Home Markets Amid persistent inflation, low-income consumers are tipping less

Amid persistent inflation, low-income consumers are tipping less

by SuperiorInvest

Sweetly Bakery & Cafe in Battleground, Washington

Source: Irina Sirotkina

It’s the holidays, yet Americans are feeling a little less generous.

WITH inflation near record highs, cash consumers began tipping less—especially for fast-casual dining and takeout.

“Tipping is the first sign of reduced spending,” said Amanda Belarmino, assistant professor of hospitality at the University of Nevada, Las Vegas.

About 17% of Americans tip less because of inflation, while only 10% tip more, according to a recent survey of more than 1,000 people by PlayUSA. More than half, or 54%, also said they feel pressured to leave a tip at checkout on an iPad.

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“Since everything went up, we’ve seen a drop in tips,” said Irina Sirotkina, owner of Sweetly Bakery & Cafe in Battle Ground, Washington.

Like many other businesses, the bakery uses a contactless and digital payment method, which encourages consumers to leave a tip when paying. For each transaction, there are predetermined options ranging from 15% to 25%.

“We encourage people to tip, but of course it’s not mandatory,” said Sirotkina.

Although the average transaction at Sweetly is less than $20, meaning the tip would be a few dollars at most, fewer people leave anything at all.

“Only about 1 in 5 people tip,” Sirotkina estimated.

Fewer consumers tip 20% or more

Although many Americans said they will tip more than usual when business resumes after the Covid pandemicafter all, consumer habits haven’t changed much.

Tip 20% in a sit-down restaurant is still standard, say etiquette experts. There is less agreement, however, on the issue of tipping for takeaway coffee or a takeaway snack.

While tipping at full-service restaurants remained steady, averaging 19.6%. Toastis the latest report on restaurant trendstips in fast food restaurants fell slightly to 16.8% compared to the previous year.

When it comes to takeout, customers are tipping even less – now at an average of 14.4%, after earlier in the year pandemicToast found.

Only 43% of diners typically tip 20% or more, down from 56% last year, according to a separate report from the restaurant technology company. Popmenu found.

“Tipping behavior can fluctuate depending on market conditions,” said Brendan Sweeney, CEO and co-founder of Popmen.

Americans have ‘tip fatigue’

“Part of it is tip fatigue,” said Eric Plam, founder and CEO of Uptip, a San Francisco-based startup that aims to facilitate cashless tipping.

“During Covid, everyone was in shock and feeling generous,” Plam said. Now, “you’re starting to see people pull back a little bit,” he noted, especially when it comes to point-of-sale tipping, which encourages customers to tip even before they receive the product or service.

“It’s tipping at the point of sale that people resist the most,” he said, “it forces you to tip on the spot.”

Workers rely on tips as inflation outpaces wages

Tipping 15% instead of 18% may not seem significant, “but if you’re a server, 3% of your income makes a big impact,” Belarmino said.

In fact, the average wage for fast food and counter workers is $14.34 an hour for full-time workers and $12.14 for part-time workers — including tips — according to the latest data from the U.S. Bureau of Labor Statistics.

“Anyone who has ever worked in a restaurant knows how hard the daily grind can be and how important tipping is,” said Popmen’s Sweeney.

Since the transactions are increasingly cashlesshaving a way to tip service industry workers making minimum or below minimum wage is critical, Plam added.

A landmark law in California aims to raise the minimum wage up to $22 an hour for fast food and quick service workers in chains with more than 100 branches across the country. The current minimum wage in California is $15.50 an hour.

President Joe Biden and many Democratic lawmakers pushed for a $15 hourly minimum wage in the US

The current federal minimum wage is $7.25 an hour and has has remained unchanged since 2009.

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