Digital Tip Jars: New tipping trend has customers sweating it out at checkout counter

A new checkout trend is sweeping across America, making for an increasingly awkward experience: digital tip jars.

You order a coffee, an ice cream, a salad or a slice of pizza and pay with your credit card or phone. Then, an employee standing behind the counter spins around a touch screen and slides it in front of you. The screen has a few suggested tip amounts -- usually 10%, 15% or 20%. There's also often an option to leave a custom tip or no tip at all.

The worker is directly across from you. Other customers are standing behind, waiting impatiently and looking over your shoulder to see how much you tip. And you must make a decision in seconds. Oh lord, the stress.

Customers and workers today are confronted with a radically different tipping culture compared to just a few years ago - without any clear norms. Although consumers are accustomed to tipping waiters, bartenders and other service workers, tipping a barista or cashier may be a new phenomenon for many shoppers. It's being driven in large part by changes in technology that have enabled business owners to more easily shift the costs of compensating workers directly to customers.

"I don't know how much you're supposed to tip and I study this," said Michael Lynn, a professor of consumer behavior and marketing at Cornell University and one of the leading researchers on US tipping habits.

Adding to the changing dynamics, customers were encouraged to tip generously during the pandemic to help keep restaurants and stores afloat, raising expectations. Total tips for full-service restaurants were up 25% during the latest quarter compared to a year ago, while tips at quick-service restaurants were up 17%, according to data from Square.

The shift to digital payments also accelerated during the pandemic, leading stores to replace old-fashioned cash tip jars with tablet touch screens. But these screens and the procedures for digital tipping have proven more intrusive than a low-pressure cash tip jar with a few bucks in it.

Customers are overwhelmed by the number of places where they now have the option to tip and feel pressure about whether to add a gratuity and for how much. Some people deliberately walk away from the screen without doing anything to avoid making a decision, say etiquette experts who study tipping culture and consumer behavior.

Tipping can be an emotionally charged decision. Attitudes towards tipping in these new settings vary widely.

Some customers tip no matter what. Others feel guilty if they don't tip or embarrassed if their tip is stingy. And others eschew tipping for a $5 iced coffee, saying the price is already high enough.

"The American public feels like tipping is out of control because they're experiencing it in places they're not used to," said Lizzie Post, co-president of the Emily Post Institute and its namesake's great-great-granddaughter. "Moments where tipping isn't expected makes people less generous and uncomfortable."

Starbucks has rolled out tipping this year as an option for customers paying with credit and debit cards. Some Starbucks baristas told CNN that the tips are adding extra money to their paychecks, but customers shouldn't feel obligated to tip every time.

One barista in Washington State said that he understands if a customer doesn't tip for a drip coffee order. But if he makes a customized drink after spending time talking to the customer about exactly how it should be made, "it does make me a little bit disappointed if I don't receive a tip."

"If someone can afford Starbucks every day, they can afford to tip on at least a few of those trips," added the employee, who spoke under the condition of anonymity.

"Un-American"

The option to tip is seemingly everywhere today, but the practice has a troubled history in the United States.

Tipping spread after the Civil War as an exploitative measure to keep down wages of newly-freed slaves in service occupations. Pullman was the most notable for its tipping policies. The railroad company hired thousands of Black porters, but paid them low wages and forced them to rely on tips to make a living.

Critics of tipping argued that it created an imbalance between customers and workers, and several states passed laws in the early 1900s to ban the practice.

In "The Itching Palm," a 1916 diatribe on tipping in America, writer William Scott said that tipping was "un-American" and argued that "the relation of a man giving a tip and a man accepting it is as undemocratic as the relation of master and slave."

But tipping service workers was essentially built into law by the 1938 Fair Labor Standards Act, which created the federal minimum wage that excluded restaurant and hospitality workers. This allowed the tipping system to proliferate in these industries.

In 1966, Congress created a "subminimum" wage for tipped workers. The federal minimum wage for tipped employees has stood at $2.13 per hour - lower than the $7.25 federal minimum - since 1991, although many states require higher base wages for tipped employees. If a server's tips don't add up to the federal minimum, the law says that the employer must make up the difference. But this doesn't always happen. Wage theft and other wage violations are common in the service industry.

The Department of Labor considers any employee working in a job that "customarily and regularly" receives more than $30 a month in tips as eligible to be classified a tipped worker. Experts estimate there are more than five million tipped workers in the United States.

Tips on tipping

Just how much to tip is entirely subjective and varies across industries, and the link between the quality of service and the tip amount is surprisingly weak, Lynn from Cornell said.

He theorized that a 15% to 20% tip at restaurants became standard because of a cycle of competition among customers. Many people tip to gain social approval or with the expectation of better service. As tip levels increase, other customers start tipping more to avoid any losses in status or risk poorer service.

The gig economy has also changed tipping norms. An MIT study released in 2019 found that customers are less likely to tip when workers have autonomy over whether and when to work. Nearly 60% of Uber customers never tip, while only about 1% always tip, a 2019 University of Chicago study found.

What makes it confusing, Lynn said, is that "there's no central authority that establishes tipping norms. They come from the bottom up. Ultimately, it's what people do that helps establish what other people should do."

You should almost always tip workers earning the subminimum wage such as restaurant servers and bartenders, say advocates and tipping experts.

When given the option to tip in places where workers make an hourly wage, such as Starbucks baristas, customers should use their discretion and remove any guilt from their decision, etiquette experts say. Tips help these workers supplement their income and are always encouraged, but it's okay to say no.

Etiquette experts recommend that customers approach the touch screen option the same way they would a tip jar. If they would leave change or a small cash tip in the jar, do so when prompted on the screen.

"A 10% tip for takeaway food is a really common amount. We also see change or a single dollar per order," said Lizzie Post. If you aren't sure what to do, ask the worker if the store has a suggested tip amount.

Saru Jayaraman, president of One Fair Wage, which advocates to end subminimum wage policies, encourages customers to tip. But tips should never count against service workers' wages, and customers must demand that businesses pay workers a full wage, she said.

"We've got to tip, but it's got to be combined with telling employers that tips have to be on top, not instead of, a full minimum wage," she said.

Please note: The video at the top of this player is from a previous report