Tipping Leads to Racial Pay Disparities?

tipjar.jpgFrom Freakonomics by Ian Ayres in the New York Times:

A few years back, I got interested in taxicab tipping – and what influences how much people tip. So together with Fred Vars and Nasser Zakariya, I collected data on more than 1,000 cab rides in New Haven, C.T. and crunched the numbers. The study (published in The Yale Law Journal) found — after controlling for a host of other variables — two independent racial effects:

1. African-American cab drivers, on average, were tipped approximately one-third less than white cab drivers.

2. African-American and Hispanic passengers tipped approximately one-half the amount white passengers tipped.

African-American passengers also seemed to participate in the racial discrimination against African-American drivers. While African-American passengers generally tipped less, on average they also tipped black drivers approximately one-third less than they tipped white drivers . . . .

However, a new study co-authored by the world’s leading number cruncher on tipping, Michael Lynn, has found a similar effect in a Southern restaurant. His article, “Consumer Racial Discrimination in Tipping: A Replication and Extension” is based on 140 surveys that he and his co-authors:

collected during three lunch shifts (11:00 a.m. to 4:00 p.m.) at a [large national chain] restaurant located in the southern United States.

Focusing on just blacks and whites, the study once again found that:

Consumers of both races discriminated against black service providers by tipping them less than white service providers.

Ayres then gives us the employment discrimination law angle: “But as a law professor what is most interesting about Lynn’s article is his suggestion that an employer might be held liable under Title VII of the Civil Rights Act for establishing a tipping policy that has a disparate impact against African-American employees . . . But the harder question is whether the racial disparate impact of tipping is legally justified by the legitimate interest of businesses to enhance customer service.”

Very thought-provoking article, with some interesting tidbits about the history of tipping practices in this country. Should tipping be curtailed to prevent discriminatory impacts in pay practices?

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9 Responses

  1. Scote says:

    We tend to give to people we identify with, so this comes a surprise to me that both blacks and whites discriminated against black service providers.

    Frankly, I think we should do away with tipping in this country. “Tips” are rarely such, except in bars. You are “expected” to tip 15% in restaurants practically regardless of service and “Mandatory Gratuities” of 18%-20% are automatically added to the bills of large parties, as well as to hotel room service and cruise ship bills. Although these mandatory “gratuities” are sometimes referred to more properly as “service charges” even that makes no sense since you are **already paying for the service** and the “service charge” is just an “extra charge.”

    There is no rational reason, for instance, why some Sky Caps performing curbside check in should make 6 figure incomes thanks to tips while ticket agents inside performing check ins and more do not.

  2. Scote says:

    BTW, I should point out that in the Sky Cap analogy the Sky Caps used to have a very high percentage of African Americans and the inside Ticket Agents use to have more Caucasians. So, in that case, some African Americans were making more money than Caucasians thanks to tips. But, I wouldn’t think, on balance that tips benefit minorities over Caucasians nor do I have metrics to prove my conjecture.

  3. Hazel says:

    In my experience the best tippers are drunk politicians.

  4. AYY says:

    Curtail tipping? I guess when everyone has nothing, everyone is equal.

    As far as employers establishing a tipping policy, whatever does this mean? Employers don’t establish tipping policies. Tips are voluntary. And in those cases where the tip is included in the bill, then all the employer has to do is to distribute it fairly.

    But I also have to wonder about the data. New Haven, huh? That’s not all that representative of the country as a whole. And how do they accurately know how much the tip was?

  5. Scote says:

    “As far as employers establishing a tipping policy, whatever does this mean? Employers don’t establish tipping policies.”

    Of course they do. Do you tip at a McDonnalds? Is there a tip jar they way many counter order restaurants and coffee houses do? No.

    As to sit down restaurants, the employer is free to pay the employees non-tipped minimum wage (higher than the minimum for tipped employees) and put “No Tipping Allowed” (or something punctually equivalent) on the menu and posted in the restaurant.

    As to distributing a tip fairly, how do you do that? Should the wait-staff make all the money, just the wait and table bussing staff? The kitchen and wait staff? What about the guy who comes in after-hours and cleans the grease traps? How about the on-duty manager?

    Tipping is a schizophrenic endeavor that rewards an arbitrary class of people over others who work just as hard.

  6. AYY says:

    Scote,

    I think you missed my point. Having a tip jar out is not creating a tipping policy. As for the sit down restaurant, the employer can say no tipping allowed, but that’s a no tipping policy.

    That’s the only policy that can be imposed (if that’s the right word) on customers. The only policy the employer can impose on customers is tips allowed vs. tips not allowed.

    As for the questions about who gets the tips, yesthose are valid questions, but even granting that point, it’s not a reason not to tip. Besides the issue in the post was fairness by race. In the cab driver situation, the questions you raised don’t arise.

  7. Scote says:

    “Having a tip jar out is not creating a tipping policy.”

    I consider whether tips are allowed to be the first and most important part of a “tipping policy,” especially since it is the issue at hand. If no tipping is allowed then there is no tipping disparity based on race. Granted, it is a sledge hammer solution but it is 100% effective if race based tipping is unequal.

    In the cab driver situation, the issue is harder because most cab drivers are independent contractors who rent the cabs from the cab company, they just look like employees to customers. On that basis there is no employer liability and I don’t know what could be done about disparities. I also don’t know to what degree tipping actually encourages better or faster service, if at all, with cab drivers. I always tip 15-20%, regardless of race, mind you, but I don’t know that I ever get anything from that time since I never do repeat business and the driver has no idea if I’ll tip or not. Just more reason why I consider tipping arbitrary classes of people to be schizophrenic endeavor that should go away.

  8. New Haven huh? So the Yalies are sticking it to black cabbies after sticking it to unions all these years? No wonder Justice Thomas is so down on his years there.