Amid ongoing inflation, cash-strapped consumers are tipping less

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The Sweetly Bakery & Cafe in Battleground, Washington

Source: Irina Sirotkina

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

With inflation approaching record highs, cash-strapped consumers are beginning to tip less, especially when it comes to fast casual dining and takeout.

“Tipping is the first sign you’re spending less,” says Amanda Belarmino, an assistant professor of hospitality at the University of Nevada, Las Vegas.

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

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“Since everything has gotten more expensive, we’ve seen a drop in tipping,” 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, where consumers are asked to leave a tip at checkout. There are predetermined options ranging from 15% to 25% for each trade.

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“We encourage people to tip, but of course it’s not mandatory,” said Sirotkina.

While the average transaction at Sweetly is less than $20, meaning a tip would be a few dollars at most, fewer people are leaving anything.

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

Fewer consumers tip 20% or more

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

Tipping 20% ​​at a sit-down restaurant is still the standard, say etiquette experts. But there’s less consensus on tipping for a takeout coffee or takeout snack.

While tipping in full-service restaurants has remained steady, averaging 19.6%, according to ToastIn the latest restaurant trends report, tips at quick-service restaurants fell slightly from a year ago to 16.8%.

Americans have ‘tip fatigue’

“Part of it is tip fatigue,” said Eric Plam, founder and CEO of San Francisco-based startup Uptip, which aims to facilitate cashless tips.

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

“This tipping at the point of sale is what people resist the most,” he said, “and forces you to tip on the spot.”

Workers rely on tips because inflation is higher than wages

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

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According to the most recent data from the U.S. Bureau of Labor Statistics, the average wage for fast food and counter workers is $14.34 per hour for full-time employees and $12.14 for part-time employees — including tips.

“Anyone who has ever worked in a restaurant knows how hard the daily hustle and bustle can be and how much tips matter,” says Sweeney of Popmenu.

As transactions increasingly take place without cash, it’s critical to have a method for tipping service industry workers who earn minimum wage or less than minimum wage, Plam added.

A landmark bill in California aims to raise the minimum wage to $22 an hour for fast-food and quick-service employees at chains with more than 100 locations nationally. The current wage floor in California 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 remained unchanged since 2009.

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