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Tipping in restaurants falls for the first time in years. Blame ‘tip fatigue’
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TIPPING IN RESTAURANTS FALLS FOR THE FIRST TIME IN YEARS. BLAME ‘TIP FATIGUE’

Published Wed, Sep 13 20239:30 AM EDTUpdated Wed, Sep 13 20231:32 PM EDT
Jessica Dickler@jdickler
WATCH LIVE
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Key Points
 * Tipping at full-service restaurants fell to the lowest level since the start
   of the Covid-19 pandemic, according to a recent report.
 * Cash-strapped consumers with tip fatigue are pushing back, experts say.
 * Two-thirds of Americans have a negative view of tipping, according to a
   recent report by Bankrate.

watch now
VIDEO12:1312:13
Why tipping in the United States has gotten out of hand
Consumer & Retail Digital Original Video


Tipping 20% at a sit-down restaurant is still the standard in the U.S.,
according to most etiquette experts — diners disagree.

After holding steady for years, tipping at full-service restaurants fell to
19.4% in the second quarter of 2023, according to online restaurant
platform Toast’s most recent restaurant trends report, notching the lowest
average since the start of the Covid-19 pandemic.



“Tip fatigue” is largely to blame, the report found.


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“During Covid, everyone was feeling generous,” said Eric Plam, founder and
CEO of San Francisco-based startup Uptip, which aims to facilitate cashless
tipping. 

“The problem is that it reached a new standard that we all couldn’t really live
with,” he added, particularly when it comes to tipping prompts at a wider range
of establishments, a trend also referred to as “tip creep.”

With more opportunities to tip and predetermined point-of-sale options that can
range between 15% and 35% for each transaction, gratuity became less about
rewarding good service, he said.

Now, consumers are pushing back.




INFLATION, SURCHARGES WEIGH ON DINERS

Two-thirds of Americans have a negative view of tipping, according to a recent
report by Bankrate, especially when it comes to contactless and digital payment
prompts. 

Higher prices due to persistent inflation have also left more consumers feeling
cash-strapped.

Further, the increasing use of surcharges has played a role, according to Toast.
Fees for restaurant employee health insurance, credit card transactions and even
tap water make diners want to leave less on the total tab, Plam said. “They
don’t need to tip as much if they’re covering health care,” he said. “That’s the
quick calculation.”

These days, fewer consumers also said they “always” tip when dining out compared
to last year, according to Bankrate, or for other services, such as ride-hailing
services, haircuts, food delivery, housekeeping and home repairs.

Brand New Images | Getty Images

Yet, since transactions are increasingly cashless, having a method to tip
workers in the service industry earning minimum wage or less than minimum wage
is critical, Plam added.

Under federal law, employers can pay workers as little as $2.13 per hour — much
less than the minimum wage — if the tips they receive bring them up to a
baseline salary. Some states are now increasing the hourly minimum wage
for tipped employees or have eliminated tipping wages altogether.

For restaurant workers, tips can boost wages about 90%, according to data
provided to CNBC from payroll platform Gusto.

Still, tips are down slightly from a year ago, Gusto also found.

“What we are seeing is a settling at a lower level in the wake of the
post-pandemic surge,” said Luke Pardue, an economist at Gusto. 

Subscribe to CNBC on YouTube.


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