[THE VIEW]Kiosks Without Tips: Are Prices Adjusted Accordingly?

Tipping Culture in the U.S.: Consumers Pay Labor Costs Directly
In Korea, Labor Costs Are Included in Prices and Borne by Business Owners
The Rise of Kiosks Brings a Shift in Responsibility
Price Reductions Still Not Noticeable in Restaurants and Stores

There are various costs involved in producing goods or providing services. Consumers do not know, nor do they need to know, how much of these costs are labor costs, material costs, or rent. However, in the United States, there is a case where consumers need to be well aware of the costs, and that is tipping.

In Korea, labor costs are included in the price, whereas in the U.S., labor costs are often not included in the price depending on the service. For example, in a restaurant, the labor cost for a server to bring food and clear the dishes after eating is not included in the food price. Therefore, restaurant customers pay the food price separately and pay the labor cost to the server under the name of a "tip." While tipping in Korea is optional, in the U.S., tipping is a cost that consumers who use the service are expected to pay.

Because there is an implicit rule that consumers must tip, employers hardly pay minimum wages to servers. Although it varies by state, if the general minimum wage is set at around $10, the minimum wage for servers is about $2. This is because employers do not need to pay high wages initially, as customers will tip anyway. Therefore, sometimes servers complain to customers who are unfamiliar with the tipping culture and leave too little tip.

The author has lived in the U.S. for over 10 years but still does not prefer the tipping culture. From a consumer's perspective, it seems that the responsibility for labor costs is shifted from the employer to the consumer. Moreover, since the tipping standards vary by industry and the level of service provided by the server also differs, consumers have to endure the hassle of figuring out and calculating labor costs one by one.

For example, in a typical restaurant, about 20% of the food price should be given as a tip, but if the service was unsatisfactory, sometimes 15% is given. However, at places like buffets where servers do not bring food, only about 10% tip is required. In general cafes, tipping is not necessary. For beauty-related industries, about 10% tip should be paid. However, if a group of six or more uses the service, the establishment may include a uniform tip in the bill. Therefore, for group customers, a tip may already be included in the bill, so no additional tip is needed.

The tipping culture, where consumers have to pay labor costs separately from the posted price, may be unfamiliar to Koreans. However, recently in Korea, cases where labor costs that should be borne by employers or sellers are shifted to consumers are increasing. Previously, tasks such as taking orders and handling payments were performed by servers, and labor costs were paid by the establishment accordingly. But after the introduction of unmanned machines, these tasks are now performed entirely by consumers. Of course, unlike tipping, consumers do not have the hassle of calculating these costs one by one. Still, it is similar in the sense that employers do not internalize part of the service labor costs.

But does the cost shifted to consumers by introducing unmanned machines actually reflect in the price? In the case of self-service gas stations, the fuel price seems generally cheaper, suggesting that cost savings are reflected in price reductions. However, it still seems difficult to feel price changes in regular restaurants or supermarkets.

Seo Boyoung, Professor at Indiana State University, USA

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