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Tuesday, June 4, 2013

Should Tipping Be Illegal?

My college roommate used to complain that tipping was just a way for restaurant owners to pass off labor costs to diners. I'm not sure if that's true; if tipping was made illegal, then owners would eventually have to raise wages (and raise menu prices).

That said, tipping is discriminatory. Servers who work hardest don't often get the biggest tips. That's because the size of a tip is typically a percentage of the cost of a meal, which means that waiters and waitresses in coffee shops get smaller tips than do those in high-end restaurants although they almost certainly work as hard or harder.

It also turns out that white servers receive better tips than black servers, and this is true even after controlling sociodemographic factors such as income, education, gender, etc. Moreover, it doesn't matter who's doing the tipping. Both black and white customers tip white servers more than they tip black servers. Interestingly, this could mean that tipping is illegal because it's a condition of employment that has an adverse impact on a protected class. The Supreme Court has ruled that even neutral business practices that are not intended to discriminate but adversely impact a protected class are illegal.

All you ever wanted to know (and perhaps didn't want to know) about tipping is the subject of the latest Freakonomics podcast, "Should Tipping Be Banned?" In addition to it's discriminatory aspects, you'll learn that
  • The devout are not good tippers
  • Women servers get bigger tips from men and men servers get bigger tips from women (surprise, surprise)
  • Attractive waiters and waitresses get bigger tips than others with attractive 30-year old blond females taking the top prize
  • Waiters who touch customers receive bigger tips than those who don't
  • National tipping rates are positively correlated with corruption
  • Some countries tip little or not at all
  • Different ethnic groups tip at different rates
  • And more 
As always, you can download the latest podcast from iTunes or listen to it at the Freakonomics website. A transcript of the podcast is available at the website as well.

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