Tipping revisited

In his “How’s Your Drink?” column this weekend, the WSJ’s Eric Felten has a suggestion for Starbucks: take away the tip jars. He then critiques the practice of tipping as a pernicious expression of aristocracy. Says Felten:

In America, receiving tips long ago lost any stigma; indeed, the “partners” at Starbucks regard their gratuities as an acknowledgment that they are more worthy than their counterparts at McDonalds. But making one’s employees dependent on the kindness of strangers is not without cost. Jim Romenesko, known for his media Web site, also runs the popular Starbucksgossip.com, where baristas and customers post comments and questions about the chain. As Mr. Romenesko has noted, the most heated, vitriolic discussions are those on tipping. Most of the postings are by levelheaded employees who make it clear that they deliver good service tips or no. But there is no shortage of workers angry at the “cheap bastards” who risk getting secretly “decaffed” if they don’t tip. One barista reminds customers: “I control your daily dose of crack!”

If the tip jar encourages staff animosity, it also makes many customers uncomfortable. On the Starbucksgossip site, plenty of coffee-drinkers echo Mark Twain’s complaint about tipping: “We pay that tax knowing it to be unjust and an extortion; yet we go away with a pain at the heart if we think we have been stingy with the poor fellows.”

Since I make a solid chunk of my income in the form of tips, it’s no surprise that I think Felton gets this wrong. How much animosity is there, really? My experience is exactly the opposite: tipping encourages rapport between staff and customers. Research backs this up, with Cornell Professor Michael Lynn finding that tips are not correlated with good service nearly so much as they are with pleasant, memorable interactions.

There’s also the matter of price discrimination. While this doesn’t apply so much to the mostly automated systems at Starbucks, I’ve written before that this is a good reason to put tip jars in indie coffee shops:

… skilled baristas in the US are underpaid. Compared to other markets, American consumers are less discriminating in their taste for espresso drinks. This means that artisan baristas are unlikely to stay in the field for long. Higher wages could induce them to stay, but the price sensitivity of many consumers makes this hard to fund. Tipping serves as a form of voluntary price discrimination for customers who care about good coffee without raising prices for those who don’t.

Felten concludes:

It’s not that we tip waiters because they are paid so little; they are paid so little because they can expect to make up the difference in tips. Starbucks is known for paying relatively well and providing respectable benefits. Yet, without the tip-jar take, the company would have to raise its wages commensurately to maintain the same caliber of employees. Perhaps prices would rise too, but I suspect many would be happy to have the full, unambiguous cost of the transaction up on the board. As things stand, the tip jar subsidizes the company’s payroll costs. So when you toss a dollar into the cup, you’re really making a donation to Starbucks — and I can think of needier beneficiaries.

He’s got a point. But let’s not forget that cash tips do have the advantage of finding their way into baristas’ pockets without being fully reported to the IRS. There are many beneficiaries worthier than Starbucks Corp., but the federal government isn’t among them.

Update 3/4/08: Spelling of Eric Felten’s name corrected.

[Via Rumors Daily.]


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