithetical to American democratic ideals.