Why do we tip? The history of tipping

In the US people tip waiters almost 20% while in Argentina this number is reduced to 10%. In other countries like Japan, tipping is insulting. And then in Spain, the customer might even be considered to be tipped: if you are with a big group and brought enough business, you will probably get some digestive "chupitos" (drink shots) for free at the end of your meal. Secondly, why are servers tipped, but not doctors nor salesmen? (Actually, in Japan doctors are tipped, but not servers...) These and many other questions were very well posed by Mr. Pink in Reservoir Dogs.  

This begs the first question: why tip at all? History suggests that originally 16th century Europeans tipped in advance to obtain faster service. If you were in a hurry, you would put a few coins up front, making sure you are noticed so that you get better service. Some suggest there was a sign saying T.I.P., "To insure promptitude," which originated the word "tip". Others suggest it was actually a slang word that spread around. According to Michael Lynn, a professor at the Cornell University with over 50 academic papers on the topic, tipping in the US began in the late 1800’s, when wealthy Americans traveling abroad to Europe witnessed tipping and brought the aristocratic custom back with them to “show off.” 

But nowadays the social norm is that we tip afterwards. Waiters are supposed to provide good service in advance with the hope of getting tip as a reward. Nevertheless, it seems that people tip almost automatically, a rather fixed percentage (which might depend on the country). A study by Cornell University found that quality of service did not correlate much with service. So it seems we do not tip for good service. One thing that did correlate with tips was how attractive the waitress was (not for waiters though). Touching the patron's shoulder when delivering the check also seems to increase tips. So beware of touchy good-looking waitresses next time you are in a restaurant.

Second, why do you tip servers but not dry-cleaners? Why tip the hotel doorman, but not the person behind the reception desk? Why tip a baggage handler at the airport, but not the flight attendant?  There really seems to be no logical explanation for this. The U.S. is empirically tip-addicted, with 31 different services being tipped. On the other hand, Canada has around 26, Scandinavian countries between 5 and 10, Japan 4 and Iceland 0. Most of the world operates on the simple premise of a service charge or a fixed price, no tip expected. But not the US.

Being now in Japan, I can see that servers deliver food promptly even without a tip. The restaurant business does not run into chaos without tips. It seems that tipping is more of a social norm nowadays, rather unrelated to service, where some countries tip and some do not. Some services are tipped and others are not. But this social norm also seems to depend to the racial group of the customer. How much is enough for a tip? How much is too much?  In the US, only about a third of blacks say they tip in 15-20% range, compared to two-thirds of white. This might be mediated by their socioeconomic status (lower average education and income), but it does not explain it completely. 

Let me end with an open question I recently read. Suppose tipping had never been invented and you were starting a restaurant, would you use tipping as the way to compensate your best employees? Or all your employees? Would that be the system that you would pick in a vacuum to compensate your team? I guess not. But this rather odd system can become gigantic. For example, tips have been estimated to account for around for 40 billion dollars in the US, bigger than the GDP of almost half the countries in the world. 

Based on episodes by Planet Money and Freakonomics.