Essays

March 11, 2004

Tipping

By John Guy

The ill-considered advice of a cruiser crystallized and solidified my philosophy about gratuities: I will give what I feel is right at the time. Here is the story:

Before leaving a marina in Porlamar, the dock master asked everyone on the shopping bus to tip generously. The message was delivered again at the large supermarket. Numerous signs near checkout stations noted that baggers are student volunteers whose income for helping shoppers comes entirely from tips. Therefore, said these signs, be generous. After paying our bill, we turned to another cruiser, a lady from Scandinavia, and asked, "How much are you going to tip?" The lady responded: "I am going to give 400 bolivars, and no more, because these people are poor, and the money means more to them. Also, I do not want to give more because high tips increase expectations thereby raising costs for everyone."

We walked away, perhaps in a manner showing that we were not comfortable with her advice, because she came up to us again to reiterate the two economic hypotheses. The first is that 400 bolivars, equal to about thirteen cents in the United States, means more to them than to us because "they are poor." The second hypothesis is that the level of general tipping will rise and that the costs to cruisers will increase if some cruisers give more than average. In her view, the actions of a few generous shoppers hurt everyone because the helpers will expect more in the future. At this point, I began to imagine the serious consequences to cruisers if the general level of tipping were to rise from thirteen cents to twenty six cents over the next few years. To help me understand the economic principles and the potential negative consequences of exaggerated generosity, I called an economist, Alan Bluespan. His comments follow:

"The value of thirteen cents in the hands of one person is the same as the value of thirteen cents in the hands of another," he said. "Neither in the United States nor in Venezuela will thirteen cents purchase a complete soft drink. A wealthy person, of course, can purchase more goods and services than a poor person. At some level of the psyche, thirteen cents means less to the rich person because he has so much more money in his pocket. The young hard-working bagger aspires to have more money in her pocket so that she, like the rich, can purchase more goods and services. The value of the money is identical for both, but the specific use of the money is different. The poor person uses the tip to pay for housing, food and clothing. The rich person already can afford the basics. So, he uses tip income for movies, travel, and computer games, or, if smart, for saving. The person giving a tip has no way of knowing how it will be used. In the hands of some, tips will be used wisely. In the hands of others, tip income will be wasted. The provider of a tip cannot and should not make a moral judgment about the value of money to the server. The young working person in Venezuela might be poor or wealthy. We cannot know, because we do not know anything about the server's family circumstance. However, we do know that the young helpers are working. They are not lazy. Adequately rewarding their work is a permanent stimulus to always work hard, to continuously strive to help others. An average tip provides average incentive. A low tip is negative. The low tip tells the worker, "I put in all this time and effort, and this is all that I get." The high tip is a compliment, giving an incentive for greater achievement while providing more personal resources to save or to pay tuition if he or she is so inclined.

"I cannot trace the history of tipping, but I suspect that it started as a means to encourage superior service. Payment of the bill at a restaurant produces an indirect relationship between the restaurant owner and the patron. The tip, however, creates a personal relationship between the patron and the server. Knowing that a tip might be around the corner, the server theoretically works harder and maintains a more pleasant demeanor than he would if all his income is paid by the absent restaurant owner. The difference between a tip and a fee, such as charged by professionals, is that a tip is voluntary while the fee is scheduled. The professional increases his/her total income by earning more fees, by obtaining more billable hours, and more clients, through referrals. The restaurant server increases his/her total income by providing patrons a pleasant experience. The amount of a tip, and the manner in which it is given, is a direct and immediate reward for labor. Some travelers allege that service is poor in countries that are poor. Would it be fair to argue that the quality of service would increase if travelers, in general, provided higher tips? I don't know, but I do have anecdotal evidence that travelers who are ready to pay twenty percent tips in the United States and in Europe become nervous and uncertain when determining the amount of a tip in a foreign land. Indirectly, the comments of the lady cruiser support this point, about which she sees one side. Her assumption that thirteen cents means more to them than to us apparently makes her feel that her level of tipping is adequate, perhaps even generous. Would she be surprised if a survey of servers turned the argument against her? Servers might feel--probably do feel--that Americans and Europeans should tip more than Venezuelans because travelers can afford higher cost. She might find that servers would rather receive nothing from her because her tip is low enough to be insulting.

"To my knowledge," said Alan, "no one has determined what phenomena cause increases in the general level of tipping. When I was young, in the fifties, ten percent was the standard tip, and fifteen percent was given for outstanding service. Today, 50 years later, the standard is twenty percent in the United States, and service is generally excellent. My conservative economic training leads me to believe that supply and demand is the cause, and that a few generous souls along the way had little or no impact. Intuitively, I want to state that her hypothesis is absurd and self-serving, but I cannot prove this. All I know is that if the supply of quality servers declines, and if the value (demand) for service increases, then the price level must increase. Where I live, in New York, many persons who serve me are students, recent graduates working while they look for better jobs and, of course, aspiring actors. For all of these, a high level of tip income is both necessary and useful. My guess is that they feel adequately rewarded at twenty percent, insulted at ten percent, and ecstatic at twenty five percent or higher, but without expectation. My daughter works at a downtown restaurant. In the last year, she received one $350 tip on a $900 bill. She felt terrific. She saved it. She knows it does not happen often. She did not change her general expectation of twenty percent.

"I wish I had time to survey both cruisers and servers. The results would be interesting, perhaps exciting. Without such evidence, I can only apply personal feelings to the situation you have described and to your implied question. My first belief is that my beliefs do not matter. Travelers will act generously, or cheaply, depending on circumstance and temperament. To me, generosity feels good. I like it. Higher tips offered with greater frequency increase the velocity of money, contribute to higher standards of living and reduced poverty. I would rather give a high tip to a server than a moderate gift to a homeless. That's just the way I am."