From takeout coffee, to hairstyling and fine dining – you may have noticed a phenomenon known as ‘tip creep’ or ‘tip inflation’ when you go to pay for a service.
It manifests in a couple of ways: tip requests on items you may not have ever tipped on before; and also an increase in the tip amount options presented to you.
Personal finance expert Barry Choi says it’s a sign of the times as businesses and households across the country alike deal with rising interest rates and a rate of inflation we haven’t seen in four decades.
“People second-guess how much they should be tipping,” Choi tells Global News. “Ten per cent used to be a basic amount but these days 15 per cent is the bare minimum.”
Choi and Bridget Casey, founder of the financial platform Money After Graduation, agree there’s also a new appreciation for service workers whose livelihoods were disrupted multiple times by COVID-19 restrictions.
“Everyone is struggling a lot right now financially,” Casey tells Global News. “Many of the people in the service industry especially are the most vulnerable to those rising prices because their wages have been stagnant for so many years.” She says with this in mind, tipping “20 per cent is normal.”
A national survey in April by the Angus Reid Institute (ARI) on behalf of Restaurants Canada suggests 44 per cent of people across the country are tipping more when dining out.
Women (47 per cent) are more likely to be boosting their gratuity compared with men (41 per cent) and those aged 55 and up (49 per cent) are being more generous these days. By province (the territories were not included in the survey), Ontario (53 per cent) and B.C. (45 per cent) led the pack while Albertans (34 per cent) were least likely to tip more.
Tipping more may be a tough pill to swallow for households that are struggling financially, and dealing with the cost of everyday goods rising as borrowing costs climb too, according to personal finance expert Rubina Ahmed-Haq.
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“A lot of people are already upset with the fact that they go to the grocery store, they pay more. They go to the gas station, they pay more. And now they’re picking up something that normally they just threw $1.50 on the table for and they’re being asked to tip,” says Ahmed-Haq.
A separate Angus Reid Institute poll suggests that four out of five people in Canada have cut spending this summer by either reducing their discretionary budget – which includes eating out, driving less, scaling back travel and donations to charity, putting off a major purchase or delaying saving for the future.
Tech-enabled tip inflation
One culprit behind this type of tip creep is technology – with digital payments increasing, retailers of all kinds have started adding tip prompts to their point-of-sale terminals.
“You get passed that terminal and what used to be 10 per cent, 15 per cent now starts at 20. I even recently saw a 30-per-cent tip suggestion, which is a bit ridiculous,” says Choi.
What’s more, he notes that the prompts are often on the total amount of the bill, rather than the pre-tax amount, which boosts the gratuity even more.
Ahmed-Haq’s solution for avoiding this type of tip creep is straightforward: pay cash and bypass the digital tip solicitation. If you’re feeling generous, you can always contribute to the tip jar.
Choi suggests that not all tips should be created equal. He is inclined to tip a lot more for excellent service from a hairstylist but not necessarily an inflated tip, or any gratuity, at a takeout counter.
“If you’re coming in and grabbing your food, leaving and there’s no service involved, I don’t think you should feel shame or embarrassed if you’re not going to leave a tip in that scenario,” he says.
However, given the new economic reality, Choi suggests that people who feel financially stretched when dining out cut back on the number of times they eat at a restaurant rather than cutting back on their tip amount.
Casey says tipping more, if you can afford it, should be encouraged, even though service sector employers are quite literally passing the buck for living wages onto consumers.
“We have to vote and advocate for higher wages and better working conditions. In the meantime, so long as things are the way they are, we have to give money directly to these people whenever the opportunity presents itself,” she says.
With job openings across Canada at a new record high, including many in service and hospitality, tip creep may be another symptom of a tight labour market and a shortage of willing workers.