August 8, 2023

Why is tipflation everywhere and how to avoid it

Almost 50% of Canadians surveyed by Restaurants Canada reported paying more in tips. How can you manage tipflation?

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Why is tipflation everywhere and how to avoid it

Someone selects an amount to tip on a debit machine

In 2022, as we all started eating out at restaurants again, Canadians noticed tipflation happening across the country. Without warning, the unwritten rules of tipping had been changed. That standard of 15% for good service had seemingly crept up to 18%, 20% and, in some places, 30%. 

This is making already expensive meals almost unaffordable, and it’s starting to negatively impact servers. In the U.S., restaurant patrons are already tipping less, and we’re sure to see the same trends here soon: the majority of Canadians are already in favour of an end to tipping because of uncontrollable tipflation.

The old standard fifteen percent increased the bill but felt reasonable

If the service was great, you’d give more. If the service was poor, you’d leave 5–10 percent to make a statement. And you’d never not leave a tip because you knew servers relied on their tips.

These unwritten rules stuck for so long because they seemed fair. 

If you could afford to buy a $25.00 meal, you could afford to pay $28.75. And those $3.75 tips added up quickly for servers: a month’s worth of just those put over $700 cash in a server’s pocket after tip outs

Then tipflation hit

Have you noticed recently that 15% isn’t offered as an option on payment machines at restaurants anymore? Almost everywhere you go, the recommended tip starts at somewhere around 20%, and that is on the total amount of the bill, tax included.

For context, with a 20% tip, that $25.00 meal would now cost $30.00. And for many people, that jump is starting to feel unreasonable. 

But if you delve a bit deeper into the science of tipflation, you start to feel that maybe you don’t have to raise your tipping rates just because they said so. 

Tipflation is an exercise in the science of choice architecture

Choice architecture is the concept of presenting options in such a way as to encourage optimal choices.

We see examples of choice architecture all around us. Two notable examples are grocery store layouts that influence what you see first and therefore buy most, and opt-out options on emails, which are intentionally inconspicuous so fewer people see them.

A sub-theory of Choice Architecture is known as nudging, which is a more explicit method of getting people to make the desired choice. 

One common form of nudging is highlighting one of many choices as the best choice, like when an online subscription will point to one as the best value. 

Another, which is what’s happened with tipping, is when choices are presented as the only choices when the options are technically infinite.  

In the past, the machine asked if you wanted to tip and the percentage you wanted to pay. Today, it gives you suggestions that start at 18% and could go all the way up to 30%.

This change set a new standard out of the blue and left the door open for random increases. A 23% tip, which would equal the jump from 15% to the 18% that became the norm in 2017, would drive that $25.00 meal up to almost $31.00.

Of course, that $25.00 meal in 2017 might cost closer to $35.00 today due to inflation. And with 13% tax and a 23% tip, you’d be paying $47.60.

The Tipflation Multiplication

So far, we’ve only discussed restaurants because it’s where tipping is most common. But other kinds of businesses where tipping has been customary have caught on to Choice Architecture. As the world moves away from cash, hair salons, taxis or Ubers, bars, tattoo and massage parlors, hotels and even babysitters are starting to nudge customers with tipping options.

You don’t have to budge when they nudge. 

You can choose to enter your own tip amount, and you can use any system you want to figure out what you want to tip.  

One way might be to set a per cent to tip based on industry. For example:

  • 15–18% for restaurants
  • 15–18% for food delivery, especially in bad weather
  • 5–10% for hair salons
  • 5–10% for massages 
  • $2 for coat check

And if the establishment you’re at doesn’t offer you an option to choose your own tip structure, you’re more than within your rights to not leave a tip at all. In that case you should let someone at the establishment know why you’re not leaving a tip so they can correct their approach.

When else is it acceptable to not leave a tip?

The correct answer is that it should always be acceptable to not leave a tip because it’s your choice. But now that a digital tip option is being presented more frequently and more broadly, consider adopting these rules:

  • You don’t have to drop money into a coffee shop tip jar, no matter how colourfully they dress it up or how clever their pitch is.
  • You don’t have to tip at a fast-food restaurant — but think about rounding up your bill to support the charity they support.
  • You don’t have to tip at clothing stores, but you can if the person helping you really went above and beyond with their time or expertise.
  • You don’t have to tip at a bakery, butcher or fishmonger. A super positive Google review will help them more.
  • You don’t have to tip at hotels. But you should tip any bellhop who helps you carry your luggage.

What if you can’t afford a tip? 

Many opinions out there are variations of “if you can’t afford to tip, you can’t afford to eat out.” This is fundamentally untrue because tipping isn’t part of the cost and never has to be. 

A tip is a choice you make to show appreciation for service you thought was worth a few extra dollars, or gratitude for people you feel went above and beyond. If you can’t afford to pay more, you can show gratitude in many other ways: 

  1. Tell their manager about the great service you received
  2. Write a positive review online and call out exceptional people by name (make sure to get names before you leave)
  3. Passionately refer friends and family

And what about tipping on tax?

Many people forget to calculate their tip on the pre-tax amount of their bill and instead calculate their tip based on the taxed amount. Depending on your bill and the province you’re in, the unnecessary extra you pay in tip can add up quickly.

The tip you choose to pay is an appreciation of the effort put forward. Nothing more. Thinking of it as anything else will lead to growing tipflation, and that will eventually lead to fewer people going out to places they’re expected to tip.

Pushing back on tipflation by following your gut as to what is worthy of a tip and how much to give will help everybody win in the long run.

Do you have more questions?

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August 8, 2023

Why is tipflation everywhere and how to avoid it

Almost 50% of Canadians surveyed by Restaurants Canada reported paying more in tips. How can you manage tipflation?

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