Tuesday, March 22, 2011

Ah, Capitalism.

As usual, today’s post is kicked off by a news article. It seems my country is becoming more and more unusual in that we don't habitually tip waiters, cabbies and so on. We figure the person is getting paid already out of the cost of the service. And of course, here, they are. Even the minimum wage for service staff here is a reasonable amount, and those on casual rates generally make half as much again per hour.

In many places, this isn’t the case. Austraian service staff might be on a wage of $15 an hour. Call it $20 if they're casual. In the USA, the usual wage for an equivalent job might be $5 per hour. (The Aussie dollar and the greenback are within 10% of each other’s value these days, but even when our dollar was closer to 60c our service staff had a much better deal.) This is because tipping is simply the done thing over there.

But this means that while on a good day, a waiter might make hundreds in tips, on a bad day he might go home with $25. This uncertainty is very unhealthy, psychologically speaking. Ultimately it’s also bad economically, as if your citizens are unable to plan their finances and have a reasonable guaranteed income, they’re going to be either a lot more cautious with their spending or a lot more likely to go into debt or overdraft.

Now, you might argue that there’s nothing essentially wrong with this. It’s the market at work; if I give you a service, you decide what that service was worth. Should we also put buskers on a fixed wage, and then give all their takings back to the city that pays them that fixed wage? Of course we shouldn’t. But they know what they’re getting into. They’re explicitly relying on generosity; and they’re also working only for themselves. But paying regular service staff fiddling small change on the expectation that customers will voluntarily give them enough to make up a decent wage is not on.

A tip should be a bonus for exceptional service. They’re too volatile — even with the supposed average of 10% or even 20% in some places — and much more sensitive to the whims of the customer than the worker’s actual performance. 14-hour-a-day sweatshops are also “the market at work” — that doesn’t say anything about whether they’re acceptable. It also gives rise to the “customer is always right” attitude that gives Americans their arrogant reputation here. Over there, the customer has the power of withholding a substantial fraction of the service staff’s expected income, with the result that they walk all over them. They come out here and try that — I’ve seen it happen — and are amazed when we tell them where to stick it. This is the biggest argument against a tipping culture: it creates unnecessary inequality, which can be and is often abused.

Now, I’m of course coming from an Australian mindset here, and tipping might not always lead to this sort of inequality — I’ve no idea what the situation is in Europe, but I’d hazard a guess that it’s not just tipping that causes this, but a combination of tipping with tiny minimum wages.


  1. One interesting aspect is that in any other field, these would be called bribes (and the system, corruption). You tip your waitress... do you tip the nurse at the hospital? The doctor? The lady at the council?

  2. A much better argument than any of mine, may I say.