Transcript
Speaker: I'm Jane Williams. This is the Red Eye Podcast. You can hear our live broadcast on Saturday mornings from 10 till noon at 100.5 FM in the Lower Mainland.
Speaker: On the podcast today, Simon Peck joins me to talk about why we should ban tipping and enact a living wage. The number of businesses inviting us to tip their workers is growing all the time.
Speaker: Tipping used to be restricted to full service restaurants, but now it's spread to coffee chains and fast food joints. A new analysis published by BC Policy Solutions proposes that it's time to finally ban tipping in Canada and enact a living wage.
Speaker: Simon Peck is one of the authors of the piece along with Alex Hemingway and Bruce McAdams. Simon Peck is associate professor at the Gustafson School of Business at the University of Victoria. And Simon joins me today. Hello. Hello.
Speaker: So how widespread is tipping? I mean, what kind of places might we now be invited to offer a tip? So I would say it's becoming more and more widespread. And so in this piece, we talk about two key trends that I think many of your listeners would be familiar with. So one is tipflation, where the tip percentages were being prompted for higher and higher. And in so doing, the tips themselves end up being higher. And then what's called tip creep, where we're we're being prompted to tip in more and more contexts.
Speaker: Well, let's talk about Tip Creek first of all. Where are the new locations? So I think it's coming up in a lot of different contexts. So in many cafes, in many limited service restaurants, we're seeing it in some retail establishments as well for some trade services. And also some very interesting cases we found like at a Yupik berry farm when picking up a graduation dress and even in some cases like liquor stores.
Speaker: So I would say it's happening in a wide variety of contexts where 10 or 15 years ago, most people would not have expected tipping to be common. Speaking from my own experience, when you're presented with, you know, you may be paying with a credit card and it's right there on the machine. It's hard in the moment to decide whether or not you want to tip in that location.
Speaker: Absolutely. and And that's one of the key factors that's at least partially responsible for this tip creep is the fact that it's very uncomfortable for us to say no. And the way we're being nudged is very effective because if you think about a cafe 15 years ago, right, where there was a tip jar, it was up to you to opt in to tip if you would like.
Speaker: But now you have to do the uncomfortable work of opting out, typically in front of a worker. So it's very hard to you know make your own independent choice about whether you would like to tip or how much you would like to tip.
Speaker: Talking about percentages, it seems like, as you say, they're just going up all the time. Definitely. So that's something that you know most of us would would have realized, especially since the beginning of the COVID-19 pandemic, where historically, you know people might say 15% of the before tax total would be you know reasonable tip. Now, in many cases, you see the minimum suggested tip be 18, sometimes 20%.
Speaker: So what's driving this change in the landscape of tipping? So I think there's a few ingredients that influence this shift. The first is, I think, during the, especially at the onset of the COVID-19 pandemic, there were a lot of folks that were interested in showing their appreciation for workers, those essential workers that were still there, providing a lot of important services like food, delivery, etc.,
Speaker: And then I would say also the rise of these payment platforms that enable tipping and make it very easy. It's very straightforward for any business right now, whether a food truck or a berry farm, to just add that tipping option. And if they're getting some interest from their employees to install that because their peers have the same option in their businesses, it's an option that's there and that's live right now.
Speaker: And i would say another factor is that, you know, it's very hard for businesses to increase wages right now. So they may not be able to or they might not want to. And creating a tipping system where you essentially shift the responsibility to pay for your workers, at least partially onto consumers, can be very attractive to those businesses.
Speaker: Now, one of the obvious downsides of tipping for workers is their income is not predictable. What are some of the other negative aspects that you found in tipping?
Speaker: So there's surprisingly quite a lot that have been pointed out in previous research. So one, as you mentioned, is the income volatility, which is a very important concern. That means it can be harder to qualify for things like mortgages, hard to plan your life.
Speaker: There's also a lot of research that points that people tip workers differently based not necessarily on the quality of their work or the service, but on things like their attractiveness or their race.
Speaker: And then tipping also can create a lot of friction among workers and sometimes between workers and management based on how tips are distributed. So it creates a lot of these consequences on workers.
Speaker: well Well, let's talk a little bit more about the problems within the workforce. How does that manifest itself in a business? So if you take a typical restaurant, and this is where our co-author Bruce McAdams did a lot of really cool work a few years ago, you can have the front of house and the back of house.
Speaker: And there's a lot of differences across businesses in terms of whether or not back of house employees get access to any of those tips, and if so, how So, know, as a customer, we might be thinking that was a great meal, we'll offer a 25% tip. And it could be the case that the person who actually made the meal and the person who cleans the dishes, etc. gets none of that or gets a very small proportion.
Speaker: So that can create a lot of tension between back of house and front of house workers over who gets the rewards for the work they've done. And then also even among, for example, front of house workers, depending again on how tips are distributed, it can create competition, for example, for the better tables or the more lucrative tippers. So less of a team environment and more of a focus on maximizing individual tips if tips are mostly kept by individual workers.
Speaker: And from my own experience, waitressing in restaurants, and it's also often can be controlled by the manager or by the person who's seating people, which front of house staff get the better opportunities.
Speaker: Exactly. So all these things can be you know very tricky for workers. So those kind of tensions among workers, let's say, but also for a lot of workers, just the fact that you're receiving tips can be quite uncomfortable.
Speaker: It can make people feel a reduced sense of dignity at work or a sense of you know autonomy that you you don't need handouts from customers to be able to make a living. And sometimes it also exposes workers to uncomfortable interactions with customers who might even unknowingly abuse their power.
Speaker: Do we know what customers think of the practice of tipping in general? I mean, we know what we personally think when we are customers, but has there been research into what customers in general think about tipping?
Speaker: So on that point, there's been two really powerful polls over the last few years that really motivated us to propose this alternative solution. And so historically, I would say in general, tipping was preferred by the majority of Canadians when polled in contexts like restaurants. So, you know, more than 50% of Canadians would say the tipping system as is works in this context, and there'd be a minority that would disagree.
Speaker: But as we've seen these trends of tip creep and tipflation, We've seen in a market shift where now a majority of Canadians would prefer shifting away from tipping to businesses being responsible for paying their employees full compensation.
Speaker: So that's a huge shift in Canadians' attitudes towards tipping. Now, I want to explore the model that you're proposing, but I just want to look at it for a moment from the point of view of employers, because you could see tipping as ah as a net gain for employers, but are there actually any downsides from a business's point of view?
Speaker: There definitely can be. So for example, some of those frictions and tensions we discussed, that affects managers a lot. And I think most managers in restaurants would find they have a very challenging role trying to orchestrate all these different teams of employees effectively. So that can be challenging.
Speaker: Some earlier research also points out that in restaurants, again, it's difficult to get people interested in becoming managers in a restaurant because you can often make a lot more money as a bartender or a server and in some cases.
Speaker: So that's not always easy if you want to have rigorous succession planning in place. And also there's growing research showing that customers are fed up, or many customers are fed up with businesses prompting for tips in context when tips are not expected.
Speaker: so there's a risk that you can go too far and that in prompting customers to tip, you'll get a lot of backlash. Now, you're calling for a ban on tipping and a raise in minimum wage to at least the level of the local living wage. Is there any evidence that customers would be prepared to pay higher prices and not tip?
Speaker: So what we're calling for in this piece is for Canadians and Canadian policymakers to seriously consider this shift because there's pros and cons to every model. But we think that it could be viable in a lot of cases, that it would overcome some of the downsides of tipping, and that it would be more aligned with what we're seeing in these polls, where at least in some polls, there's a majority of Canadians expressing an interest in such a model where employers would be responsible for their employees' full compensation.
Speaker: So I think it does address many concerns. Obviously, it has its own upsides and downsides, but it does seem to be aligned with this changing sentiment that we're seeing. I guess it's a classic example of where if one or two locations do it, they're vulnerable, but but you really need an overall shift. You really need that policy shift for it to work.
Speaker: That's one of the main reasons why we were interested in exploring what a band might look like. And you're absolutely right, because we, over time, see businesses experiment with no tipping throughout Canada and the US.
Speaker: And in many cases, they do fail. there's examples, for example, Beast Pizza in Toronto. is one where one of the owners was quite transparent about the challenges they faced. So you're right that if you go it alone and you increase prices, you likely have two consequences. One is that customers will experience sticker shock because they'll see that your prices are about 18 to 20% higher and not factor in the the reality that that already includes a tip. And you might also struggle to retain some staff if they're very attracted to potentially earning twice as much money with tips at a competing restaurant.
Speaker: But if you level the playing field and have that living wage floor, businesses are all kind of in the same boat in that case. How do you see this coming in at a policy level? Where would it come from?
Speaker: These are issues that technically do fall under provincial legislation. know When it comes to minimum wages, for example, or tipping, that's where these issues are addressed in the law. So it's feasible for a provincial government, for example, or the federal government for federally regulated workplaces to take aspects of this model or the model itself and implement it there.
Speaker: But of course, it would take a lot of attention and time and consideration consultation to make sure we get it right. But the minimum wage, in theory, could be raised to a living wage floor, and there could be bans, for example, on firms requesting tips.
Speaker: Well, it's a really interesting discussion. I'm going to point people towards your article. Thanks so much for talking with me today, Simon. It was great chatting with you. Thanks for your interest. I've been speaking with Simon Peck. He's associate professor at the Gustafson School of Business at the University of Victoria. And he's one of the authors, along with Alex Hemingway and Bruce McAdams, of a recent analysis on tipping published by BC Policy Solutions. You can find it at bcpolicy.ca.
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Speaker: I'm Jane Williams. Thanks for listening.
