Why Tip?

By PAUL WACHTER

http://www.nytimes.com/2008/10/12/magazine/12tipping-t.html?pagewanted=1&_r=1
Published: October 9, 2008

ONE DAY IN November 2006, Jay Porter, the owner of a small restaurant in San Diego called the Linkery, scheduled a staff meeting. Less than two years old, the casual farm-to-table restaurant in the rapidly gentrifying neighborhood of North Park had already won praise from national magazines. Nonetheless, Porter was troubled. The staff was squabbling, mainly over money: waiters were angling for better shifts and tables, and the kitchen workers didn’t feel they were getting a fair share of the profits. The bickering was typical of the restaurant business, but Porter, who is 38, had no previous industry experience. He had been a computer consultant, one who made good money but derived few other satisfactions from his job.

When he opened the Linkery, Porter said, he hoped his employees would become as emotionally invested in the venture as he was, sharing a sense of purpose and joy in their work. Now that vision seemed hopelessly naïve. “Here I was, winging it as an owner, running into these frustrations, which all boiled down to money,” Porter told me this summer. “I felt there had to be a better way.” After much thought, Porter arrived at a possible solution, which he presented to his staff on that November afternoon. “How do you feel about eliminating tipping?” he asked them.

Porter’s question strikes at the very heart of the American dining experience. Each year, according to the economist Ofer Azar, diners hand over some $42 billion in tips at the nation’s full-service restaurants, which employ 2.6 million waiters, most of whom rely on tips for the bulk of their incomes. While anxieties surrounding tipping abound — Is 15 percent enough? 20? And who is this “captain” on the bill? — studies show that Americans overwhelmingly prefer this discretionary system to a set service charge, which is common in Europe and many other parts of the world. Indeed, at the few restaurants in this country that have adopted a fixed gratuity, diners often leave additional tips.

Tipping, its defenders say, improves service by rewarding good waiters and punishing bad ones. But that’s not what Porter saw when he looked out on his dining floor. In his brief experience, working for tips encouraged selfishness rather than teamwork. Moreover, good service was not always rewarded with a big tip, nor bad service with a poor one. “No other profession works like this,” Porter told me, “and I don’t see why the restaurant business should either.” At his restaurant, Porter and his staff agreed, it no longer would. The Linkery would be more than just a restaurant; it would become perhaps the nation’s only anti-tipping laboratory.

THERE WAS A time, not so long ago in this country, when the Linkery’s no-tipping policy would not have stood out. Tipping was imported from Europe, and when it arrived in America, it met with impassioned and organized opposition. While the precise origin of tipping is uncertain, it is commonly traced to Tudor England, according to “Tipping,” Kerry Segrave’s history of the custom. By the 17th century, it was expected that overnight guests to private homes would provide sums of money, known as vails, to the host’s servants. Soon after, customers began tipping in London coffeehouses and other commercial establishments. One frequented by Samuel Johnson had a bowl printed with the words “To Insure Promptitude,” and some speculate that “tip” is an acronym for this phrase.

Tipping began as an aristocratic practice, a sprinkle of change for social inferiors, and it quickly spread among the upper classes of Europe. Yet even at its outset, tipping engendered feelings of anxiety and resentment. In the mid-1800s, after leaving the Bell Inn of Gloucester, the Scottish writer Thomas Carlyle complained: “The dirty scrub of a waiter grumbled about his allowance, which I reckoned liberal. I added sixpence to it, and [he] produced a bow which I was near rewarding with a kick.”

After the Civil War, wealthy Americans began traveling to Europe in significant numbers, and they brought the tip home with them to demonstrate their worldliness. But the United States, unlike Europe, had no aristocratic tradition, and as tipping spread — like “evil insects and weeds,” The New York Times claimed in 1897 — many thought it was antithetical to American democratic ideals. “Tipping, and the aristocratic idea it exemplifies, is what we left Europe to escape,” William Scott wrote in his 1916 anti-tipping screed, “The Itching Palm.” One periodical of the same era deplored tipping for creating a class of workers who relied on “fawning for favors.”

Opposition to tipping was not limited to the media. In 1904, the Anti-Tipping Society of America sprang up in Georgia, and its 100,000 members signed pledges not to tip anyone for a year. Leagues of traveling salesmen opposed the tip, as did most labor unions. In 1909, Washington became the first of six states to pass an anti-tipping law. But tipping persisted. The new laws rarely were enforced, and when they were, they did not hold up in court. By 1926, every anti-tipping law had been repealed.

Ultimately, even those who in principle opposed the practice found themselves unable to stiff their servers. Samuel Gompers, who was president of the American Federation of Labor and a leading figure of the anti-tipping movement, admitted that he “followed the usual custom of giving tips.”

Meanwhile, Europe was rethinking its devotion to the custom. The 1943 Catering Wages Act in Britain established a minimum wage for service employees that helped decrease their reliance on tips. And in 1955, France passed a law requiring its restaurants to add a service charge (“service compris”) to each bill, a practice that has become the norm for most of the continent. By then, the anti-tipping movement had all but vanished in the United States. Its last great champion, the social scientist Leo Crespi, died in July of this year. Sixty years earlier, Crespi published a scholarly study of tipping and called for the formation of a National Anti-Tipping League of diners. But the call went unanswered — even by Crespi, who never dined out.

WORD OF THE Linkery’s anti-tipping policy quickly spread through the local restaurant community. Ken Cassinelli, who owns a nearby Italian restaurant, was appalled. It had taken him 30 years of waiting on tables to set aside enough money to open Apertivo. Tips built his restaurant. “The Linkery is a big sham,” he told me. “All Porter is doing is taking money away from his waiters.”

Notwithstanding the vitriol, Cassinelli may have a point.

Typically, waiters receive an hourly wage — as little as $2.13 in some states, though California law mandates at least $8 — plus tips, some of which they may pass on, or “tip out,” to their support staff. The laws of California and several other states prohibit redirecting tips to restaurant workers who traditionally don’t receive them — owners, managers and members of the kitchen staff. (Earlier this year, a California judge ordered Starbucks to pay its baristas $105 million for tips the company diverted to supervisors.) But a service charge is free of such constraints. It’s also fully taxed, while waiters, on average, fail to report what the I.R.S. says is at least 40 percent of their tips.

Porter considered raising the prices of each item on the menu and simply increasing the wages of his employees. But that would have penalized the restaurant’s many takeout diners. Also, he figured many potential diners would look at the prices and — not factoring in what they spend on tips — compare them unfavorably with those of his competitors. So Porter instead proposed a service fee of 18 percent, to be pooled and split roughly 3 to 1 between the restaurant’s front of the house and its kitchen. In his pitch to his staff, he employed the same arguments Alice Waters had nearly two decades before. The owner of arguably the nation’s most celebrated restaurant — Chez Panisse in Berkeley — Waters wrote her board: “At our restaurant the quality of the food and the skill and taste of the cooks are at least as central to our success as the quality of the service. Unfortunately, traditional tipping has created great disparities in earning between the serving staff and the cooking and support staff.” By introducing a service charge — currently 17 percent — Waters was able to increase income to the kitchen.

A few other high-end restaurants have followed Waters’s example, including Charlie Trotter’s in Chicago, the French Laundry in Napa Valley and Per Se in Manhattan (the latter two are owned by Thomas Keller). None of these restaurants, however, including Waters’s, forbid additional tips. “Some people still tip, and the waiters get to keep that money,” said Mike Kossa-Rienzi, general manager of Chez Panisse.

But Porter, like the anti-tippers of yore, was persuaded tipping itself was pernicious. “If you have a fixed gratuity, but people are still tipping, then you’re back to Square 1 in terms of the money dynamic,” he says.

If he could, he would have raised everyone’s wages, but there wasn’t enough revenue. The restaurant was already paying 65 percent of its employees’ health-insurance premiums, and Porter was working on a scheme to give long-term employees ownership stakes in the business. Still, he worried that his staff might not be receptive to his proposal. Michael McGuan, Porter’s general manager, expected at least half of the restaurant’s eight servers to quit. But only one did, and Porter has had little trouble hiring additional waiters. Cassinelli says that’s because most of them, like their boss, have little restaurant experience. While that’s true of a few of Porter’s hires, most of the Linkery’s servers have waited on tables for years. They have simply drawn different lessons from their experiences.

Cassinelli prided himself on earning big tips. “I could always upsell my tables’ liquor and desserts,” he said, using the industry term for swaying diners to order more than they normally would, driving up the bill and hence the tip. There are other tricks at waiters’ disposal. Studies demonstrate that waiters can increase their tips by introducing themselves by name, squatting alongside tables, touching diners and drawing smiley faces on the backs of checks. While Cassinelli isn’t necessarily an advocate of such ploys, he says that waiters only excel at their jobs when they have the proper economic incentives.

But Chelsea Boyd told me that eliminating tipping had made her work as a waiter at the Linkery more meaningful than any other restaurant job she has had in the previous 10 years. “For the first time, I get to concentrate on the job, and I’m looking at the guests without seeing dollar signs or worried about what anyone else is making,” she says. Under the old system, waiters earned between $25 and $35 an hour, much of which was untaxed. “Now, waiters make about $25 an hour, which is fully taxed,” Boyd says.

Renee Lorion, a former waitress at the Linkery who now works in publishing in New York, liked the new anti-tipping policy too. “As servers, we all took a pay cut, but we knew it was for the general health of the restaurant,” she told me. “What made it work is that Jay was very transparent about the restaurant’s finances.”

Obviously, the kitchen appreciates the new policy. “Earning three or four extra bucks an hour makes a difference,” Matthew Somerville, a cook, says. “In most restaurants, there’s not a close relationship between the front and the kitchen. But here you don’t have that tension, where waiters are trying to accommodate customers’ special requests, while the cooks doing the extra work don’t see any of the tips.”

Today, Porter’s employees appear almost as fervent in their opposition to tipping as their boss. But winning over his staff was only half the battle.

WHEN I CANVASSED restaurant owners across the country, most said that customer opposition precludes any significant move away from tipping. “I like the idea of a service charge, and I’ve thought about having one,” says Hakan Swahn, the owner of Aquavit, a restaurant in New York that serves Scandinavian cuisine and has branches in Stockholm and Tokyo. Because tipping is negligible in Sweden and frowned upon in Japan, at these outposts the cost of service is factored into the bill. But that’s not possible at his Manhattan flagship, Swahn told me. “The customers would protest.”

Eighty percent of Americans say they prefer tipping to paying a service fee, according to Zagat Survey. They do so, Leo Crespi’s surveys first demonstrated, primarily because they believe tipping provides an incentive for good service. But there is little correlation, in fact— less than 2 percent, according to Michael Lynn, a Cornell professor of consumer behavior and marketing.

Economists have struggled to explain tipping. Why tip at all, since the bill is presented at the end of a meal and can’t retroactively improve service? And certainly there’s no reason to tip at a restaurant you will never revisit. “Using a rational and selfish agent to explain tipping, one reaches the conclusion that the agent should never tip if he does not intend to visit the establishment again,” Ofer Azar, the economist, writes. “Yet this prediction is sharply violated in practice: most people tip even when they do not intend to ever come back.”

The single most important factor in determining the amount of a tip is the size of the bill. Diners generally tip the same percentage no matter the quality of the service and no matter the setting. They do so, Lynn says, largely because it’s expected and diners fear social disapproval. “It is embarrassing to have another person wait on you,” the psychologist Ernest Dichter told a magazine reporter in 1960. “The need to pay, psychologically, for the guilt involved in the unequal relationship is so strong that very few are able to ignore it.” Ego needs also play a part, especially when it comes to overtipping, according to the Israeli social psychologist Boas Shamir.

These psychological factors also go a long way in explaining the steady rise of the average tip in the United States from 10 percent in the early 20th century to 18.9 percent today, with little regional variation. “To overtip is to appear an ass: to undertip is to appear an even greater ass,” Benjamin Franklin reportedly noted during his stint in Paris, and his quandary continues to vex American diners.

But not at the Linkery. Porter and his staff have found that most diners accept the no-tipping policy, which is explained on the restaurant’s Web site and menu as well as upon the presentation of the check. This doesn’t surprise Lynn, who says he believes consumer preferences for tipping are not as strong as Zagat Survey suggests. In a less-cited 1987 Gallup telephone survey, only 34 percent of American respondents said a 15-to-18 percent service charge was unreasonable. In Lynn’s own 2004 Internet survey, 44 percent of American respondents said they would prefer to have waiters paid higher wages instead of tips, while only 22 percent disagreed. “Given that consumers’ preferences appear to be weak and are unlikely to have strong effects on patronage behavior, they need not dictate tipping policies,” Lynn concludes.

That has already proved true at the antipodes of American dining — the fast-food restaurant and the private club — where tipping is not usually allowed. And with few objections, many full-service restaurants include service charges for groups of six or more diners. They do so because tip size is inversely proportional to the number of diners. One 1973 study at an Ohio restaurant revealed that individual diners tipped 19 percent on average, while groups of six left 13.5 percent. “[T]o the extent that many people contribute to a check, the responsibility of each to the waiter may be psychologically divided among the people present,” the researchers concluded.

Despite such precedents, every so often diners at the Linkery take offense. “I’ll go over to the table and ask if there is a problem with the service,” McGuan, the general manager, says. “If there is, then I offer to remove the service charge. Almost always, the customers’ issue isn’t about the service but about not being able to handle their loss of control.”

Porter says that he doesn’t mind losing these diners. But most restaurant owners are not as nonchalant. Last June, after the Linkery moved, its old space was taken over by the Sea Rocket Bistro, which focuses on local sustainable seafood. Management thought it would be a good idea to retain Porter’s no-tipping policy, since the restaurant was courting the same customers. But that proved difficult. “It became a strain to explain the policy to first-time customers,” Elena Rivellino, the Bistro’s general manager, says. “We had some people complain that an 18 percent gratuity was too high, and others said they’d like to tip more.”

In his one concession to big tippers, Porter offers them the option of donating money to charity. The Linkery’s charity of the month is printed on the menu, and in two years more than $10,000 has been raised for various causes. “But it’s funny what usually happens when a diner asks why they can’t tip more,” McGuan says. “We tell them we’re comfortable with what we charge for service, and they’re free to donate to our charity of the month. Most don’t.”

Rivellino said that as a new restaurant struggling to fill its tables, the Sea Rocket Bistro couldn’t afford to turn down additional revenue, especially if doing so might offend diners. The restaurant dropped its service charge in a matter of weeks.

OVER DINNER ONE night, Porter told me that he didn’t expect his war against tipping to spread beyond his restaurant. “You might be able to get rid of tipping if you raised the minimum wage to $15 an hour, but that’s not going to happen anytime soon,” he said. We were sitting in the back garden of one of Porter’s favorite San Diego restaurants, Starlite, and I found myself nodding in agreement. Tipping had bested greater foes than Porter.

And yet Porter never tires of defending his position. “At the end of a nice meal, the last thing anyone wants to do is think about math and social mores,” he said. Again, I nodded. But at dinner’s end, when the waiter returned with my credit card, I did some quick mental arithmetic and left 20 percent.