Tipping Sucks

July 17, 2008 by
Filed under: Business, Finance and Investment 

Hello Everyone,

First of all, I am alive and well. I have been away on vacation recently in the USA. I had naively hoped to return home to better economic news, but it turns out that the opposite is true. The price of oil has continued to climb, more American Banks have become insolvent and the repercussions are being felt worldwide.

Most people have found few things to be positive about, but I can think of one thing. The weak US dollar made my vacation far more affordable. I can’t say that I lived or travelled like a king, but I certainly ate like one. Even in the most touristy areas, such as Niagara Falls, I was able to get a satisfying meal for $10. In contrast, last weekend in Sydney, I paid that same amount for a mere tomato bruschetta in a cafe, located on Broadway.

Two things however did annoy me very much about the USA. These are the practices of quoting prices ex-tax and the need to pay an additional tip for table service at restaurants. Tax was usually around 10% and tips averaged to 15%, so the menu price would be inflated by 25% in most cases.

Here in Australia, these practices do not exist. You pay the advertised price and that is that.
I expressed my feelings of frustration to other travellers I ran into, who would often answer “When in Rome, do as the Romans”. I did, but I really didn’t like it. Here are my main reasons:

1. Tipping Encourages Misleading Advertising

To me, I am effectively dealing with a business that quotes a misleadingly cheap price to get my attention, who then ask for an additional fee to get fulfilment of the service. This stinks of corruption and is completely against the ideals of capitalism, which relies upon transparency.

It appears that the reason tipping took off in America was because it allowed an employer to hire staff at a ridiculously low wage, to avoid taxes.

2. Tipping Promotes Idleness Amongst Employees

When I go out, I want the same level of service from each waiter – someone who can understand and take an order, and then bring the food out promptly.

I found, more often than not, service was actually worse in the USA. Although most restaurants had multiple waiters, I usually had to wait for the specific waiter that was assigned to my table, in order to make it easy for them to distribute the tips. As a result, many waiters were standing around twiddling their thumbs, which is very inefficient.

3. No Objective Measure to Value the Quality of Service When Leaving a Tip

It is stated that tip is designed to pay and reward the waiter for their ‘good’ service. In practice, I paid close to 15% to everybody, as there is no objective yardstick to judge what ‘good’ service is.

A number of times, a waiter kept coming back to give long speeches offering me more dishes, or alternative variations. To them, they were providing good service. To me, they were hassling me to eat and purchase more than I had originally asked for, and this detracted from the experience.

I reckon that If the bean counters in the business can prove that a certain staff member is able to attract more business, this should be recognised with a raise following a salary review.

4. No Competition Between People Collecting Tips

When I go to a restaurant, would it be acceptable for me to ask for the waiter who will charge the lowest tip? Surely, this should be allowed in a capitalist system.

Also, let’s say I don’t like the waiters in a restaurant. Would I be allowed to bring my own personal waiter who will then be responsible for taking the food from the kitchen and cleaning up after me, and I will pay him myself? I don’t think so.

5. Tipping Promotes Discrimination Against Less Wealthy Customers

Apparently, tips were originally 10% and they have crept higher over the years, and are now between 15% and 20%. One explanation is that wealthier people have been paying progressively higher tips to obtain better service than others, and this would result in lesser well-off groups of people receiving inferior service. Is this acceptable?

References on Tipping

I found this excellent paper written by an economist who discusses the history of tipping in America and beautifully outlines the case against tipping in great detail:

http://taxprof.typepad.com/taxprof_blog/files/the_case_against_tipping.pdf

 What do you think?

Comments

4 Comments on Tipping Sucks

  1. tipd.com on Sun, 23rd Nov 2008 2:48 pm
  2. Tipping Sucks…

    Is Tipping Anti-Capitalist? An Australian traveller talks about his frustrations and criticisms of the practice of tipping at restaurants in the USA….

  3. Personal Finance Buzz on Sun, 23rd Nov 2008 2:57 pm
  4. Personal Finance Buzz…

    Your story was featured in Personal Finance Buzz! Please visit and promote your article….

  5. teleburst on Sat, 19th Dec 2009 6:40 pm
  6. Funny thing is there pardner – if you compare menu prices in Sydney and here in the States, you’ll find prices even higher without tipping, even if you take the tax and tipping here into account. Try it yourself. Go to the website of a restaurant chain that has locations here and the States. Say…Outback. Compare a menu from…say Nashville Tennessee and Sydney. Guess what you’re going to find? Well, I won’t tell you. I’ll let you find out for yourself.

    And, guess what, if you make the same comparison at Outback between…say Edmonton and nashville, you’ll find that you Canadians are paying about 27% more for a 12 oz ribeye if you include the 5% GST that might or might not be included in the menu price (the menu doesn’t make it clear so I’m going to give you the benefit of the doubt). Of course, here in Nashville, you have a 9.25% tax, so the difference drops to a mere 22.75% higher price than in Music City. Plus, from what I understand, 10 – 15% (as opposed to 15 – 20% in the States) is still a custom in Canada from all that I’ve read, so you’re still “on the hook” for that (obviously, it’s just as “optional” as here in the States, so we have to include both 10% and 15% as a comparison). So now you’re “only” paying an extra 15.75% more than here in the States once you take out the tax and tip issues. Guess why that is? Because Tennessee servers are paid $2.13 an hour while your servers are paid about $11 an hour. And yet, we both make about the same amount of moeny in general. so basically, you’re happy with paying an extra 15% just to eliminate tipping? Gee, that’s a principle that I really can’t get behind.

    Report back when you get the chance about the different prices if you want. And if you really want a shock, go to another “non-tipping society” (Japan) and find out that the 12 oz $21.79 (menu price including tax) ribeye at Outback in Nashville will “only” set you back $34 (including tax) *and* they’re going to tack on a 10% “service charge” on top of that.

    Just make sure you do all the requisite currency conversions before you do the comparisons. And take tax into account. On the Japanese menu, it’s not ex-tax and it’s 10% nservice charge.

    Hey wait – you mentioned that difference in price yourself:

    “I was able to get a satisfying meal for $10. In contrast, last weekend in Sydney, I paid that same amount for a mere tomato bruschetta in a cafe, located on Broadway”.

    Care to guess why? Yep, believe it or not, tipping is your friend. It keeps the total cost of your meal down.

    I won’t address the other subjective complaints about service. That’s impossible for me to challenge. But ask yourself this – if you got that same “substandard service”, would it be better if you had to pay a fixed amount and lost the option of tipping less if you had desired? My opinion? (and I’m biased as I’m a waiter, but I’m also a diner as well) Hell no.

  7. Melissa Roggeveen on Sat, 5th May 2012 3:52 am
  8. I agree! Tipping SUCKS! I often see a 'tip' section in restaurants in AUSTRALIA now and it makes me mad! Don't go there Aussies it's not as fun as it sounds. I go to the US every year and tipping is a major pain in the butt, everyone's got their hand out.

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