6 Reasons Tipping Needs To Be Replaced

I am not a fan of tipping. It is inefficient, anti-worker, and at times even anxiety-inducing. I propose that all businesses mandate that their employees refuse to accept tips from customers. There would of course need to be a commensurate rise in prices of products and services, as well as increased wages paid to employees. In the new system, customers will pay higher prices but no tips, which should average out to be about what they pay now. Employees will make higher wages directly from their employer, but since they will not be getting tips from customers, they will end up having similar take home pay. Businesses will be taking in higher payments from customers, but paying out their employees higher wages - netting out with about the same profit margin. This lack of change in the economic outcomes of all the actors is by design. Replacing tipping isn’t about changing consumer, employee, or employer economic welfare - it’s about eliminating the pitfalls of tipping. Here is why I think such a tip-free world would be superior:

1. Less Ambiguity

Everything about tipping is largely unwritten. I’ve been tipping my whole life, yet I still find it difficult to know when or how much I should tip. If I eat really fast at a buffet, and don’t even get served, do I still need to tip the same amount as I would have at a long sit down meal? Should I tip on the total bill, or just on the amount before taxes? Who exactly should I be tipping when I stay at a hotel? How much should I tip the delivery person? Should I always tip based on percentage, or are there some absolute amounts that I should be using? If tipping were eliminated, all of these unwritten rules, and all my mental exhaustion trying to decipher them, would go away.

2. More Transparent Pricing

I hate seeing one price advertised, and paying a higher price at the end of a transaction. I’m a firm believer that all prices a company advertises should be the final price that a consumer actually pays. Obviously this would mean businesses would all have to include taxes in their advertised prices - which is a whole other issue. However, when tipping is involved, it is almost always the single largest contributor to the gap between the advertised price, and the price you pay. Eliminating tipping would go a long way towards closing this gap, and finally making pricing fully transparent.

3. Less Confusing For Foreigners

There are a few bizarre social norms that make visiting the US difficult for foreigners. Besides our baffling use of the metric system, I’d venture to say tipping is the most confusing for visitors. Tipping isn’t practiced in many parts of the world, and can even be considered insulting. I’ve experienced this first hand when traveling - having to determine if I should tip and how much is an annoying ritual I perform everytime I’m in a new country. If we eliminate tipping, and clearly communicate that tipping is not accepted, we can make visiting the US easier for people from all over the world.

4. Eliminates Customer Anguish

Tipping is an emotional reaction rather than one of pure math for me. If I liked my server I may give her a higher tip because I feel bad that she doesn’t make much money as a waitress. If the kitchen screws up my order, I may end giving the minimally acceptable tip instead of my normal higher rate because I am upset. If the people in my group are tipping much higher than normal, I will increase what I normally tip because I would feel guilty not doing so. In each of these situations, my tip was affected by how I was feeling - feelings that had nothing to do with the quality of service that was performed that I was theoretically tipping on. Furthermore, all of these feelings were negative in origin - feeling bad, feeling upset, and feeling guilty respectfully. If there were no tipping, I wouldn’t have to even think about how much the waiter makes, how to signal my disapproval for getting the wrong food, or how to be as generous as my peers.

5. Less Friction

The actual logistics of tipping are actually quite a hassle. For each financial transaction involving a tip you need to not only give a server your credit card and pay for the meal or service, but on top of that you need to manually write in the tip on the receipt. Furthermore, when tipping is involved there is often a customer receipt, and a merchant receipt that you have to keep straight. If you are one who keeps receipts, this means that you have to write the tip in on both receipts - further adding to the burden. If there were no tipping this onerous process would be eliminated from billions of transactions each year, saving people time and wasting less paper.

6. More Predictable and Fair Wages

Two of my friends (who coincidentally lived on a boat with me once) were waiters at one point in their lives. I’ve can recall two vastly different stories from one of their worst, and one of their best nights working as a waiter.

My first friend was a waiter at a small restaurant near his dorm in college. He had worked all afternoon into the early evening. When he finally got off his shift, and was ready to hang out that night I asked him how work was. He told me he only had 2 customers, both of whom didn’t tip, and was therefore paid only the minimum wage for servers of $2.13/hr that night. Needless to say he was very disappointed, and even a bit stressed out because he was really counting on making more money that night.

My other friend worked at Tao, a fancy restaurant in NYC. One night the whole restaurant was rented out by some Wall Street firm. Beyond the huge cost of simply buying out the restaurant that night, they also ordered thousands of dollars of alcohol. Needless to say the tip was absolutely enormous, and I’m pretty sure my friend was relatively flush with cash that night, compared to normal.

In both of these situations I think it would have been more beneficial to my friends to get a higher, and thus more predictable wage instead of relying on tips. For my friend that made $10 for a 5 hour shift - he would have been able to leave work knowing exactly how much he made, instead of feeling despondent about the bad luck he had that night. For my friend who got an extraordinarily large tip one night, even he would have been better in a world without tipping. He would have a higher paycheck on a steady basis (instead of these occasional spikes). He could also have fully compared his wage with other waiters, since everyone would be paid an hourly wage that could be ascertained, instead of in tips that are largely hidden.