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The modern, often contentious, practice of tipping did not originate in the bustling diners or digital payment screens of the United States. Its antecedents lie in the rigidly stratified social structures of medieval and early modern Europe, where it functioned not as a wage system but as a complex social ritual reinforcing class hierarchy. Understanding these origins is paramount, as they reveal that tipping was born as a discretionary performance of status, a foundation that would later be warped to serve entirely different economic and racial purposes upon its transplantation to America.
The earliest forms of what we might recognize as tipping can be traced to the feudal era in Europe.1 It was a custom embedded in the relationship between the landed aristocracy and the servant class. Wealthy lords and ladies, when visiting other aristocratic manors, would bestow small sums of money, known as "vails," upon the host's servants.3 This was not an expected or necessary component of the servants' income but rather a gratuity given for performance that was deemed exceptionally good.5
However, the primary motivation was not merely to reward labor. The act of giving a vail was a public performance of social superiority. It was a mechanism for aristocrats to "flex their wealth" and affirm their elevated status over the serving class.7 In this context, the tip was less a "thank you for your hard work" and more a demonstration of largesse and power, a gesture that reinforced the vast social and economic chasm between the giver and the receiver.7 By accepting the vail, the servant acknowledged their subordinate position, completing a ritual that solidified the existing class structure. Some historical accounts suggest a more transactional, though still power-laden, origin, where feudal lords would toss coins to beggars or potential highwaymen along the road to ensure safe passage—an act of preemptive appeasement rather than post-service gratitude.1 In either case, the fundamental dynamic was one of hierarchy, not a peer-to-peer exchange for services rendered.
As European society evolved, this aristocratic custom migrated from the private manors of the nobility into the burgeoning commercial spaces of the 17th and 18th centuries, such as English taverns and coffeehouses.2 This transition marked a critical, albeit subtle, evolution in the nature of the tip. In these new commercial settings, the relationship between patron and server was transactional, not feudal. The act of tipping began to shed some of its purely aristocratic character and take on a more instrumental purpose.
It was in this environment that the term "tip" is said to have gained currency. One popular, though likely apocryphal, etymology suggests it originated as an acronym for the phrase "To Insure Promptitude," which was supposedly written on bowls in London coffeehouses where patrons could drop coins.2 While the linguistic accuracy of this origin story is debated, its thematic significance is undeniable. It captures the functional shift in tipping's purpose: from a reward for past excellence to an inducement for future promptness. The gesture was no longer just a backward-looking acknowledgment of superb service but a forward-looking tool to influence the quality and speed of service yet to be rendered. This introduced a quasi-transactional, almost coercive, element that blurred the line between a gift and a bribe—an ambiguity that would become a defining feature of its distorted American form. This new dynamic, where a tip could be used to secure better treatment, laid the groundwork for a system where the gesture, while still framed as voluntary, was increasingly underpinned by social and economic pressure.
The transplantation of tipping to the United States in the 19th century was not a seamless cultural transfer. Instead, it ignited a fierce ideological and economic battle that exposed deep-seated anxieties about class, democracy, and race. The ultimate entrenchment of tipping in America was not a cultural inevitability but the direct result of its profound utility as a tool for racial and economic exploitation in the tumultuous aftermath of the Civil War. While Europe, its place of origin, would largely move away from the practice, the United States would embrace and legally codify its most exploitative form, creating a unique and enduring system of labor that continues to shape the nation's service economy.
Wealthy Americans traveling abroad in the 1850s and 1860s encountered the European custom of tipping and brought it back to the United States, viewing it as a marker of sophistication and aristocratic flair.5 However, their enthusiasm was not shared by the general public. The practice was met with immediate and widespread hostility, condemned as fundamentally "un-American".5 Critics argued that tipping was a "vile imported vice" that replicated the rigid class hierarchies of feudal Europe, an ideology that the new democratic republic had ostensibly been founded to reject.12 The core of the American ideal was that citizens should be paid a fair wage for their labor by their employer, not be forced to rely on the discretionary and often condescending handouts of customers.7 Tipping was seen as creating a "servile class" of workers, a concept antithetical to the principles of an egalitarian society.12
This opposition was not merely rhetorical; it coalesced into an organized anti-tipping movement. Between 1909 and 1926, six states—Washington, Arkansas, Iowa, South Carolina, Tennessee, and Georgia—passed laws making the practice of tipping illegal.2 The intellectual foundation for this movement was articulated in William R. Scott's influential 1916 book,
The Itching Palm: A Study of the Habit of Tipping in America. Scott systematically dismantled the practice, labeling it "democracy's mortal foe" and a form of "Flunkyism," which he defined as a "willingness to be servile for a consideration".12 This period represented a genuine ideological struggle over the nature of service and labor in a democracy.
While the anti-tipping movement was fighting on ideological grounds, powerful economic forces were pushing in the opposite direction, driven by the profound social upheaval of the post-Civil War era. The abolition of slavery through the 13th Amendment created a new class of millions of freed Black workers seeking employment. Industries with a high demand for service labor, particularly restaurants and the burgeoning railroad sector, saw an opportunity to hire this new workforce at minimal cost.5 They seized upon the controversial custom of tipping and fundamentally distorted its purpose. Instead of being a bonus paid by a customer
in addition to a wage paid by the employer, the tip became a substitute for the wage itself.11 Employers, especially in the South, "hired" newly emancipated Black men and women with the explicit understanding that they would receive no formal pay and would have to subsist entirely on the gratuities of a predominantly white clientele.8
This practice was racially coded from its inception. It allowed employers to continue exploiting Black labor while absolving themselves of the responsibility of providing a living wage. The system also perpetuated the social hierarchy of slavery, forcing Black workers into a position of dependence and servility. The racialized nature of the practice was openly acknowledged at the time. As one journalist observed in 1902, "one expects Negroes [to] take tips … it is a token of their inferiority. But to give money to a White man was embarrassing to me".19 Tipping was thus transformed into a tool of post-slavery economic and social control.
A primary vector for nationalizing this exploitative model was the Pullman Palace Car Company. Founded by George Pullman, the company built and operated luxury railcars and almost exclusively hired Black men—many of them former slaves—to work as porters.5 Pullman saw them as "perfectly trained servants" who would work long hours for cheap wages.9 He paid them a pittance—as little as $27.50 a month in 1915 for what was often 400 hours of work—and explicitly structured their compensation to be dependent on tips from white passengers.9 This strategy saved the company millions of dollars in labor costs and was instrumental in spreading the American model of tipping across the country, institutionalizing a system of servility that linked service work with racial subordination.8 The economic advantages of this model for powerful corporate interests ultimately proved more potent than the ideological arguments of the anti-tipping movement, leading to the repeal of all state-level bans by 1926 and the firm entrenchment of the practice in the American economy.9
What began as a racially charged, post-war labor strategy was soon solidified into the bedrock of the American service economy through a combination of economic pressures and landmark federal legislation. The practice of tipping as a wage substitute, once a contentious and informal arrangement, became legally codified and vigorously defended by powerful industry lobbies. This process created the two-tiered wage system that defines and disadvantages millions of American service workers to this day, a system unique in the developed world.
A critical turning point in the institutionalization of tipping was the era of Prohibition in the 1920s.9 With the nationwide ban on the sale of alcoholic beverages, restaurants and hotels lost a primary source of revenue. Facing severe financial strain, these businesses fully embraced tipping as an essential part of their economic model. It allowed them to subsidize labor costs and keep menu prices artificially low, which was crucial for attracting customers in a difficult economic climate.7
During this period, the industry's attitude toward tipping shifted dramatically. What was once seen by some proprietors as a form of bribery or a necessary evil became an indispensable tool for survival and profitability.9 Management began to actively encourage the practice, and the public, facing fewer alternatives, gradually accepted it as a standard part of the dining experience. This economic crisis effectively cemented tipping's role not as a bonus for good service, but as a core component of the business model, shifting the burden of employee compensation squarely onto the shoulders of the consumer.
The informal, exploitative system of tipping was given the full force of federal law with the passage of the Fair Labor Standards Act (FLSA) in 1938. While this landmark New Deal legislation established the first-ever federal minimum wage, it explicitly excluded tipped workers from its protections.5 At the time, the tipped workforce was composed predominantly of Black women, and this exclusion effectively codified the discriminatory practices that had become widespread since Reconstruction.27 For the first time, the federal government legally sanctioned a system in which an entire class of workers could be paid a wage of $0 by their employer, so long as tips covered the difference.
This two-tiered system was further entrenched in 1966 with an amendment to the FLSA that created the "tip credit".5 This provision legally allows employers to pay a "subminimum wage"—an hourly rate below the standard federal minimum—and count employees' tips toward their obligation to pay the full minimum wage. The term "tip credit" is itself a misnomer; it is not a credit for the worker but a direct subsidy for the employer, who is permitted to use customer generosity to offset their own labor costs.
The final, and perhaps most damaging, legislative action occurred in 1996, when Congress froze the federal tipped subminimum wage at $2.13 per hour, where it has remained ever since.5 This act permanently decoupled the tipped wage from the standard minimum wage. As the standard minimum wage has risen over the decades, the employer's cash wage obligation has remained fixed, meaning the portion of the wage covered by customer tips—the tip credit—has grown ever larger. In 1991, the $2.13 tipped wage was 50% of the standard minimum wage; today, it is less than 30%.31
The preservation of this highly advantageous system for employers has been the primary objective of one of the nation's most effective lobbying forces: the National Restaurant Association (NRA). For decades, the NRA has spent millions of dollars on lobbying and campaign contributions to fight against any increases to the tipped minimum wage at both the federal and state levels.32 The organization was instrumental in the 1996 freeze and has successfully defeated numerous attempts to pass legislation like the Raise the Wage Act, which would phase out the subminimum wage.32
The NRA's core arguments assert that the tip credit system benefits everyone: servers earn high wages (with the NRA citing a median of $19-$27 per hour), operators can afford to hire more staff, and customers enjoy lower menu prices.32 They contend that eliminating the tip credit would force restaurants to raise prices dramatically, cut jobs, and ultimately harm the very employees the policy is intended to help.32 This narrative, backed by significant political spending, has proven highly effective in maintaining the legal status quo, despite growing evidence of the system's harms.
The legal framework surrounding tipping in the United States creates a complex and often misleading reality for service workers. While the law technically requires employers to ensure that an employee's cash wage plus tips equals at least the full minimum wage, this guarantee is frequently illusory. The system's convoluted nature, which varies significantly by state (as shown in Table 1), places the burden of tracking hours and tips squarely on the employee. Coupled with weak enforcement and the inherent power imbalance between low-wage workers and their employers, this structure creates an environment where wage theft is not just possible, but pervasive. The tip credit system, born from a history of racial exploitation and solidified by powerful corporate interests, functions less as a wage guarantee and more as a legal fiction that enables the systematic underpayment of millions of service workers.
| State | Standard Minimum Wage ($) | Tipped Minimum Wage ($) | Maximum Tip Credit ($) | Tip Credit as % of Standard Minimum Wage |
|---|---|---|---|---|
| Federal | 7.25 | 2.13 | 5.12 | 70.6% |
| Alabama | 7.25 (Federal) | 2.13 | 5.12 | 70.6% |
| Alaska | 11.91 | 11.91 | 0.00 | 0.0% |
| Arizona | 14.70 | 11.70 | 3.00 | 20.4% |
| Arkansas | 11.00 | 2.63 | 8.37 | 76.1% |
| California | 16.50 | 16.50 | 0.00 | 0.0% |
| Colorado | 14.81 | 11.79 | 3.02 | 20.4% |
| Connecticut | 16.35 | 6.38 (Hotel/Restaurant) | 9.97 | 61.0% |
| Delaware | 15.00 | 2.23 | 12.77 | 85.1% |
| District of Columbia | 17.50 | 10.00 | 7.50 | 42.9% |
| Florida | 13.00 | 9.98 | 3.02 | 23.2% |
| Georgia | 7.25 (Federal) | 2.13 | 5.12 | 70.6% |
| Hawaii | 14.00 | 13.00 | 1.00 | 7.1% |
| Idaho | 7.25 | 3.35 | 3.90 | 53.8% |
| Illinois | 15.00 | 9.00 | 6.00 | 40.0% |
| Indiana | 7.25 | 2.13 | 5.12 | 70.6% |
| Iowa | 7.25 | 4.35 | 2.90 | 40.0% |
| Kansas | 7.25 | 2.13 | 5.12 | 70.6% |
| Kentucky | 7.25 | 2.13 | 5.12 | 70.6% |
| Louisiana | 7.25 (Federal) | 2.13 | 5.12 | 70.6% |
| Maine | 14.65 | 7.33 | 7.32 | 50.0% |
| Maryland | 15.00 | 3.63 | 11.37 | 75.8% |
| Massachusetts | 15.00 | 6.75 | 8.25 | 55.0% |
| Michigan | 10.56 | 4.01 | 6.55 | 62.0% |
| Minnesota | 11.13 | 11.13 | 0.00 | 0.0% |
| Mississippi | 7.25 (Federal) | 2.13 | 5.12 | 70.6% |
| Missouri | 13.75 | 6.88 | 6.87 | 50.0% |
| Montana | 10.55 | 10.55 | 0.00 | 0.0% |
| Nebraska | 13.50 | 2.13 | 11.37 | 84.2% |
| Nevada | 12.00 | 12.00 | 0.00 | 0.0% |
| New Hampshire | 7.25 | 3.27 | 3.98 | 54.9% |
| New Jersey | 15.49 | 5.62 | 9.87 | 63.7% |
| New Mexico | 12.00 | 3.00 | 9.00 | 75.0% |
| New York | 16.00 (NYC/LI/Westchester) | 10.65-13.35 | 2.65-5.35 | Varies |
| North Carolina | 7.25 | 2.13 | 5.12 | 70.6% |
| North Dakota | 7.25 | 4.86 | 2.39 | 32.9% |
| Ohio | 10.70 | 5.35 | 5.35 | 50.0% |
| Oklahoma | 7.25 | 2.13 | 5.12 | 70.6% |
| Oregon | 14.70 (Standard) | 14.70 | 0.00 | 0.0% |
| Pennsylvania | 7.25 | 2.83 | 4.42 | 61.0% |
| Rhode Island | 15.00 | 3.89 | 11.11 | 74.1% |
| South Carolina | 7.25 (Federal) | 2.13 | 5.12 | 70.6% |
| South Dakota | 11.50 | 5.75 | 5.75 | 50.0% |
| Tennessee | 7.25 (Federal) | 2.13 | 5.12 | 70.6% |
| Texas | 7.25 | 2.13 | 5.12 | 70.6% |
| Utah | 7.25 | 2.13 | 5.12 | 70.6% |
| Vermont | 14.01 | 7.01 | 7.00 | 49.9% |
| Virginia | 12.41 | 2.13 | 10.28 | 82.8% |
| Washington | 16.66 | 16.66 | 0.00 | 0.0% |
| West Virginia | 8.75 | 2.62 | 6.13 | 70.1% |
| Wisconsin | 7.25 | 2.33 | 4.92 | 67.9% |
| Wyoming | 7.25 (Federal) | 2.13 | 5.12 | 70.6% |
Data compiled from U.S. Department of Labor and state-level sources as of early 2025. Some states have different rates based on employer size or location; standard rates are shown for simplicity.28
In the 21st century, the American tipping system has mutated further, driven by technological innovation, the economic shocks of a global pandemic, and the rise of the gig economy. These forces have created what is now commonly known as "tipflation" and "tip creep," phenomena that have further detached the act of tipping from its ostensible purpose of rewarding good service. The modern tip has become a mandatory, often psychologically coercive, surcharge that generates widespread anxiety for consumers and deepens the economic precarity for workers, representing the most distorted version of the practice to date.
The primary public justification for the American tipping model is that it incentivizes excellent service. However, a substantial body of research in behavioral economics and social psychology reveals this premise to be largely unfounded.40 Studies consistently show that the quality of service has only a minimal effect on the size of the tip. Variations in customer perceptions of service quality account for as little as five percent of the variance in tip percentages.45
Instead, tipping behavior is overwhelmingly driven by other factors. The single most powerful predictor of a tip's dollar amount is the size of the bill, which accounts for approximately 70% of the variability—far more than all other factors combined.45 The true motivators are psychological and social: consumers tip to conform to social norms, to gain social approval, and to avoid the feelings of guilt and embarrassment associated with not tipping, or "stiffing," a server.40 Minor server actions that create a sense of personal connection or reciprocity—such as smiling, writing "Thank you" or drawing a smiley face on the check, or making a light, non-invasive physical touch—have been shown to increase tips far more effectively than the actual quality of the food or service rendered.46 This evidence fundamentally debunks the incentive-based argument for tipping, revealing it instead as a system of social compliance.
The COVID-19 pandemic acted as a powerful accelerant for the distortion of tipping norms. Initially, the crisis prompted a surge in generosity, with consumers tipping more as a gesture of solidarity and hazard pay for essential service workers who were risking their health.49 However, this "groundswell of appreciation" was short-lived and soon gave way to widespread "tipping fatigue".52
This fatigue was a direct response to two concurrent phenomena: "tipflation" and "tip creep".54 Tipflation refers to the dramatic increase in suggested tip percentages, with default options on payment screens often starting at 20% or 25% and going as high as 30%.52 Tip creep describes the aggressive expansion of tipping requests into nearly every corner of the service economy, including counter-service coffee shops, takeout counters, retail stores, and self-service kiosks—places where tipping was previously rare or nonexistent.53 A 2023 survey found that 72% of Americans say they are being asked to tip in more places than they were five years ago.53
A primary driver of both tipflation and tip creep has been the proliferation of digital point-of-sale (POS) systems, such as tablets from companies like Square and Toast.54 These devices have fundamentally re-engineered the social dynamics of the tipping transaction. Instead of a discreet moment where a customer decides on a tip in private, the transaction is now often a public performance. The tablet is swiveled toward the customer, displaying large, pre-set tip options, while the employee and other customers in line watch.54
This process leverages powerful psychological biases. The pre-set percentages act as an "anchor," a cognitive bias where people rely heavily on the first piece of information offered when making a decision.46 The public nature of the transaction creates immense social pressure, leading to what is now called "guilt tipping"—the act of leaving a gratuity not out of appreciation, but to avoid the shame or awkwardness of selecting "no tip" or a lower amount under the gaze of the worker.54 This technological intervention has been remarkably effective at shifting norms; one survey found that 78% of Americans now report that tipping no longer feels optional.55 Technology has thus weaponized the social pressure inherent in the tipping custom, transforming it from a voluntary act into a psychologically coercive surcharge.
The rise of the gig economy has introduced yet another layer of distortion. Platforms like Uber, DoorDash, and Instacart initially resisted incorporating tipping, promoting the appeal of a seamless, cashless transaction.57 However, in order to keep their base pay rates to workers low, most platforms eventually integrated in-app tipping, making workers highly dependent on gratuities for a significant portion of their income—often as much as 50%.58
This has created a uniquely problematic dynamic. The impersonal, transactional nature of app-based interactions erodes the social norms and face-to-face pressure that traditionally compel tipping.57 Customers feel less obligated to tip a faceless driver they may never see again. This has led to new forms of exploitation, such as "tip baiting," a practice where a customer on a platform like Instacart promises a large tip to ensure their order is accepted and delivered quickly, only to reduce or remove the tip after the service is complete.59 The result is a system where gig workers are more financially dependent on tips than ever, while the psychological and social mechanisms that encourage tipping are simultaneously weakened, leaving them in a state of extreme economic precarity.
The American tipping system, built on a history of racial exploitation and legally sanctioned by a two-tiered wage structure, inflicts tangible and far-reaching harm. This is not merely a system of flawed incentives; it is a self-reinforcing cycle of economic precarity, systemic discrimination, and workplace abuse. The data reveals a stark picture where the burdens of this model fall disproportionately on the most vulnerable workers, perpetuating the very inequalities it was designed to create over 150 years ago.
The tipped subminimum wage is a direct driver of poverty. Tipped workers are twice as likely to live in poverty compared to the general workforce.60 As detailed in Table 2, the disparity is starkly illustrated by comparing states that adhere to the federal $2.13 tipped wage with "One Fair Wage" states that have eliminated it. In states with the lowest tipped wage, the poverty rate for waitstaff and bartenders is 18.5%, significantly higher than the 11.1% rate in states where they are paid the full minimum wage before tips.61
This economic hardship is not distributed equally. The tipped workforce is overwhelmingly composed of women (nearly two-thirds) and disproportionately of people of color (40%).34 This demographic reality means that the harms of the system are concentrated on already marginalized groups. The practice of tipping itself is a conduit for discrimination. Multiple studies have confirmed that customers, whether consciously or unconsciously, discriminate in their tipping habits, with Black servers consistently receiving smaller tips than their white counterparts for the same quality of service.19 This racial bias in gratuities directly translates to a racial wage gap, further entrenching economic inequality.
The complexity of the tip credit system makes it a breeding ground for wage theft. While employers are legally obligated to make up the difference if a worker's tips plus their subminimum cash wage do not meet the full minimum wage, this rarely happens in practice. The burden of meticulously tracking hours and tips and then challenging an employer falls on the worker—an often intimidating prospect for a low-wage employee fearing retaliation.
The result is wage theft on an epidemic scale. A U.S. Department of Labor investigation of over 9,000 restaurants found that an astonishing 84% had wage and hour violations.31 Many of these violations involved employers illegally keeping tips or failing to pay workers the full minimum wage.31 One Fair Wage reported that 35% of tipped employees had experienced wage theft in the past year alone.63 Economists estimate that minimum wage violations alone cost American workers $15 billion annually—a sum greater than the value of all robberies, burglaries, and motor vehicle thefts combined.64 The convoluted nature of the tipped wage is not an accidental flaw; it is a feature that enables the systematic and widespread underpayment of service workers.
The economic precarity created by the tipped subminimum wage fosters a culture of sexual harassment. The restaurant industry is the single largest source of sexual harassment claims filed with the Equal Employment Opportunity Commission, with the accommodation and food service industry accounting for 14% of all claims despite making up only 7% of the workforce.66
The link is direct and causal. When workers, the majority of whom are women, must rely on customer tips to survive, they are forced into a position of subservience where they must tolerate inappropriate and harassing behavior to avoid jeopardizing their income.68 A 2021 study found that over 60% of tipped restaurant employees reported being sexually harassed.68 This power imbalance is exacerbated in states with the lowest tipped wages. Women working in states with the $2.13 subminimum wage are twice as likely to experience sexual harassment as their counterparts in One Fair Wage states.60 They are also three times more likely to be told by management to wear "sexier" or more revealing clothing to appeal to customers.72 The system effectively monetizes tolerance for abuse, making sexual harassment an expected and tolerated part of the job.
The American tipping system is thus an interlocking architecture of harm. The subminimum wage creates economic desperation, which forces a reliance on tips. This reliance, in turn, subjects workers to the racial and gender biases of customers and creates a power dynamic that enables rampant sexual harassment. The financial instability, racial and gender pay gaps, and toxic workplace culture are not separate problems but are interconnected consequences of a single, deeply flawed system rooted in a legacy of exploitation.
| Socio-Economic Indicator | Tipped Workers (Subminimum Wage States) | Tipped Workers (One Fair Wage States) | General U.S. Workforce |
|---|---|---|---|
| Poverty Rate | 14.8% (18.5% for waitstaff) | 11.7% (11.1% for waitstaff) | 6.2% (non-tipped workers) |
| Median Hourly Wage (incl. tips) | $9.57 | $11.44 | N/A |
| Workforce Demographics | |||
| % Female | ~67% | ~67% | ~47% |
| % People of Color | ~40% | ~40% | ~38% |
| Reported Wage Theft | High (84% of restaurants in violation) | Lower (but still present) | Varies by industry |
| Reported Sexual Harassment | High (2x more likely than OFW states) | Lower | Varies by industry |
Data compiled from reports by the Economic Policy Institute, One Fair Wage, and the U.S. Department of Labor. Figures represent the most recent available data, generally from the late 2010s to early 2020s.19
The manifest failures of the American tipping system have prompted a search for alternatives, ranging from radical overhauls by individual restaurateurs to systemic, policy-driven reforms. These efforts have met with varying degrees of success and failure, but together they illuminate a potential path toward a more stable and equitable model for service industry compensation. The evidence suggests that while culturally engineering the abolition of tipping has proven difficult, legally dismantling the exploitative structures that underpin it is a more viable and effective strategy.
In the mid-2010s, a wave of high-profile restaurateurs attempted to abolish tipping in their establishments, a movement spearheaded by Danny Meyer's Union Square Hospitality Group (USHG) in 2015.74 Under its "Hospitality Included" policy, USHG eliminated tip lines on receipts and raised menu prices by 15-25% to fund higher, stable hourly wages for all employees. The stated goals were noble: to create pay equity between the traditionally tipped front-of-house staff (servers, bartenders) and the non-tipped back-of-house staff (cooks, dishwashers), and to provide all employees with a predictable, professional salary instead of a precarious, tip-dependent income.75
Despite widespread media attention, the experiment was largely a failure. USHG reversed its policy in 2020, and other prominent restaurateurs who followed suit, including David Chang and Tom Colicchio, also reverted to tipping.76 The reasons for the failure were twofold. First, there was significant internal resistance from top-performing servers, who saw their total compensation decrease without the potential for high earnings on busy nights; USHG lost as much as 40% of its veteran front-of-house staff.76 Second, there was customer backlash. Even if the final cost of a meal was comparable, diners reacted negatively to the higher "sticker price" on the menu, a psychological phenomenon known as price anchoring.79 Similar experiments at the chain restaurant Joe's Crab Shack also failed and were quickly rolled back.74 These cases demonstrate the immense difficulty for individual businesses to unilaterally opt out of a deeply ingrained, albeit flawed, cultural and economic system.
As a middle ground, some restaurants have moved toward implementing mandatory service charges instead of relying on voluntary tips.81 These charges, typically a fixed percentage of the bill (15-23%), are legally considered restaurant revenue, not employee property like tips. This crucial distinction gives management the flexibility to distribute the funds as wages to all employees, including kitchen staff who are legally barred from traditional tip pools in many jurisdictions.81 Distribution models vary, including equal splits, allocations based on hours worked, or percentages based on job role.81
This model offers greater wage stability and equity than tipping but faces some of the same challenges as the no-tipping model, namely customer resistance to mandatory fees that feel like a tip but are not discretionary. Hybrid models are also emerging, which retain traditional tipping for most service but apply an automatic service charge for large parties or special events, offering a balance between the two systems.82
Perhaps the most successful and scalable approach has been the policy-driven effort of the One Fair Wage (OFW) movement. An outgrowth of the Restaurant Opportunities Center (ROC), OFW does not seek to abolish the cultural act of tipping. Instead, its goal is to abolish the legal mechanism that enables its exploitation: the tipped subminimum wage.85 The OFW campaign advocates for state and federal laws that would require all employers to pay all employees the full standard minimum wage, with tips being retained by the worker as a true gratuity on top of that base wage.
This policy-driven approach has achieved significant success. As of 2024, seven states—Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington—have eliminated their subminimum wage for tipped workers, and the District of Columbia is in the process of phasing it out.38 The economic impact in these states directly refutes the dire predictions of the restaurant lobby. Data shows that in One Fair Wage states, the restaurant industry has experienced stronger growth in both the number of establishments and the number of jobs compared to states that retain a lower tipped wage.31 Furthermore, tipped workers in these states earn higher median wages (even including tips), experience significantly lower rates of poverty, and report half the rate of sexual harassment compared to their counterparts in states with a $2.13 tipped wage.60
The failure of individual no-tipping experiments, contrasted with the success of state-level One Fair Wage laws, offers a clear lesson. Attempts to culturally engineer the end of tipping from within the industry are fraught with peril, facing resistance from both workers accustomed to the high-variance system and consumers resistant to transparent pricing. A more viable path forward is to change the legal framework. By eliminating the tip credit, policy can address the root cause of the system's inequities—the subminimum wage—while allowing the cultural practice of tipping to persist. This approach restores the tip to its original, pre-American distortion function: a voluntary bonus for excellent service, not a mandatory subsidy for an inadequate wage. It aligns the law with the public's professed understanding of what a tip ought to be, making it a more politically and economically sustainable solution.
The journey of the tip from a feudal gesture of aristocratic power to a coercive feature on a digital tablet is a uniquely American story. It is a narrative that reveals how a seemingly innocuous social custom can be systematically distorted to serve as a powerful tool for economic and racial subjugation. The modern American tipping culture is not an immutable or organic norm; it is a historical construct, born from the unresolved legacy of slavery, legally codified through discriminatory labor laws, fiercely defended by powerful corporate interests, and now amplified and further warped by coercive technology.
The evidence is unequivocal: the system is fundamentally broken. It has failed its primary public justification of incentivizing good service, as psychological research demonstrates that tipping is driven by social pressure and guilt, not merit. It has failed its workers, trapping millions—disproportionately women and people of color—in a cycle of poverty, wage instability, and rampant sexual harassment. And it has failed its customers, who are increasingly frustrated by the "tip creep" and "tipflation" that have transformed a gesture of gratitude into an opaque and obligatory surcharge.
The ongoing debate over tipping and wages is therefore not a trivial matter of restaurant economics. It is a critical battleground for labor rights, racial justice, and gender equity in the 21st century. The path toward a "correct" tipping culture, one that is fair to both workers and consumers, does not lie in shaming customers or in isolated, often unsuccessful, business experiments. It lies in policy reform. The success of the One Fair Wage movement in several states demonstrates that it is possible to create a more equitable system. By eliminating the legal fiction of the tipped subminimum wage, lawmakers can force employers to take primary responsibility for compensating their workers. This single policy change would restore the tip to its rightful place: a true, voluntary gratuity—an extra reward for a job well done, not a desperate mechanism for survival. Recalculating the cost of service to include a fair, livable wage for all workers is the necessary first step in undoing 150 years of a distorted and damaging legacy.