More places than ever are asking for tips because workers’ wages are rising

• More and more companies are asking customers to tip.
• It is driven in part by the proliferation of digital payment technologies that include claims to tip workers.
• But some companies may also resort to tipping to avoid paying their workers even more.

If you feel like you’re being asked to tip everywhere you go, you’re not alone. More companies are asking you to participate, and experts say it may be in part to help pay their employees.

In addition to wait staff in restaurants, customers are now required to tip food delivery, haulage drivers, fast food workers, mechanics, and even when using self-checkout machines in coffee shops, sports stadiums, and airports. This comes as many of these companies have raised wages in recent years in an effort to fill job openings.

“Many employers would rather tip a tip than pay employees proper wages,” Ben Zipperer, chief economist at the Economic Policy Institute, told Insider, adding that “the customer pays the full cost when workers have to rely on tips for a wage increase.”

In addition, Mason Jenkins, assistant professor of marketing at the University of Charlotte, cited the proliferation of touchscreen digital payment systems as a major driver of expanded tipping requests and said adoption could be contagious.

“The more managers see other retailers asking for tips, the more likely they are to incorporate them as well,” he told Insider. “This phenomenon works for consumers as well. The more consumers see the person ahead of them in the tipping line for counter service, the more we think it might be a norm and the harder it is to resist.”

Americans disagree about what to do with the rise of tipping. On the one hand, customers aren’t required to tip, and if tipping provided a way for workers—many of whom are underpaid—to get some extra cash, that could be a good thing. But with the leisure and hospitality business squeezed between inflation and rising workers’ wages, some argue that customers should not be responsible for helping them pay workers a living wage. Experts tell Insider that’s what a lot of companies have been asking for — and many customers aren’t happy with.

Labor cost increases, and tips help cover the cost

Companies relying on tips to help pay their workers is far from a new phenomenon — particularly in the restaurant industry. But in recent years, the shift to American culture has spread, according to Michael von Massow, associate professor of food economics at the University of Guelph in Ontario.

“Historically, tipping was reserved for restaurant employees, taxi drivers, and hairdressers,” he wrote in a guest post on The Conversation in January about the state of tipping in North America. “Now, other industries such as fast food, retail outlets and even mechanics are offering tipping options at terminals to encourage – or pressure – customers to tip,” he added.

One possible reason service companies are preparing to switch to tipping is that they are under particular pressure to keep labor costs in check.

In recent years, many service companies have struggled to attract workers and have had to increase salaries as a result. Rather than raise wages more to fill remaining job vacancies and keep existing employees satisfied, some companies may be tempted to embrace tipping as a free way to get extra pay for their workers, Lawrence Kotlikoff, an economics professor at Boston University, told Insider.

“Companies are under pressure and hope their customers will, in fact, be willing to pay more on a voluntary basis,” he said regarding the rise in tipping options.

Today, it’s still legal to pay tipped workers less than $2.13 an hour in the United States, which is well below the federal minimum wage of $7.25 an hour.

While companies that roll out the tip may be able to appease their employees for a while, Kotlikoff said he doesn’t think this will last.

“They are asking their workers to take risks, to earn more on average with more variety,” he said. “It might work a little bit, but when workers get tired of the bad days of tipping too much and customers get tired of so many companies asking them for bailouts, things get turned around.”

Jenkins of the University of Charlotte said dissatisfaction could grow even more if some workers find they are unable to get all the new advice they see.

“Companies should provide more transparency about where shopper tips end up,” he said. “Anecdotally, I’ve heard from consumers who were surprised to hear franchise workers at concerts and sporting events say that any tips they end up with go to management.”

Are you a business owner, service worker, or customer with a view on tipping culture? Contact this reporter at [email protected].