 Hi, I'm James. And I'm Anthony. And this is Words and Numbers. So Ant, this week, unlike every other week, we're going to go all the way back to 1922 and consult with Emily Post because why wouldn't we want to think about good manners? That's right. Why wouldn't we want to think about good manners here on Words and Numbers? And in 1922, Emily Post wrote that we should tip for good service and a tip should be in the neighborhood of 10% of the total bill. 10%? For good service, right? So it's an optional thing and if you choose to do it, it should clock in at about 10%. Well here we are, less than 100 years later and I dare say tipping has gotten full out of control, right? Everybody I come in contact with from the hotel maid to the people who give me coffee at the Starbucks to the people who make ice cream cones have little tip jars out and want to be tipped. It's well beyond just waiters and bartenders at this point. But what brings this to mind for me and I'm sure for you is that recently Uber has decided to allow for a tipping option. That's right. On their app, the tip thing option shows up now. One of the beauties of Uber and there are many beauties of Uber so I don't want to make it seem like this was it. But one of the beautiful things about Uber was the price was the price. It's listed clearly on the app. You'll pay what it says and you'll get where you're going. Yeah and when you get there, you don't have to fumble around with cash and all that nonsense. You just get out and walk away. That's right. It's done and you walk away from your ride and everybody's perfectly happy. But no more. And this has had some very strange immediate unintended consequences as these sorts of things often do. And I know you've been in a couple of Ubers in the past week or so where driver behavior has gotten unpredictable or maybe it was very predictable. Well it was the oddest thing. You know actually in the past I thought it would be nice if the app had a tipping function because I've had a couple of drivers who were just stellar. And I wanted, you know, I never carry cash, right, so that becomes a problem. But you know I wanted to tip them and now the app has this. But the thing that I found disconcerting is a couple of drivers actually had signs posted in the car saying, you know, we accept tips and one guy said not just I accept tips but specifically how about tipping in cash as opposed to anything else, right? So now we're right back to the taxi model where we've got to fumble with the cash and all that nonsense. But more than that, what annoys me is when the tip becomes expected because that's no longer a tip for good service, that's wages, right? Right. This has, I mean, and I think what we're going to end up calling this is something like Gratuity Creep, right, because not only have more and more people kind of put their hands out and made it clear that they expect to be tipped for whatever service they happen to be offering, but the tips have gotten quite out of hand as well to the point now where we're so far beyond Emily Post's 10% that in New York City at present the currently expected tip for average service is 25% to 30%. So we're looking at, I mean, we're really looking at a value added tax on top of almost everything. Well, it is, and I think there's somewhat of a misconception. I've heard people say, not many, but I've heard people say things along the lines of, well, you know, with inflation, you need to tip more. And that's just a complete misunderstanding of the laws of mathematics, right? If you're tipping a percentage, as inflation pushes the price of the thing up, necessarily you're automatically paying more, right? So tipping a higher percentage is not an adjustment for inflation. This is over and above, but it raises the question, you know, what is the appropriate number? So I'm doing a little bit of math, and imagine a... Imagine that. You're doing math. Right, but imagine a person who's waiting tables, right? And let's assume for simplicity that, you know, the average table, the bill is 30 bucks. And let's suppose that the average, you know, waiter or waitress can handle five tables simultaneously, and those, all the people stay on average for an hour. If each of those tables tips 15%, not 20, 15, the waiter or waitress ends up making 22.50 an hour just on tips. Add in the wages and you're now at $25 an hour. So a 15% tip seems to translate into approximately $25 an hour, which leads me to believe now that's, you know, quite a nice wage granted, but we're talking about something that's, you know, something that's lesser skilled labor, right? No offense to waiters and waitresses. $25 an hour, that's the median hourly wage for workers when you include things like, you know, steel workers and, you know, other people who have skilled in jobs that require higher levels of education. Well, actually, if you think it through, it's, you know, based on a two thousand eighty hour work week, that's almost the median household income in the United States, because it's going to be, well, it's going to be over $50,000 a year, and we're not even getting into how much of that is taxed. Right. Well, now that's interesting because I did run across a study that indicated that 40%, the estimate is 40% of tips are not reported, right? So immediately you've got, you know, all the tax benefits to the person of doing that, but it makes me wonder, is it the case that the push for a 20 or a 30% tip is to compensate for large numbers of people who are tipping very little, you know, like 0 to 5%, because if that's the case, if you got a bunch of people tipping nothing and a bunch of people tipping 30%, on average, you're back at that 15% number I mentioned. Right. And, you know, I have to admit, I'm a chronic overtipper, as is almost everyone who ever spent even a minute waiting tables, right? Because it's a miserable job and most people wouldn't want it, nor could they do it. So I don't want to diminish how demoralizing this line of work can be and that these people should, in fact, be pretty well compensated for doing it. The larger question here is a different one entirely. It's what's appropriate and why does our understanding of what's appropriate change so radically over time? Because really, to go from a 10% suggestion to a 30% expectation over 80 or so years is a radical transformation of an industry. Yeah, that's right. And I think it's important to underline something here. I'm not suggesting that waiters and waitresses should be paid less. This isn't about how much they're paid. It's about how much is paid via tips versus how much is paid via regular hourly wage. And what I find annoying is that the bulk of that is ending up on the customer basically as a hidden cost. You come in, you think that you're going to be charged X dollars for something and it ends up being 1.5 times X when you're done with the taxes and tips and all of that. Well, it's not really hidden, though. I mean, if you don't know that tipping is involved by the time you sit down at the restaurant, you might be an idiot. Tipping is just part of the expectation. But this comes to your point of the expectation. If it's expected, almost required, that you're going to pay 20%, then let's just put it into the wage rate and be done with it. Why leave it up to me at all? Yeah, and that raises the very fascinating question of why did we end up at this perspective at all? Why wasn't that how we went? Why didn't we go that way? Because we easily could have. With anything that involves tipping, it could have been wrapped up into salary. And yet we seem to have chosen not to do it that way. Any idea why? Well, there are some good economic behavioral arguments for why tipping is actually a good idea. But they all relate to situations in which the manager or the business owner cannot directly observe the quality of service the person is providing. So if I can't observe directly the quality of service that my wait staff is providing, it's better that they get most of their income through tips, let the customer make the judgment of how well they're doing. So that explains the wait staff. What it doesn't explain is things like hotel mates, right? The housekeeping service, the management can just walk in and directly observe whether they've done this job well or not. The guy behind the counter at Starbucks, similarly, right? So lots of those things, I don't understand why there's a push for tipping there at all. Right. And I think that speaks to the cultural expectation of tipping more than it does the economic reasons why we might do it, right? Right. So how is it that we became culturally expected to tip for service everywhere? And that's kind of astonishing. I mean, the people that I encounter on a relatively frequent basis who fully expect to be tipped that I would probably never consider tipping a person for, it's gotten out of hand. And you compare what goes on in the United States, for example, to Europe. In Europe, the tipping culture is extremely different than it is here. Again, not saying anything about the total amount that's paid to the worker. But in Europe, of everything that's paid to the worker, most of it is wage and far little compared to what happens in the United States comes from tipping. Right. And I've always wondered how two places that share a relatively similar background and very similar mores developed such radically different traditions over time in this respect, right? Because look, let's face it, going to a restaurant in, say, England, Ireland, Scotland, not that different from going to one in the United States, right? Things happen in roughly the same order. The food is more or less edible in Scotland, England and Ireland, more or less. And I think better in the United States, but we're not tipping the cook. I guess that'll be the interesting part, right? When do we tip the chef? Well, yeah, yeah, I don't understand how that works. But one interesting thing that comes up when you compare US to Europe, you would think given the much higher tax rates in Europe, that the tendency would be to tip there far more than the United States under the assumption that the governing bodies can't observe how much you're collecting and therefore can't tax it. Right. Of course, the restaurant patrons don't have the same level of disposable income to throw around that way either for exactly the same reason. So this is just kind of a curiosity when it comes right down to it. We've got undeniable gratuity creep over time. It's clearly happening. It happens in no small part, on the one hand, because people don't know how percentages work. And on the other hand, because culturally, it's just become expected. And it seems to be ready to spiral out of control, right? When you get much past 30%, really, what's the point in purchasing much of it? Right. So, you know, I'll throw it to you for the last word, but where do you think this is all going? Well, that's interesting. I could imagine it going one of two ways. One is that the tipping gets so out of control, both in magnitude and in scope of jobs that are considered tip worthy that customers just start to rebel and say, look, I'm just not doing this. You get a little bit of this flavor with Uber. One of Uber's selling points was there's no tipping. What the price, we tell you, is the price, and that's it. So that's one possible route we might go. The other possible route we might go is that the thing just keeps on spreading. So you get to a point where basically workers are not employees, but subcontractors. So I have a restaurant. James, you can come work at my restaurant. I'm not going to pay you anything. You can live off of whatever tips you can manage to pull in. And if you can't pull in any tips, well, then you go away, right? So I don't know which of those two extremes we're going to attend to, but I think we're going to tend to one or the other. Well, the latter gives us a minimum wage by other means, doesn't it? That's an interesting thing. Right. Well, the minimum wage then becomes zero, right? Yes, that's right. We finally get the minimum wage we've always deserved, zero. Right. And on that happy note, that's all we've got time for this week. So join us next Wednesday around noon Eastern time for another episode of Words and Numbers. Until then, check out all the great content at fee.org and at fee online on social media. And see you next week. I guess I'd like to leave you a tip, but you don't have a tip jar out. That's right. No tip jars here. See you next week, James.