Has the US Tipping Culture Gotten Out of Hand?

Tipping has been a common practice in the US for a long time, but it’s become so widespread that people have coined the terms “tipflation” and “tip creep” to describe the phenomenon. 1

What’s considered a “good” tip has ballooned from 10% to 15% and often to 20%, as noted in an article from The Reynolds Center for Business Journalism. Customers are baffled by this new norm.

One Redditor who noticed that their friends had been consistently tipping over 20% for subpar service asked in the r/tipping subreddit, “When did that become normal?” Others feel the same. “There’s no reason for tipping to have ever increased,” another recent post read.

Tips are now everywhere. Readers of The Guardian report encountering tip prompts in many surprising locations, ranging from self-checkouts and airport vending machines to used bookstores and cinema box offices. 2

Data from Gusto, a payroll company, confirms that tipping has surged in sectors where the practice was once rare. Between 2019 and 2024, the share of bakeries processing tips jumped from 36% to almost 50%. The number of retail stores using tip prompts grew by nearly 75% over that same period, rising from just under 4% to over 7%.

What contributed to the “tip boom”?

Hospitality and tech experts blame the COVID-19 pandemic and the advent of digital payment systems for the inflation and expansion of tips.

According to Stephen Barth, a professor of hospitality law and leadership, customers tipped big during lockdown because they knew frontline workers were risking their lives to deliver groceries or brew coffee. When the world reopened, that “emergency” generosity didn’t go away; it became the new norm.

The increased use of digital payment systems has worsened the issue.

“Since payment apps and touch screens make it simple for merchants to preset gratuity amounts, many businesses that didn’t ordinarily ask for tips now do,” The New York Times tech writer Brian X. Chen wrote.

He noted that the tipping buttons, which often range from 15% to 25%, make it easier for customers to “choose a generous tip … than a smaller one or no tip at all.” 3

Product designer Ted Selker noted that most people are more comfortable clicking a high (preset) percentage than clicking “custom” and manually entering a lower amount. 3 He called this setup a form of coercion. 3

Beyond the software itself, the physical presence of a worker, who often watches the customer select their tip, adds a layer of social pressure. It can shame people into tipping more to avoid being labeled as cheap.

Psychologist Ernest Dichter said that customers’ compulsion to tip workers stems from “the guilt involved in the unequal relationship.” 4

Tobin Polk, co-owner of the coffee shop SEY Coffee, has a similar view. To him, tipping feels less like a “thank you” and more like “pity” for someone who isn’t paid a decent wage. That’s why his business doesn’t allow tipping, he said.

“It’s clearly just a way to shift more power into the hands of the people who already hold power,” Polk told The New York Times.

While this sentiment may seem cynical, it isn’t that off-base if you look at the history of tipping in the US.

Tipping’s dark history and racially charged background

Tipping didn’t start as a reward for great service; it was a relic of European servitude during medieval times. 5 Wealthy Americans imported the custom during the 1850s and 1860s, but it didn’t take off until the Reconstruction era, when the country was grappling with the end of slavery. 6

When businesses started hiring formerly enslaved Black Americans, many refused to pay the workers a base wage and forced them to rely on tips. 5 Today, many scholars and activists believe the practice was exploitative. Barth has gone as far as calling it “essentially an extension of slavery.” 5

Early labor movements fought back against tipping. One of the most famous clashes was at the Pullman Company, a railroad entity that reportedly was one of the driving forces behind the US tipping culture.

For years, Pullman porters campaigned to get rid of the tipping model and secure a real wage. They were repeatedly blocked by the company’s leader, Robert Todd Lincoln, who preferred using “gratuities” to keep labor costs low. 4 (Ironically, Lincoln was the son of Abraham Lincoln.)

Seen in this light, early tipping culture was less about hospitality and more about maintaining a servitude-style dynamic in a post-slavery world.

Modern tipping and the subminimum wage

Post-war Europe raised the minimum wage, eliminating the need for tipping. 4

In the US, Congress amended the Fair Labor Standards Act (FLSA) in 1966 to introduce the “tip credit.” Under this provision, employers could use tips to cover 50% of the federal minimum wage, which was $1.25 per hour at the time. 7 8

This logic “effectively designated a share of customer tips not as gratuity but as a wage subsidy provided to employers,” economist Sylvia Allegretto wrote in an article for the Center for Economic and Policy Research (CEPR).

The gap only widened from there. In 1996, Congress revised the tip credit provisions to let employers pay tipped workers just $2.13 per hour—a figure that hasn’t budged in three decades—as long as tips cover the rest of the federal minimum wage (currently $7.25 per hour) each workweek. 9 10

Theoretically, employers must pay the difference if tips don’t bridge the gap, but many ignore the mandate. 11 12 A federal review of employment records from 2010–2012 found that nearly 84% of 9,000 full-service restaurants had violated wage laws. 13

States with “One Fair Wage” policies

Seven states (Minnesota, Montana, Nevada, California, Alaska, Washington, Oregon) have enacted “One Fair Wage” policies, which require workers to receive the full minimum wage before tips. 15

A study from the Economic Policy Institute found that tipped restaurant workers in those seven states earn an average of 21% more in wages and tips than their counterparts in states with a subminimum wage.

Getting rid of the subminimum wage hasn’t harmed businesses. From 2011 to 2019, restaurants in the One Fair Wage states had stronger growth than those in other states. 15

This data counters some advocates’ argument that the tip credit model boosts workers’ earnings and helps employers manage labor costs. 6

Advocates also defend the American tipping model by arguing that it leads to better service. 5 6 There’s even a popular myth that the word “tip” is an acronym for “To Insure Prompt Service.” 5

Although the argument seems logical—more money equals harder work—research shows that’s not necessarily true.

Cornell University professor Michael Lynn has characterized the relationship between tips and service quality as “tenuous at best” in one of his studies. He found that using gratuities as a key motivator doesn’t work. Restaurant managers should find better ways to measure and encourage hard work, he said.

Beyond that, the tipping custom keeps many workers poor and discriminates against certain minorities.

Stagnant base wages

While the price of everything has soared in the last few decades, the base pay for millions of US workers has been frozen thanks to the tip credit provisions. 8 Many businesses count on customers’ generosity to keep their own labor costs at a bare minimum.

Perhaps counterintuitively, the only instances in which base wages increase occur during economic crashes. During the pandemic, for example, base pay saw rare spikes because tips nearly vanished, according to data from the ADP Research Institute.

When gratuities dry up, employers are legally forced to meet the minimum out of their own pockets. This highlights an ironic reality in which base wages generally rise only when the tipping system itself breaks down.

Financial instability

Unlike employees with fixed paychecks, tipped workers’ livelihoods are at the mercy of things they can’t control: a customer’s bad mood, a sudden rainstorm, or a slow Tuesday afternoon.

The Economic Policy Institute study found that the median wage for tipped workers (including tips) is $10.22 per hour—nearly 40% less than that of the general workforce. 16 That “wage gap” has real-world consequences. Tipped staff are twice as likely to live in poverty compared to those with stable salaries. 16

The toll isn’t just financial. Tipped workers lose the ability to have an “off” day or push back against an abusive customer without sacrificing their pay, argued one writer for The Guardian.

Gender and racial inequality

For the women and people of color who make up a disproportionate share of the service industry (68% and 50%, respectively), the tipping system can be discriminatory. 17

A 2018 study from Eater shows a “tipping gap” in which white servers and bartenders across all restaurant types outearn their counterparts in other racial groups for the same work. The contrast is so stark that Lynn argues the tipping model “may violate the Civil Rights Act.” 4

Women have another battle to fight. In states where the base wage is stuck at $2.13, they’re often forced to tolerate inappropriate behavior to make sure they can pay their bills.

According to a study from Restaurant Opportunities Center (ROC) United, women in subminimum-wage states are twice as likely to experience sexual harassment and three times more likely to be pressured by management to dress “sexily” compared to those in states where employers pay the full minimum wage.

Many labor experts believe the most promising path forward is to dismantle the federal subminimum wage, which the proposed 2025 Raise the Wage Act aims to do. 17 18 19

However, passing that legislation may be a tall order with a divided Congress, a CNBC Make It article noted. Even Donald Trump’s plan to eliminate taxes on tips, which some critics say won’t do much to help struggling workers, is unlikely to be executed. 20 5

Historically, the US government has always given in to the restaurant industry’s million-dollar campaign to maintain its wage exemptions. 5 18 Without a groundbreaking political change, the “tip credit” system is probably here to stay.

Even if the laws change tomorrow, the habit might not. Tipping is so deeply ingrained in the US culture that people would likely continue the practice out of habit, Barth claimed. 5 He does believe, however, that normalizing conversations about this custom could help Americans begin to work toward changing it. 5

Ultimately, the future of tipping may lie in full transparency. Rather than relying on a “surcharge” disguised as a reward, a sustainable model would involve pricing goods and services to reflect a fair wage. After all, most people would agree that tips should be an act of genuine appreciation for a job well done, not a guilt-induced subsidy to help corporations cover their staff’s payroll.