US Companies Can't Raise Wages... "Keep the Tips"

Tip-Demanding Companies, 6% in 2019 → 16% This Year
41% of Consumers Say "Raise Salaries Instead of Relying on Tips"

There is criticism that American companies are shifting the burden they should bear by increasingly demanding tips from customers instead of raising employee wages. Consumers' dissatisfaction is growing as tips are requested not only at restaurants and bars where employees provide services but also at cookie and beverage shops, appliance repair businesses, and plant stores where little service is expected.

According to the Wall Street Journal (WSJ) on the 23rd (local time), a survey by Homebase, a US employee management software company, found that 16% of 517 small businesses require customers to leave tips at payment. This is nearly three times the 6.2% recorded four years ago in June 2019. Paychex, which provides payroll software to companies, reported that the proportion of employees covering part of their wages through tips increased from 5.6% in 2020 to 6.3% as of May this year.

Not only has the number of companies receiving tips increased, but the amount of tips paid by consumers has also risen. According to Gusto, a payroll information provider, which analyzed 300,000 small businesses, the average hourly tip received by service sector employees excluding restaurants increased by 30%, from $1.04 in 2019 to $1.35 as of June this year. Service industry workers earned $16.64 per hour in wages and $4.23 in tips in May, with tips accounting for one-fifth of total earnings.

Professor Seherazade Lehman of George Washington University said, "The US economy is increasingly relying on tips compared to before," adding, "This is becoming increasingly difficult to control. American companies are shifting the responsibility for raising employee wages onto consumers." US companies are struggling with labor shortages amid a booming job market. Although they need to raise wages to retain employees, growing management pressure is leading them to shift the burden onto customers by demanding tips. The logic companies use to justify requesting tips is that if wage increases increase corporate burdens, it could ultimately lead to higher prices for products and services.

Jonathan Morduch, a public policy professor at New York University, stated, "Companies are preparing for the possibility of a recession and do not want to be tied down by wage increases," adding, "Tips provide companies with much greater flexibility."

Consumer dissatisfaction is rising. Even stores with kiosks where customers pay themselves are being criticized for crossing the line by asking how much tip to leave on the kiosk screen during payment. According to a survey conducted by financial services company Bankrate in May with 2,400 Americans, consumers are tipping less than during the height of the COVID-19 pandemic. Forty-one percent of respondents said companies should raise employee wages rather than rely on tips.

Saru Jayaraman, director of the Food Labor Research Center at the University of California, explained, "Employers think it is wise to use the tip system instead of raising wages," but added, "(Excessive tip demands) upset consumers and force employees to handle the issue, which actually risks losing employees."

This content was produced with the assistance of AI translation services.