Inflation is causing more people to skimp on tips, hitting service workers hard
- Inflation isn't stopping people from going out, but they're becoming more frugal with tips, some servers and bartenders say
- Service-sector workers rely on tips to make ends meet
- The drop in tips is making it harder for them to cope with inflation
When Daniel Westwood, who bartends at a daiquiri bar along the Las Vegas Strip, hands customers their checks he tells them: “I appreciate tips. That’s how I pay my wife’s Amazon card.”
Such remarks are frowned upon in the bartending community, he said. But with so many customers leaving paltry tips this summer or stiffing him altogether, his not-so-subtle reminder feels like a necessity.
“I have people look me directly in the eyes and hit ‘no tip’ on the credit card processing machine, and they just don't care,” Westwood, 35, said.
He has been bartending across Las Vegas for almost two decades through multiple recessions. But even during those tough times, customers tipped him adequately, he said.
The shift nowadays “100% has to do with inflation," he said. “I’m hearing customers all the time going: ‘It’s too expensive. We can’t tip.'" One customer recently left a handful of coins as a tip on a $120 bill they racked up, he added.
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Americans are feeling the pinch of inflation across just about every spending category as it hovers at a 40-year high. But that hasn’t caused Americans to cut back on vacations or dining out, according to consumer spending data published by the Bureau of Economic Analysis.
Instead, many people who eat out, particularly in cities with high tourist volume, are leaving smaller tips, servers and bartenders told USA TODAY. That’s making it even more difficult for those workers to cope with inflation.
Westwood earns $12 an hour not including tips, unlike many service-sector workers who earn a tipped minimum wage, which allows employers to pay workers below minimum wage if they are able to earn at least minimum wage with tips.
Before the coronavirus pandemic, when he worked multiple bartending jobs at high-end restaurants and bars, he’d take in $250 to $350 a day in tips, he said. At those levels he was able to set aside money to kickstart his own business, Westwood Cocktail Innovations, selling cocktail smoking kits he crafted.
But lately he’s earning less than $200 a day in tips and as a result, he has put the business on hold. “I'm really pinching my pockets and I'm going, ‘crap, crap, crap – I haven't paid my water bill in two months.’
“Our tip money is what we live off of,” Westwood said. He is the primary earner in his family, which includes his three children and wife.
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Most of what servers and bartenders earn comes from tips, according to findings published in 2018 by Restaurant Opportunities Centers and the National Employment Law Project drawn from the Census Bureau’s Current Population Survey.
“If I lived solely off of what I'm earning hourly, I would not be able to afford to live here with my family," Westwood said. "We would be in a little run-down studio apartment in a very bad part of town.” Right now, he pays $2,000 to rent a four-bedroom home outside Las Vegas. Six years ago, he said, he paid close to $1,000 a month for an even bigger four-bedroom home in the same area.
Ashlee Eisenstein, a waitress at 5& Diner in Phoenix, Arizona, earns a tipped minimum wage of $9.80 an hour. And like Westwood, she has been getting stiffed more frequently than ever before in the past seven years she worked at the diner. If they tip, it’s often less than 10%, she said.
“It's like if you can't afford to go out to eat, don’t go out. I don’t think they realize I don’t make minimum wage and I’m depending on tips to make it.”
That’s a stark contrast to what she was experiencing at the height of the pandemic when the diner was doing only to-go orders and “people were very generous with tips.” And when customers started getting stimulus checks, tips jumped even higher, she said.
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Fewer Americans are tipping waiters, but tip amounts are slightly increasing
About 73% of Americans say they always tip servers when they dine out. That’s 4 percentage points lower than in 2019, according to a nationally representative survey of more than 2,600 adults published by CreditCards.com. The numbers are even bleaker for food delivery workers – 57% of people say they always tip them, compared with 63% in 2019.
“Inflation is a logical explanation,” said Ted Rossman, senior industry analyst at CreditCards.com. But he suspects it’s not the only reason why people are tipping less. “I just have to wonder: Are some people tipping less because they waited too long for a table? Their food was slow? Or something wasn't cooked quite right?”
Jordan White, 33, who works part time at a New York City-based blues club, said it has always been common for customers to stiff her, particularly because the club attracts many European tourists who aren’t accustomed to tipping. She doesn’t think inflation is driving patrons to not tip her lately.
In fact, after the club, which is in Greenwich Village, recently followed her recommendation to add tip suggestions to bills, she has seen her tips increase. But attendance at the club, which has a $20 cover charge, has been down a lot since Memorial Day. She said that’s probably because people’s budgets aren’t stretching as far with inflation, so they’re visiting the club less.
White also works at a bar in Long Island City that she described as “local-centric”. Customers there tend to be regulars who tip her relatively well. At the club, she earns $50 to $65 a shift and at the bar, she earns $25 to $30 a shift. Lately, a typical day’s worth of tips comes out to about $200.
Labor shortages hit the food and beverage industry hard
The food and beverage industry has been one of the hardest hit by labor shortages amid the Great Resignation. In April, the 1.3 million job openings represented nearly 12% of all job openings across the country, according to the latest Job Openings and Labor Turnover report published by the Bureau of Labor Statistics.
Average hourly earnings, which includes tips, rose by 8.7% for full-service restaurants and 9.2% for bars and other drinking venues from last May to April of this year, according to BLS data. Nationally, average hourly earnings grew by nearly 5% over that time period.
Overall, tips at quick-service and full-service restaurants increased slightly in the first quarter of this year compared with a year before, according to data from Toast, a point-of-service payment company. On average, people tipped 19.9% on transactions at full-service restaurants compared with 19.8% last year. And at quick-service restaurants, people tipped 17% compared with 16.9% last year.
“When diners cut back on their tips, or worse, don’t leave a tip at all, it further exacerbates the inflationary pressures we’re all feeling," Michelle Korsmo, president and CEO of the National Restaurant Association, said in an emailed statement to USA TODAY. "Tipping shows appreciation for a service provided and helps employees build a great career with high earning potential.”
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The National Association of Bartenders did not respond to a request for comment.
Lesley Smith, a bartender at The Bull, a tri-level dive bar in Key West, Florida, isn’t experiencing that appreciation and support.
“A lot of people are freaking out about the higher menu prices,” she said, adding that most drinks have gone up by about a dollar since last year. On a typical weekend night, she earns close to $700 in tips. But last Sunday “was one of the worst all year." She made less than $200 in tips.
“I was just like ‘holy crap, I'm definitely gonna be eating into my savings this summer to not be living off of ramen.’” Last month, her electricity bill was 35% higher than the prior month.
It’s typical for cruise groups that come to Key West to fail to tip, says Smith, 43, who believes they “forget they’re not on the ship where they don’t have to tip.” But day-trippers from Miami, she has noticed, have become “a lot more frugal with tips.”
“Somebody actually bothered to write in a quarter on their credit card receipt.” Even some locals have been stiffing her, which used to be even rarer. “Everything else is getting a little more expensive, but our pay is going down drastically.”
Elisabeth Buchwald is a personal finance and markets correspondent for USA TODAY. You can follow her on Twitter @BuchElisabeth and sign up for our Daily Money newsletter here