SAVANNAH, Ga. (WSAV) — According to the U.S. Department of Agriculture, prices for meats, dairy products, cereals and other foods were expected to increase this year — but what about tips?
Tips are encountering their own form of inflation and have now been associated with the term “tipflation” as consumers continue to be faced with swiveling digital kiosks and other point-of-sale machines that ask for tips as high as 30%.
“On the topic of ‘tipflation’ I see two components: 1) the percentage used for the tip and 2) who works for tips,” stated Dr. Richard McGrath, professor of Economics at Georgia Southern University. “Since tips are generally calculated as a percentage of the restaurant bill, and the bill is subject to inflation, tipping the same percentage over time should automatically adjust the server’s earnings for inflation.”
McGrath said historically, the standard tip rate was 15%.
“As restaurant prices rose, the earnings of the servers rose,” he continued. “Some people argued that rising prices required a rising tip percentage, but this is mathematically incorrect. By paying servers a percentage, their earnings are already indexed to restaurant prices and the associated inflation.”
McGrath said the advent of card payment systems has put consumers in the difficult position of figuring out who is a tipped employee because the systems routinely either suggest a tip rate or default to a tip rate that must be changed.
“Customers are then placed in an awkward position of having to refuse to tip or to lower the tip rate,” he explained. “Counterworkers generally have not received tips because their employers were expected to pay at least the federal minimum wage. Tips, in this circumstance, were just a little something extra, and certainly not near 15%.
“By setting up card payment systems in the manner we see now, consumers are pressured to leave substantial tips without knowing how employees are paid.”
Tipping has spread to occupations that oftentimes earn more than regular minimum wages. Baristas and customer service associates can make between $16 to $35 per hour in Savannah.
Savannah resident John Mobley said: “I wouldn’t tip them. You go and order, and they give you your food.”
However, Mobley said he does tip restaurant servers.
“Well because they serve you and they come back, and they check on you and they will fill your glass up with water.”
Karyn Minor, who has been in the service industry on and off for about 20 years, said: “I think being a server or a bartender, you definitely should get tips. But as a service window, if I’m going to a fast-food place, you’re getting paid a wage, whereas we’re getting paid $2.13 an hour. I don’t think people know that.”
She continued, “If you’re getting paid a regular wage, I don’t technically think you should get a tip. I get it, you know, for a haircut or for a massage, or whatever, I mean I tip a little bit, but if you’re handing me a coffee, why am I tipping you?”
“A counter service worker who is handling 30 or 40 customers per hour is certainly in a different position than a table server who dedicates substantial attention and energy to four tables per hour,” McGrath stated. “The sheer dollar volume of business at the counter suggests that tipping at a high rate is neither necessary nor reasonable.”
Starbucks barista Bhruvi Patel said: “For us, tips provide like gas to get to work. Most of us use them as gas money because a lot of us travel like 30 or 40 minutes to get to work.”
She continued, “We don’t get a lot of cash tips now, but we have digital tipping, so we get a lot of digital tips now, which is great.”
To those who think only occupations such as restaurant servers should get tips, Patel said: “I don’t necessarily disagree, but I don’t necessarily agree either because I give tips. I think that with the service that we provide, I think those tips are well deserved.”
As “tipflation” could likely continue, McGrath suggests consumers take a different approach.
“The response by consumers needs to become more sophisticated, and maybe a bit more blunt. Maybe consumers should start asking the managers who works for tips and who is paid by the establishment.”
He continued, “While I typically tip around 20%, I want that to be my decision, not a decision made or suggested by someone else.”