Have you noticed how tipping in America has evolved beyond traditional settings like salons and restaurants? These days, customers are also asked to give tips at fast food counters, self-checkout kiosks, and even auto repair shops. This tipping explosion has created tension, leaving many frustrated and dividing businesses and workers. What's driving this shift, and where is it headed?

Major political parties are considering proposals to eliminate income taxes on tips, adding fuel to the fire. While this might sound like a win for workers, economists argue it could be unfair. Focusing on tipped workers leaves other low-wage employees out of the picture. Many tipped workers themselves are also wary, concerned that this policy could eventually lead to lower overall pay. Eager to gain their support, presidential candidates are realizing the importance of these four million workers.

A Growing Divide in the Workforce

JackF / iStockphoto

Despite the attention paid to tipping, not all workers see it as positive. Saru Jayaraman, president of One Fair Wage, points out that tipped workers are finally being heard. Still, she isn't convinced that removing taxes on tips is the solution. She focuses on eliminating the subminimum wage, which allows some workers to earn as little as $2.13 per hour, as long as tips make up the difference. The tipping system is deeply flawed, and while it can lead to higher earnings in specific scenarios, it also leaves workers vulnerable, especially as more customers push back against constant requests to tip.

Evidence shows that some businesses are even using tipping to avoid increasing base wages, shifting the financial burden to customers. If the economy weakens, this trend could intensify, and workers who rely on tips may find themselves in an even more precarious situation. As tipping spreads into industries where it was previously uncommon, more workers will face challenges if customers begin to tip less.

The Rise and Fall of No-Tipping Policies

baramee2554 / iStockphoto

Amanda Cohen, a New York City chef and owner of the restaurant Dirt Candy, has long been a critic of the tipping system. In 2015, she banned tipping at her restaurant, opting instead to pay all her workers higher wages, regardless of their role. Amanda raised menu prices to cover the cost, and other high-profile restaurateurs, such as Danny Meyer, followed suit. They argued that tipping created an unpredictable and often inequitable environment. Servers often earned significantly more than kitchen staff, and tips left room for biases, harassment, and discrimination.

However, the no-tipping movement struggled to gain widespread acceptance. While it made sense for some high-end establishments, the pandemic changed everything. Early in the crisis, many Americans began tipping more generously to show appreciation for essential workers. But as businesses reopened, restaurants that had eliminated tipping found it nearly impossible to hire staff. Amanda's no-tipping stance is one of the few remaining holdouts, with Danny's restaurants reversing their policy in 2020.

The Future of Tipping

lisatop / iStockphoto

As tipping continues to grow in scope and complexity, the future of this long-standing tradition is uncertain. The big question remains: will tipping remain a cornerstone of the American service industry, or will we see larger systemic changes in how workers are compensated?