"Tipping Fatigue" Increasing, Companies May Have To Increase Wages To Attract Employees

The US is one of the few countries to have many tip-based services. When you go to a restaurant in Australia, people don't tip. Instead, the workers make enough money to survive without tips. Meanwhile, in the US, there are many workers who rely on tips as their sole source of income. Servers, hairdressers, and baristas have an income from mostly tips. But with tipping fatigue becoming prevalent, that's changing.

What is Tipping Fatigue?

Years ago, tipping was common. People would go into a restaurant and tip their server with no qualms. But now, people are hesitating to tip. One study showed that tipping increases with age. Individuals who are between the ages of 18 and 26 tip at a rate of 35%, while Baby Boomers tip 83% of the time.

It's not just the young crowd that's tired of tipping. According to the same survey, 66% of US adults perceive tipping culture as negative. People are tipping less now than they did in 2019, and it seems that this tipping fatigue might continue. Nevertheless, individuals feel more pressure to tip than ever. Tipping culture has migrated into other industries, and more people are complaining about that.

There's one obvious solution to the tipping problem. If employers paid more money to their workers, there wouldn't be as much pressure to tip. Many Gen Zers believe that it's up to an employer to pay fair living wages. As of now, they feel as if they're writing the employee's paycheck for the company.

Minimum Wage Struggles

Part of what's leading to tipping fatigue is the generally low federal minimum wage. For decades, the minimum wage remained the same even when inflation occurred. Although the amount varies by state, the average salary of a food service worker in the US in 2023 was only $29,250.

The base salary for employees who receive tips is even lower. As of 2023, the minimum wage for employees who receive more than $30 in tips is $2.13 hourly. It's impossible for someone to live a decent quality of life on that wage alone. While some states have passed legislation to increase that number, there are still areas of the country that pay less than $3 hourly to tipped employees.

One of the issues with tipping is that it's not consistent. Depending on the shift time, you could make nothing in tips or hundreds of dollars in tips. Now that tipping fatigue is happening, people are able to rely less on tips.

Switching Careers

To deal with the fewer tips, some people are changing industries. This has resulted in a shortage of workers in food service industries at a time when there are already job vacancies.

How Companies Are Handling It

Companies are seeing the impact of tipping fatigue. When employees can't make enough money in tips to pay the bills, they quit. This has caused some businesses to close their doors, adjust their hours, and overload their existing employees.

For now, some companies are taking matters into their own hands. It's becoming more common for companies to have no-tip policies and to instead charge a service fee on every bill. Then, the companies use this charge to pay out their employees. One LA restaurant started doing a 20% charge on all their takeout orders. Because takeout tips tend to be far and few between, employees weren't making enough money. The charge went to a tip pool, which included front and back-of-house employees.

Unfortunately, people didn't respond well to the charge. They complained about it because they weren't receiving the same level of service as they did in the restaurant. However, processing the takeout order took time and money. And for some restaurants like the one in LA, takeout orders take a great deal of time and planning.

Should Businesses Pay Employees More?

This is like the chicken and the egg conundrum. People say that business owners should pay their employees more money, but business owners say there are bigger issues. In large cities, the cost of housing is high. What should be a fair wage isn't enough for employees to survive.

It's impossible to say who should be footing the bill for employees. However, one thing is certain. Customers don't want to pay the bill anymore. With inflation being so high, people are struggling to buy necessities. This makes tipping even more unappealing to them.

Is Tipping Culture Over?

There are some companies that now offer higher wages to offset the lack of tipping. But it's not a widespread practice and is impossible in many cases. For some businesses, raising wages would mean going out of business.

For now, it's still up to the consumer to give employees a living wage. If a barista only makes $8 an hour, they need tips to be able to pay for their own food and housing. Tipping culture can't disappear until there are serious issues addressed. This means cities need to have more affordable housing, people must address racial and gender inequalities, and more.

If you're an employee, there are a few options. You could look into taking a job at a business that doesn't take tips. Customer service and sales positions are only two examples of jobs that tend to have more fair hourly wages, but there are plenty of other examples.

Another option is to work for a company that pays a higher base salary. Currently, some companies in tipping industries are offering higher salaries. You could look for similar work with a better employer, and then you'd rely less on tips.

Finally, you could speak with your current employer. There's no guarantee that they'll raise your salary, but it's worth a try. You can always come up with reasons why you deserve a pay increase and set up a meeting with your manager. If you make a strong case and there's money in the budget, your employer might pay you better.