Amid persistent inflation, cash-strapped consumers are leaving fewer tips

The Sweetly Bakery and Cafe in Battleground, Washington

Source: Irina Sirotkina

It’s the holiday season, but Americans are feeling a little less generous.

With inflation near all-time highs, cash-strapped consumers have started tipping less, especially when it comes to fast-casual dining and takeout.

“Tipping is the first sign of reducing spending,” said Amanda Belarmino, an assistant professor of hospitality at the University of Nevada, Las Vegas.

About 17% of Americans tip less due to inflation, while only 10% tip more, according to a recent PlayUSA survey of more than 1,000 people. More than half, or 54%, also said they feel pressured to tip when paying on an iPad.

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“Since everything has gotten more expensive, we’ve seen a drop in tips,” said Irina Sirotkina, owner of Sweetly Bakery & Cafe in Battle Ground, Washington.

Like many other businesses, the bakery uses a contactless and digital payment method, which encourages consumers to leave a tip when they pay. There are default options ranging from 15% to 25% for each transaction.

“We encourage people to tip, but it’s obviously not required,” Sirotkina said.

Even though the average transaction at Sweetly is less than $20, which means a tip would be a few dollars tops, fewer people leave something.

“Only about 1 in 5 people tip,” Sirotkina estimated.

Fewer consumers tip 20% or more

Although many Americans said they would tip more than usual once business resumed after the Covid pandemic, spending habits, in the end, haven’t changed much.

Tipping 20% ​​at a table-service restaurant is still the standard, etiquette experts say. But there’s less consensus on tipping a take-out coffee or take-out snack.

While tips at full-service restaurants have remained constant, averaging 19.6%, according to ToastAccording to the most recent restaurant trends report, tips at quick-service restaurants were down slightly from a year ago to 16.8%.

Why Tipping Is An American Custom

When it comes to takeout, customers tip even less, now up to 14.4%, on average, after it spiked early in the pandemic, Toast found.

Just 43% of diners typically tip 20% or more, up from 56% last year, according to a separate report from restaurant technology company Popmenu.

“Tip behavior can fluctuate based on market conditions,” said Brendan Sweeney, CEO and co-founder of Popmenu.

Americans have ‘nose fatigue’

“Part of it is tip fatigue,” said Eric Plam, founder and CEO of San Francisco-based startup Uptip, which aims to make tipping easier without cash.

“During Covid, everyone was shocked and feeling generous,” Plam said. Now, “you’re starting to see people back off a bit,” he noted, particularly when it comes to point-of-sale tipping, which leads customers to tip before they’ve even received the product or service.

“This tipping at the point of sale is what people resist the most,” he said, “forcing you to tip right there.”

Workers rely on tips as inflation outpaces wages

Tipping 15% instead of 18% may not seem significant, “but if you’re a server, 3% of your income has a big impact,” Belarmino said.

In fact, the median wage for fast food and counter workers is $14.34 per hour for full-time staff and $12.14 for part-time employees, including tips, according to the most recent data from the US Bureau of Labor Statistics.

“Anyone who has ever worked in a restaurant knows how tough the daily grind can be and the importance of tips,” said Popmenu’s Sweeney.

With transactions becoming more cashless, a method of tipping service industry workers who earn minimum wage or less than minimum wage is critical, Plam added.

A landmark bill in California aims to increase the minimum wage by up to $22 an hour for fast food and quick service workers at chains with more than 100 locations nationwide. California’s current wage floor is $15.50 per hour.

President Joe Biden and many Democratic lawmakers have pushed for a $15-an-hour minimum wage in the US.

The current federal minimum wage is $7.25 per hour and has not changed since 2009.

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