American service industry approaching a 'tipping point'

February 27, 2018, American Institute of Physics
Left: Average reported tip rate in American restaurants over time, according to the NPD group (1982-1984) and Zagat annual surveys (1989-present).Right: For conventional tip rates below some critical threshold Tc, a rational restaurant owner would allow diners to leave gratuity to maximize profitability (black curve). Beyond that critical threshold, a rational restaurant owner would disallow tipping in their restaurant (red curve). Credit: Sara Clifton

The average rate at which Americans tip for services has been increasing steadily for decades, which creates a growing pay disparity between tipped and nontipped workers. The practice has been branded over the years as classist, anti-egalitarian, and downright undemocratic, leading some restaurateurs to abandon it. A new paper, drawing insight from nonlinear dynamics, hopes to shed light on the economically irrational world of tipping, showing that at a certain point, banning the practice might be fair and profitable.

A team of researchers presented a model that describes the dynamical nonlinear system that captures the relationships among tipped restaurant workers, nontipped ones and customers as restaurant owners change their tipping policies. As reported recently in the journal Chaos, from AIP Publishing the researchers used a dynamical systems approach and numerical modeling to find that, at certain tip rates, a rational restaurant owner would be wise to reel in how much customers can tip and perhaps to ban it altogether.

"Tipping has always been a super controversial topic, and it's been an especially hot topic in the news lately," said Sara Clifton, study author at University of Illinois at Urbana-Champaign. "I was shocked that such a simple model could replicate what we see qualitatively in the real world."

Clifton and her colleagues employed a social group competition model. This approach has been used to describe anything from declines in religious affiliation to the prevalence of left-handedness. Hypothetical restaurants were defined as social groups in which servers, cooks and customers interacted. As hypothetical management decisions were made, the adapted dynamically until equilibrating.

Cooks, for example, prefer to work in restaurants with higher wages. A bump in food quality brings in more customers, who are weighing both the food and the service. This causes the demand to be a server to rise, so long as the wages and tipping policies are friendly for wait staff. If cooks' pay is prioritized over that of waiters, customers might become turned off by the poor service.

Global sensitivity and uncertainty analysis using techniques called Latin Hypercube Sampling and Partial Rank Correlation Coefficients revealed that equilibrium distributions of diners and servers depend significantly on tip rates and employee pay.

As tipping rates rise, the team's model predicts we will approach a critical threshold at which it's more profitable for restaurateurs to abandon tipping in their eateries.

Where this threshold occurs depends on a variety of factors, including menu prices and the diner-to-server ratio. Clifton reports that the model reflects real-world restaurants. For example, she points to the dearth of tipping in and recent high-profile attempts to abandon tipping, only for it to be later reinstated.

"Ultimately, it's diners that collectively decide the critical tip rate," Clifton said. "Diners are making the most complicated decisions in the system."

While her current model only predicts the ending of tipping as tipping rates increase, Clifton said she hopes future work and access to reliable data will allow her to deliver answers on how restaurant owners should deal with this hot-button topic.

Explore further: Servers perceive well-dressed diners as better tippers, study finds

More information: Sara M. Clifton et al, The tipping point: A mathematical model for the profit-driven abandonment of restaurant tipping, Chaos: An Interdisciplinary Journal of Nonlinear Science (2018). DOI: 10.1063/1.5004711

Related Stories

Study investigates collapse of natural or social systems

May 10, 2017

A tipping point is a critical threshold at which a dynamical system undergoes an irreversible transformation, typically owing to a small change in inputs or parameters. This concept is very broad and can refer to the extinction ...

Recommended for you

T. Rex couldn't stick out its tongue, new research shows

June 20, 2018

Dinosaurs are often depicted as fierce creatures, baring their teeth, with tongues wildly stretching from their mouths like giant, deranged lizards. But new research reveals a major problem with this classic image: Dinosaurs ...

15 comments

Adjust slider to filter visible comments by rank

Display comments: newest first

24volts
5 / 5 (2) Feb 27, 2018
Pay the employees a decent wage and they don't need to be tipped. I'm not going to tip over 15% regardless unless the service is really fantastic and I will not tip fast food people as they make at least minimum wage and most of the time more than that for a totally unskilled job. It doesn't take much in the way of training to figure out how to put a burger in a bag along with a napkin and half of them can't even manage that correctly. The majority of fast food workers don't even know how to give correct change without the cash register telling them how much.
rrwillsj
2.6 / 5 (5) Feb 27, 2018
24volts, from my experience in the restaurant industry? I am sure you receive exactly the level of service you earned, based upon the level of courtesy you show your server.
Bart_A
not rated yet Feb 27, 2018
If the industry abandoned the practice of tipping, I for one will never miss it.
mackita
4 / 5 (2) Feb 27, 2018
The fiscal crisis at the end of Bush era probably eliminated occupation opportunities and tipping. The paying tips is counterproductive for customers as it allows restaurant owners to pay less for employee which brings lower quality of their service.
Thorium Boy
3 / 5 (2) Feb 27, 2018

Heaven forbid that anyone should be paid more for good performance. That would be...capitalistic!! Rewarding excellence! How evil!
Mark Thomas
5 / 5 (1) Feb 28, 2018
I like tipping because it is one of the few things our whole society (here in the U.S.) does on the honor system. Yes, anyone can legally screw over those servers by walking out and leaving them nothing, but as the article above pointed out, we are actually getting more generous over time.
mackita
not rated yet Feb 28, 2018
as the article above pointed out, we are actually getting more generous over time
This is not exactly what the article has said, instead of it it pointed to tipping point in tipping...
antialias_physorg
5 / 5 (2) Feb 28, 2018
I've always found the the idea of mandatory tipping a bit bizarre. Tipping should be for exceptional service (i.e. over and above the expected quality/service). People in the service industry should be paid a decent wage and not need to rely on tips. Those that try to go beyond themselves to provide a superior customer experience should profit from additional tips.

I will not tip fast food people

Agree. What's so special about someone delivering pizza? Where's the extra effort that warrants a tip? I have no problem paying more for a pizza if that's what it takes for the delivery boy's wages to go up, but tipping for the most basic of tasks someone is hired for seems ludicrous.

Since it is usually the whole establishment that chips in on this increased experience quality (and not just single servers or cooks) tips should be collected and distributed fairly among the staff.

Mark Thomas
not rated yet Feb 28, 2018
Me: "as the article above pointed out, we are actually getting more generous over time "

Mackita: "This is not exactly what the article has said, instead of it it pointed to tipping point in tipping..."

How else would you interpret this?

"The average rate at which Americans tip for services has been increasing steadily for decades, which creates a growing pay disparity between tipped and nontipped workers."
Mark Thomas
not rated yet Feb 28, 2018
The unwritten rule of tipping is you don't tip if you are not being waited on, and I don't mean by a person at a point-of-sale register. I think the idea is you are getting individual attention and treatment, so the server deserves a little more if done well and a little less if not.

For example, you never tip for fast food, serve yourself buffet, pizza that you pick up yourself or Chinese food you pick up yourself. If someone delivers a pizza to your house, he/she deserves some kind of tip, unless the delivery was fouled up.
24volts
not rated yet Mar 03, 2018

For example, you never tip for fast food, serve yourself buffet, pizza that you pick up yourself or Chinese food you pick up yourself. If someone delivers a pizza to your house, he/she deserves some kind of tip, unless the delivery was fouled up.


I don't consider delivered food as fast food or the same as going to a waiter type sit-down restaurant. By saying fast food, I mean places like Hardees and McDonalds, etc... When I order a pizza (rarely) it's bought from a place about 1/2 mile from me and costs less than $20. I either do pick it up there myself or the delivery person gets a $5 tip for bringing it. I think that is more than adequate for the service supplied.
TheGhostofOtto1923
not rated yet Mar 04, 2018
Tip jars in Subway sandwich shops crack me up.
mackita
not rated yet Mar 04, 2018
I think that is more than adequate for the service supplied.
You're already paying for delivery in base price of pizza, no need to pay for delivery once again.
The unwritten rule of tipping is you don't tip if you are not being waited on, and I don't mean by a person at a point-of-sale register.
It makes a rather narrow boundary between tipping and bribery. Not to say, you're making wages for employee lower as a whole by your "solidarism ", because their employers would feel free to pay them less.
Mark Thomas
not rated yet Mar 05, 2018
It makes a rather narrow boundary between tipping and bribery.


LOL! I take you have not spent much time here in the U.S., or maybe just not in restaurants. Tipping is simply a cultural difference, not an evil conspiracy barely discernible from bribery. Re-read the article above and let me suggest that a good waiter at a good restaurant in the U.S. can make a lot more than you are thinking.
Mark Thomas
not rated yet Mar 05, 2018
I order a pizza . . . and costs less than $20 . . . the delivery person gets a $5 tip for bringing it. I think that is more than adequate for the service supplied.


I agree!

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.