Tipflation

by Jeffery A. Keill CFP, CIM, FMA,FCSI

In the past few months, I have been made to feel like a social stranger to the new world of post covid tipping practices. Am I the only one? Does anyone else feel like a disconnected member practicing the social grace of tipping recently? Let me explain for those who do not harbor the same strange feeling of society’s over-reach for what’s inside our wallets in what we call ‘tipflation’.

The history of gratuity or tipping goes back to ancient times such as The Roman Medieval Era. It was really formalized in the Renaissance period in Europe, as Lords would often provide “vails” (small amount of money) for services performed by their staff and servants. Tipping- a term which came from the act of tipping of one’s hat to acknowledge thanks, respect, and gratitude- became very commonplace in North American around the turn of the 20th century and after the major World Wars. Of course, the act of tipping had its detractors, who wanted to make ‘tipping’ illegal, as it was seen to be demeaning to workers and created inequity between employees. This denouncing of tipping was obviously not successful, as we are here today talking about “tipfaltion”

“Tipflation” is a term to describe the phenomenon of the ever-increasing expectations for tips or gratuities, often in service industries like restaurants or hospitality. This is done by societal pressures with which one may feel obliged to participate, with the non-compliant being outcasts and viewed as cheap and petty. It is done constructively with an upfront assault, as tipping option on electronic payments no longer offer historic percentage levels. It is also done in a more subtle way by non-traditional service providers now trying to engage in the tipping culture to help offset staff wage demands.

During the month of March, I made an effort to be aware of the socio- financial landscape and the march of the tip-parade towards my hard earned cash. It seems tipping has become a free-for-all activity-not ironically, not really “Free-For-all”. A famous submarine sandwich maker was now asking if I wanted to tip their Sandwich Artists. The local dealership asked if I wanted to tip the mechanic for the excellent oil change, along with the same obligatory request at every restaurant and fast food chain. The tip-attack was on me from several fronts. Strangely enough during the same period one of the longest standing and most respected professionals- my barber- did not even ask for a tip (although he sure did get one for having to work with a head like mine). To add insult to injury, not only are the tip-masters ever expanding in our world but they are also increasing the rate of the philanthropy expected. What has historically been a 10% tip over the past 50 years has now disappeared, sadly like the lowly penny and the theme of Hockey Night and Canada. Even the lowly option of “other” is slowly being erased from the electronic payment terminals. In there place are the newer, fancier rates of 15%, 18% and 20%.

Further exasperating is the fact that higher rates are also on the higher product and service costs. With inflation running in at a cumulative 15% since the ever enjoyable covid lockdown period and the increase in server minimum wages, the cost of $100 at a restaurant (or an oil change by a Sandwich Artist) is now $115. If a tip of 10% on $100 was $10 in today’s service standards, you might find yourself looking at 20% on a $115 table bill. That results in a whopping $23 tip on top of your $115 bill. Failure to engage in this expectation will surely mean risking bad table service next time, and the enjoyable sneer of disgust from your table mates (whom you likely and graciously bought their supper as they can’t afford to eat out anymore).

Food for thought. How do we measure the correct amount of tip anyway? Not easily done as service satisfaction is very subjective to the customer with a dash of quantitative metrics based on societal norms. For example- a customer would expect a certain level of service provided where we can set the “ satisfied” level at 100%. A customer could also expect a normal tipping rate of, say, 15%. Now lets think of being out at a restaurant where the bill is $100 and the service was on par as satisfactory- that being adequate to meet your basic expectations. Could this then warrant the standard of 15% of $15 tip ? Lets say it does. Now during another trip to the same restaurant with the same $100 food bill and the same 15% standard tipping rate, we have a scenario where the customer experiences a really superb level of service- that being above the satisfactory expectation. Say is was subjectively 25% better service, therefore 125% of the standard tipping rate. This would mean the patron would be comfortable offering a tip of 19% Of course if service was sub-standard compared to the standard at at say 50%, the tip would be lessened by 10%. (In pre covid world, a sub-standard service level would generally mean no tip at all, but I digress here). The simple tipping calculation can be expressed as: Standard Tip rate X Service Level Rate X Pre-Tax Food or Service Bill = Tip Amount.

Ok sounds like I’m going off on the service provider like some fuddy-duddy penny pinching miser. Not so. I enjoy tipping service providers and accordingly to the level of service provided. Is it the servers fault that the costs have risen? No, and it surely has risen for them too after all. Do they, like everyone else, not deserve to be paid fair wage for fair labor based on the value point offered to society? Absolutely, we all do. The question of tipflation comes down to these two points: 1) Who should truly dictate the amount of tip being offered, the customer, the business, the server? 2) Does a 100% increase in the rate of the tip amount, from 10% to 20%, demand twice the level of service then it was before?

Maybe I am just getting old and have lost touch with todays tipping frenzy. What do you think?

Last Edit Feb 3, 2025