The Economist January 15th 2022 49
InternationalMicroeconomicsThe point of tipping
D
avid frankstarted working for tips
when he was 11 years old, delighting
restaurant diners in New York with his
magic tricks. As a teenager he would make
an average of $6070 in an evening—not
bad, but he wanted more. So he started
reading research on tipping, and found a
study showing that servers who left a sweet
at the end of the meal could up their pay.
He tried handing punters a playing card at
the end of his act, hoping that the memen
to would persuade them to part with more
cash. It worked.
Mr Frank’s findings confirmed the no
tion of the tip as a sort of reward for out
standing service. That may sound straight
forward, but a followup study with Mi
chael Lynn of Cornell University, where Mr
Frank now happens to be a student, found
an opportunity for some sleight of hand.
They discovered that performing a magic
trick at a table also increased the tips for
the waiters and waitresses serving there,
even though they had done absolutely
nothing more than usual. Though tipping
may seem like a simple economic trans
action, by incentivising people to performextra well, it turns out to be anything but.
For a start, economists are puzzled by
the fact that so many people give tips, vo
luntarily handing out cash for a routine
service, when it is assumed that customers
generally want to pay as little as possible
for what they buy. But fuzzier factors also
seem to matter, like the feelings of grati
tude that Mr Frank inspired. A survey in
2010 by Ofer Azar of Israel’s BenGurion
University of the Negev found that 85% of
American tippers claimed to be following a
social norm, while 60% said they tipped to
avoid guilt (see chart on next page).
During the pandemic these fuzzy fac
tors appear to have intensified. Mr Lynn
observed that people have been tipping
more generously even while ordering take
away food, while Sarah Conlisk of the Fed
eral Reserve Board has found that people
travelling in richer areas have been tipping
their taxi drivers more than before. This, it
is reckoned, was in effect doling out dan
ger money, as tipping rates rose along with
covid19 hospitalisation rates; in Trump
voting areas they rose less fast, as percep
tions of risk may have been lower.The presence of a pandemic or of a ma
gician performing at one’s table are just
two of an array of factors that may affect
the size of a tip. A tipper may simply be
touched by the server. If a waiter squats
down beside you at the table as he or she
takes your order, that often elicits a higher
tip. Good weather may spur generosity too.
Race can be an uglier factor. A study of tips
for cab drivers found that black drivers
were tipped on average at a rate of 13%,
while white drivers got 20%. Another stu
dyfound that female Uber drivers were
tipped 1012% more than male ones, but
not if they were over 65.
Tipping habits vary vastly across the
world. In America, where tips added to res
taurant meals are around 20% of the tab,
some suspect that a history of racial in
equality has bolstered the practice. In 1902
John Speed, a journalist, wrote: “Negroes
take tips, of course; one expects that of
them—it is a token of their inferiority. But
to give money to a white man was embar
rassing to me.”
In many European countries a service
charge is included in the bill and custom
ers are not expected to pay much extra but
they often round the figure up, leaving a
few coins or a modest note on the table,
amounting to an extra percentage or two.
In some Asian countries, tipping is posi
tively frowned upon. In Japan, for in
stance, it is viewed as an insulting insinua
tion that the recipient is akin to a beggar
desperate for a handout. A similar attitude
prevails in South Korea. In Hong Kong resDoes it make for better service? The evidence is mixed—and attitudes vary
widely across the world