It’s Just a Tip: How Gratuity Culture is Changing

Andrea Gonzalez
Sports, Business and Culture Editor

Before the widespread use of the Square checkout system, tipping, like a bad test grade, was a private matter. Leaving a tip was a hidden principle of transactional interactions, like being served at a restaurant. Studies showed that more attractive female servers earned bigger tips than their male counterparts, says Business Insider. Now, cut-price pharmacies in Australia are being slammed on social media for asking their customers to show their support with a 15 percent tipping option, reports Yahoo Finance.

Should customers tip the cashier at a salad bar for ringing an order or the Starbucks worker at the drive-thru window? People used to scribble a gratuity amount under the dim light of a restaurant, but now they do it while others wait in line with a glowing screen displaying bright blue options. As the guilt trip begins, the polite thing to do is press a tip amount, and everyone else looks away. However, consumers face tip options at almost every establishment they visit, and some are expressing discomfort at the expectation of a tip for someone who is merely doing their job.

Tipped employees are legally defined as individuals who receive more than $30 a month in gratuity cash wages, according to the U.S. Department of Labor. Tips are a tool to ensure promptness of service. The custom comes from Europe, where coachmen would toss coins to ensure the safety of passage on the road. After the abolition of slavery in the United States, tips were used as compensation for workers in trains and dining. Workers had to share the earnings with their bosses, as it was considered a privilege to have a job that could be given to a white person, says CNBC. In recent years, the practice has spun out of control, as establishments where it is not customary to tip have begun to ask their customers to leave an amount already predetermined in the payment processing device. Forbes reported that in 2023, Americans tipped 16 percent on average, but a sense of resentment is beginning to cultivate among different age groups.

As the pandemic swept the world, small businesses and gig workers faced total disruption. The service industry, especially dining and group experiences, saw staggering revenue declines, kickstarting a wave of additional fees and gratuity options available on food delivery and even travel apps. Surcharges are automatically added to the bill, and customers must choose to them. During the pandemic, tips became a lifeline for thousands of small businesses that wished to keep their workers afloat while making ends meet. Thus, enter Square and Clover, the two biggest success stories in the payment processing business.

Square and Clover are the payment management services business by Block (SQ), and Fiserv (FI), publicly traded financial services companies that are both rapidly growing,  reports CNBC. Their devices exist in thousands of small and chain businesses for payment processing, providing smaller processing fees and analytics. During the pandemic, the software was essential to keeping small businesses afloat and reducing contact by allowing people to pay for orders on the platforms. Today, the tablets provide clearer gratuity options than past models. These devices allow merchants to customize the tipping amount presented to customers, causing anxiety among customers at the register and prompting experts to examine how tips might continue to increase.

As these companies expand, tips become more aggravating to customers, and workers who live off tips can find themselves on the losing end. Inflation rose 3.4 percent in 2023, and millions of Americans saw the price of necessities rise rapidly. Tips and surcharges at every turn left many feeling sour. Last year, full-service restaurants saw tips fall to 19.4 percent, the lowest average since the start of the pandemic, reports CNBC. People who religiously left extra dollars for a delightful experience are reconsidering their options. The effect hurts some of the most vulnerable workers in the economy, such as the typical waiter at local restaurants.

While customers internally debate their tips, a fight is happening between activists, corporations, and workers. Organizations like Worker Center Library believe that abolishing the subminimum wage would help restaurant workers improve customer service and live better lives. However, Andy Puzder, CEO of Carl’s Jr, told the Wall Street Journal that increasing wages would reduce employment opportunities for people who need them most. At the same time, other tipped workers believe that a minimum wage at a restaurant would take away the generous tips that help them earn between $200 to $250 daily as bartenders and servers, according to NBC News.

To tip or not to tip? The one quasi-discretionary area where customers and employees could partner has been stained by the increased presence of third parties.. Nevertheless, customers must remember that even when the tablet wasn’t there, employees at the local coffee shop always hoped that we would put a tip in the jar.

Image courtesy of Getty Images