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A waiter in a white shirt and dark apron carries a tray of drinks through a warmly lit restaurant.
A waiter in a white shirt and dark apron carries a tray of drinks through a warmly lit restaurant. Photo by Andrea Piacquadio / Pexels. Image source
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NewGlobal · Culture & Everyday Life

Is Tipping a Scam Created by Restaurant Owners?

Created by dabai laoshi · 28 Aug 2026

Key Vocabulary

substitute

something used in place of another thing that would normally be required

American employers learned to treat tips as a substitute for wages.

subminimum

below the ordinary legal minimum, especially of a wage

The federal subminimum wage for tipped workers has remained $2.13 an hour.

anchor

to influence a later choice by putting a number or option in front of someone first

A screen that starts at 25 percent can anchor people toward a higher tip.

inequity

a situation that is unfair, especially in how money or power is shared

Tipping creates inequity between waiters and the kitchen staff who cook the food.

subsidy

money that covers part of a cost that someone else would otherwise have to pay

Customer tips function as a subsidy for restaurant payroll.

Article

A tip can feel as natural as saying thank you, yet in American restaurants that extra percentage is less a reward for service than a wage the industry learned to substitute onto the guest.

Restaurant owners did not invent tipping: the custom has older European roots, and wealthy travelers brought it home in the nineteenth century. What they industrialized was using it as a substitute for wages. After the Civil War, hotels and railroads hired newly freed Black workers, paid them too little to live on, and invited guests to make up the difference; Pullman workers earned too little without tips. [1][2]

Law later froze the arrangement into a number. When restaurants entered the Fair Labor Standards Act in 1966, they received a tip credit so owners could count customers' money toward the minimum. The federal subminimum wage for tipped workers has sat at $2.13 an hour since 1991. In 1996 Congress locked that figure in dollars rather than as a share of the ordinary minimum. This resulted in the disparity widening whenever the regular wage rose. Employers must supplement pay if tips fall short of $7.25, but most of a living still sits with the guest. [3][4]

Digital screens made the old social pressure harder to avoid. A tablet rotates to 18, 22, or 25 percent while the worker is watching, so declining to tip is an action rather than remaining silent, and suggested percentages can anchor people toward a higher option. [5]

Inside the same kitchen door, the system produces inequity. Servers collect the tips while cooks who prepare the food usually do not, and high-earning servers often resist a uniform hourly wage because a busy dining room can pay far more. When restaurateur Danny Meyer attempted to replace tips with elevated menu prices, many experienced waiters departed, and the experiment later ended. [7]

The control guests imagine they hold is weaker than it feels. Cornell researcher Michael Lynn has found that service ratings explain only a sliver of the differences in tip percentages, while the magnitude of the bill explains far more because people follow a percentage convention. [6]

So is tipping a scam created by restaurant owners? It is not a deception they invented from nothing, but a European courtesy that American employers converted into a wage subsidy, that Congress inscribed into labor law, and that some of the highest-earning servers will protect. The next time a screen offers 25 percent, ask whose compensation you have been asked to complete.

Discussion Questions

  1. In your culture, is a tip a gift, a wage, a bribe, an insult, or something else — and who taught you that meaning?
  2. If employers offered higher menu prices and a full wage, but waiters earned less than they do from tips, whose side would you take?
  3. Do tip screens make you more generous, more resentful, or both? What does that say about the design?
  4. Should kitchen staff share in tips even if they never speak to the guest? What would that change about "service"?
  5. Is "scam" the right word for a system that some workers defend because it pays them well?

References

  1. Federal Reserve Bank of Richmond, "Tipping: From Scourge of Democracy to American Ritual," on European origins, post-Civil War tipping, and Pullman porters. Source
  2. Jonathan Maze, "In the U.S., tipping has a complex and controversial history," Restaurant Business, on Pullman wages and estimated payroll savings. Source
  3. U.S. Department of Labor, Fact Sheet #15, on the $2.13 federal cash wage for tipped employees and the tip credit. Source
  4. Sylvia Allegretto and David Cooper, "Twenty-Three Years and Still Waiting for Change," Economic Policy Institute, on the 1991 freeze and the 1996 decoupling of the tipped wage from the regular minimum. Source
  5. Nir Eyal, "How Technology Tricks You Into Tipping More," Psychology Today, citing Kam Leung Yeung's Iowa State study and New York taxi-screen data. Source
  6. Michael Lynn, "Restaurant Tipping and Service Quality: A Tenuous Relationship," Cornell Hotel and Restaurant Administration Quarterly, 2001; Cornell Chronicle, "Why we tip, who we tip and what it really says about us," March 2026, on the roughly 4 percent of tip-percentage variance explained by service ratings. Source
  7. Julia Moskin, "Danny Meyer's Restaurants Will End Their No-Tipping Policy," The New York Times, 20 July 2020; Serena Dai, "Danny Meyer Admits Large Portion of Staff Left Over No-Tipping Changes," Eater NY, 6 February 2018. Source

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