On a Wednesday afternoon, my brother and I decided to have lunch at Red Robin. After enjoying a delicious meal, we used a tablet to pay, and it asked us for a tip. The default value? 20%. Just a few years ago, this would have been considered a huge tip. But nowadays, 20% and higher has become normal. And this new norm has created a widespread controversy over American gratuity culture, with many deeming it "toxic" and "out of control". While some argue we shouldn't tip so much, others say that we should tip even more. The real question now is, has tipping reached a tipping point? And how will it affect the economy?

According to a 2024 survey by CNBC, approximately 75% of Americans believe tipping culture has become out of control. There are many reasons for this, including tipping fatigue, expectations, and social pressure. Tipping has become expected in more places than it was several years ago, including ride-share and delivery services. Because tipping has become more of an expectation than a gesture of appreciation, customers often tip more due to feelings of obligation rather than good service. This is known as "guilt tipping", which has led to "tip fatigue". Americans, tired of being pressured into tipping more, have begun to resent "guilt tipping" and thus tip less. According to Toast's recent restaurant trends report, tipping at restaurants decreased in 2023 from five years earlier. Additionally, a recent survey  by the Pew Research Center found that 57% of American diners said they usually tipped 15% or less, with just 2% claiming they left gratuities greater than 20%. These surprising stats show that American tipping norms have severely backfired and will continue to if the problem isn't solved.

The main root of the problem comes down to COVID-19. It led to unemployment rates rising to a peak of 14.8% in 2020, as well as many businesses losing lots of money. While that number has gone down now, many restaurants are still struggling, and employee behavior has transformed. Now, more people are beginning to work from home. Businesses are having trouble hiring workers and therefore providing good service. Thus, they have resulted to increasing tips. Doing so allows them to not only reduce payroll expenses but gives people a bigger incentive to work. This shows that the intention of increasing tips was never bad from the start. By doing all this, businesses could continue providing services for their customers. However, while it worked in the beginning, businesses began taking advantage of this and upping their tip more and more. Now, it has escalated out of control. People have become so sick of being pressured into tipping large amounts that they are beginning to not use these services anymore, leading to businesses once again losing money and appeal.

It's quite clear that tipping has indeed, reached a tipping point. So what be done? How will the economy be affected? Well, it seems that businesses will have no choice but to lower tips in order to gain appeal once again. If tips stay the same or continue increasing, more people will stop using these services, leading to major problems. The economy could worsen a lot if American gratuity culture remains the same. However, to make up for the lowered tips, businesses could provide more rewards and bonuses to their workers, as well as leverage new technologies to improve the workers' conditions and tasks. By adopting these technologies, they could also save money on resources for certain processes, helping them earn more profit and continue running. Overall, I believe that workers deserve to be appreciated for their services, but it shouldn’t happen at the customer's expense. Workers should be tipped a good amount, and it's important to keep in mind there are other ways they can be appreciated besides tipping. Thus, businesses should focus on rewarding their workers for their good service in other ways besides tipping, through bonuses, rewards, and other forms of promotion.

One last thing I want to quickly address is how tipping could possibly lead to an AI revolution. As mentioned before, the reason people are upset about American gratuity culture is because they feel pressured to tip high amounts. However, if businesses begin using AI to do more and more of their services, people will not have to tip anymore. Thus, this tipping issue could potentially fuel a faster adoption of AI in businesses and in the industry, which would ultimately transform our economy and put an end to "tipping fatigue". Let me know your thoughts in the comments.