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--:-- Noel King: Welcome to Today Explained. I'm Noel King.
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--:-- Noel King: Tipping culture is out of control, according to one in three Americans who were surveyed by Bankrate earlier this year. I was always brought up that you tip when you're satisfied with the service that you've received.
--:-- Noel King: Absolutely. I was brought up that way, too.
--:-- Guest: Oh, my God, you guys, I was brought up that way, too.
--:-- Noel King: That same Bankrate survey found that Gen Zers and men tip the least. Asked for comment, men replied with some frustration.
--:-- Guest: It's become almost like a meme, right, where the tablet gets swiveled around and it shows 20 percent, 25 percent, 35 percent as the barista or whomever it is sort of looks at you with raised eyebrows to see which choice you make.
--:-- Noel King: Coming up on Today Explained, DoorDash launches an experiment to make us tip.
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--:-- Noel King: This is Today Explained. Do you tip? Are you a tipper? I do. I do tip. I sometimes tip too much. I have a little bit of insecurity around that, and I'm constantly seeking validation from strangers.
--:-- Noel King: But that's my own personal issues that I'm working through, and I would appreciate it if you didn't, you know, judge me for it.
--:-- Noel King: Andrew Hawkins, transportation editor at The Verge, has some issues, also has been covering an experiment that DoorDash is doing.
--:-- Andrew Hawkins: Yeah, so I guess they've been testing this new feature for a couple months now. But basically what happens is if you go into the DoorDash app to order some takeout and you attempt to proceed without tipping your delivery worker, a pop-up will show up on your phone that says, are you sure you want to do that?
--:-- Andrew Hawkins: Because if you don't, your food might end up taking longer than you expect. And this is meant to encourage more people to tip their delivery workers.
--:-- Andrew Hawkins: Okay, I wanted to be part of the game, the grand experiment. So I opened DoorDash on my phone a minute ago and nothing popped up.
--:-- Andrew Hawkins: But now this makes sense because I didn't know that not tipping on DoorDash was even an option. I always just pick like 25% or whatever the highest is.
--:-- Andrew Hawkins: And so because I guess you have to go and type in zero if you don't want to tip. Yeah, that's correct. You have to actively put in zero.
--:-- Andrew Hawkins: And I think that this is actually active for all markets. It's only in specific markets. Like, for example, it works here in New Jersey, but I have a colleague in South Carolina who could not get it to show up for her.
--:-- Andrew Hawkins: So it's clear that DoorDash is testing this in a few markets, but not all markets. But basically what happens is you have to actively put in $0 for your tip, and the pop-up will show up.
--:-- Andrew Hawkins: And it says, orders with no tip might take longer to get delivered. Are you sure you want to continue? And that is meant to then incentivize the customer to then maybe rethink their zero-tip decision.
--:-- Andrew Hawkins: Okay, so there are people out there who have been doing this, who have been doing zero-tip on DoorDash, obviously, because DoorDash considers it a serious enough problem to now warn people.
--:-- Andrew Hawkins: What does DoorDash say is its motivation? Is it like you guys are being cheap? Like, how blunt are they about this?
--:-- Andrew Hawkins: I think it's a couple different things. They want to obviously ensure that their delivery workers feel taken care of and respected and are being treated well by the customers.
--:-- Andrew Hawkins: And so I think it's probably in response to feedback that they've received from this community of dashers, as they call them.
--:-- Andrew Hawkins: The couriers are called dashers, which they all have to have some sort of stupid name. But the feedback that they probably have received at the company level is that, you know, we're getting a lot of zero tips that, you know, there are customers who are opting not to tip.
--:-- Andrew Hawkins: And if there's anything that you can do on the product side to help encourage more tipping, we would love to see that. This is DoorDash's response to that.
--:-- Andrew Hawkins: Now, DoorDash does say that most of its customers tip. We don't have exact numbers or any data on what most means, but DoorDash insists that the majority of its customers do tip their delivery workers.
--:-- Andrew Hawkins: How big a part of the take-home pay is the tip? So the delivery workers receive 100% of their tips.
--:-- Andrew Hawkins: The payment that they receive from the company varies. It depends on how far they're traveling for the delivery, how much of the take-out order, how big the take-out order is.
--:-- Andrew Hawkins: There's a lot of variables that go into what the take-home pay is on each of the order, but I think it varies from around $2 to $10 per delivery order.
--:-- Andrew Hawkins: But then on the tip side, 100% of those tips do end up going to the Dasher. So that's a very important part of their pay because it is something that they rely on.
--:-- Andrew Hawkins: This is an extremely low paid industry. They are independent contractors. They don't receive benefits from the companies.
--:-- Andrew Hawkins: They don't have healthcare or anything like that because they don't, they're technically employees. They're contractors and they work for a lot of different services, DoorDash, but also perhaps Grubhub and Uber Eats.
--:-- Andrew Hawkins: And so they're all about speed and consistency. And I think the tipping side of the equation is something that a lot of these delivery workers really rely on.
--:-- Andrew Hawkins: It puts customers in an interesting position because what they're basically asking for is a pre-tip, right? You're asking them to tip your delivery worker before the food even shows up.
--:-- Andrew Hawkins: You know in the past we may have used the tip to reward a fast delivery or the food is hot when it arrives or the delivery worker is especially nice and does something above and beyond.
--:-- Andrew Hawkins: And that why a customer will decide to tip a certain amount. Now the customers are being asked to tip before that transaction even takes place.
--:-- Andrew Hawkins: And that's kind of an interesting position to put the consumers in.
--:-- Andrew Hawkins: Yeah. So what's fascinating to me is that the workers, the door dashers themselves, are making a very interesting point.
--:-- Andrew Hawkins: We are underpaid. You said $2 to $10 per delivery order. That is nothing. I had no idea it was that low.
--:-- Andrew Hawkins: The company, DoorDash, is saying back to them, indeed, you are underpaid. Consumer, it's on you to make up for that.
--:-- Andrew Hawkins: When the workers kind of make their public case, does it ever come up that perhaps DoorDash itself should be paying them more?
--:-- Andrew Hawkins: Has there been any kind of organized activism among DoorDashers aimed at the company rather than the consumer?
--:-- Andrew Hawkins: Yes. To put it simply, yes.
--:-- Andrew Hawkins: And especially in a lot of the big cities around the country, you're seeing organized efforts to push for minimum wage for delivery workers.
--:-- Andrew Hawkins: Standing shoulder to shoulder, fists raising the air. New York's delivery workers have one goal, getting their companies to raise their minimum wage.
--:-- Andrew Hawkins: In New York City, for example, the gig economy workers, DoorDash, Uber Eats and others scored a significant victory just this last summer when the city announced that it would support a new minimum wage for delivery workers, effectively around $17.96 per hour for food delivery workers.
--:-- Andrew Hawkins: That's the difference between taking home $100 after a full day of work, maybe a little bit more, to taking home something that you can survive off.
--:-- Andrew Hawkins: And that's something that you're seeing in a lot of these big cities across the country.
--:-- Andrew Hawkins: As these delivery workers get more organized, come together and start to lobby for themselves, because previously, you know, it was a bit of a Wild West situation.
--:-- Andrew Hawkins: You know, as independent contractors, they lacked a lot of organizational power to push for these types of policies.
--:-- Andrew Hawkins: But we've seen that shift over the last few years, especially post-pandemic with the explosion of delivery that the pandemic brought on.
--:-- Andrew Hawkins: Why does it take so much agitation to get the companies to just pay more?
--:-- Andrew Hawkins: I mean, I'm on DoorDash more often than I should be. It's OK. We all are.
--:-- Andrew Hawkins: And I know a lot of people who live the same way. Isn't DoorDash making like a crap ton of money off of me and the millions of others who use them far too much?
--:-- Andrew Hawkins: Yeah, you would think so. But the delivery space is extremely thin margins.
--:-- Andrew Hawkins: You know, they end up losing a lot of money. I think the DoorDash, while it's been growing and it's been adding new customers and new markets, it posted around a $172 million net loss in the second quarter of this year.
--:-- Andrew Hawkins: Which is narrowing slightly from around $260 million a year before.
--:-- Andrew Hawkins: But yeah, these companies are not profitable. It's not a profitable business for them.
--:-- Andrew Hawkins: They're hoping that through venture capital money and through other investments that eventually they'll get to a point where they can break even and perhaps make a profit.
--:-- Andrew Hawkins: We're always in investment mode. I mean, DoorDash is a business whose goal is to solve many problems and certainly more problems in local economies to make all of these physical businesses successful.
--:-- Andrew Hawkins: We have a long road ahead to do that, but we're going to do it in efficient ways.
--:-- Andrew Hawkins: But they're all growing and trying to compete in such a highly competitive environment that they are basically losing money hand over fist at this point.
--:-- Andrew Hawkins: This is like the millennial lifestyle subsidy, right? Everything's free. And then the companies are banking on in five years, only one of them is left and then they can charge us more, right?
--:-- Andrew Hawkins: There has to be a long-term play here, I would think, because you can't just go on losing $172 million a quarter.
--:-- Andrew Hawkins: I mean, you see it in a lot of different areas as well. You see it in the ride-hail space between Uber and Lyft, how much more expensive it is to take a car places these days than it used to be.
--:-- Andrew Hawkins: It used to be that you could very cheaply ride anywhere you wanted to go in a big city. And now those same rides are exponentially more expensive as those companies are putting more of a premium on becoming profitable and cutting down on their losses.
--:-- Andrew Hawkins: But as you see sort of Uber emerging above Lyft and really sort of taking the vast majority of the customers in that space, I think that it's still up for grabs in delivery.
--:-- Andrew Hawkins: Uber Eats, obviously, and DoorDash and Grubhub and all of them are fighting tooth and nail for as much market share as they possibly can.
--:-- Andrew Hawkins: But I think a lot of folks on the labor side will say, you know, it's in these types of battles that the delivery workers end up really getting a short shrift.
--:-- Andrew Hawkins: And I think that's why this tipping feature is really interesting, because it shows that DoorDash is trying to perhaps encourage more delivery workers, because with more workers, they can meet more demand and therefore serve more customers.
--:-- Andrew Hawkins: And they can show that they're workers that they're actually pushing for policies that will benefit them in the long run.
--:-- Andrew Hawkins: Wow. Okay. So is it working? Is the new DoorDash prompt getting people to tip better?
--:-- Andrew Hawkins: I think that's a great question. We've only just noticed it ourselves, so it's not clear as to whether or not it's having a meaningful effect on how people tip.
--:-- Andrew Hawkins: I will say there's been a lot of research that shows that there's a lot of tip fatigue or tipflation, I've heard it described as well, where there are just more ways in which customers and people who buy goods and services are being asked to tip.
--:-- Andrew Hawkins: And I think a lot of people would prefer the companies to just pay their workers better, rather than try to, as you said, bring the customer in on that and have the customer sort of subsidize the lack of decent pay for these workers for a living wage, honestly.
--:-- Andrew Hawkins: And, you know, that's probably a bit too philosophical for this conversation, but it is something that I think a lot of people are concerned about.
--:-- Noel King: That was Andrew Hawkins of The Verge. Andrew sometimes tips too much. Andrew also sometimes works too hard, and he's a little bit too much of a perfectionist.
--:-- Noel King: Coming up, perhaps the nation's leading expert on tipping explains why we're being asked to tip so much these days in so many different venues and why we keep clicking yes and why we don't have to.
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--:-- Noel King: My name is William Michael Lynn. I'm a professor of services marketing at the Cornell Hotel School.
--:-- William Michael Lynn: Yeah, I don't want to be immodest, but I've published more on the topic than anybody else by a large margin.
--:-- William Michael Lynn: Professor Lin got interested in how we tip and why we tip when he suddenly found himself not the tipper, but the tippy.
--:-- William Michael Lynn: My father was audited by the IRS and ended up owing him a lot of money and said that his contributions to my college education were going to be smaller than he expected.
--:-- William Michael Lynn: So I found myself needing money. And when I went to look for work, I found that tipped occupations provided more income per hour work than anything else I was qualified to do.
--:-- William Michael Lynn: So it was natural to go into those service occupations. I became interested in it as a topic of research when I went to grad school.
--:-- William Michael Lynn: I had a job as a bartender, which technically was violating the conditions of a research assistantship I had.
--:-- William Michael Lynn: I asked my advisor if he'd let me keep the job, and he said, sure, as long as you think of some research to do in that context.
--:-- William Michael Lynn: Now, I never did do research at the particular bar I was working in at the time, but it did get me thinking about tipping as a topic.
--:-- William Michael Lynn: And I've been studying it for 40 years since then.
--:-- William Michael Lynn: So how does one become the leading expert? How does one study tipping? What is there to explore here?
--:-- William Michael Lynn: Oh, wow, there are so many topics to explore. I began by simply asking why do people tip and what are the factors that influence their decisions about how much to tip?
--:-- William Michael Lynn: But then I got into why do tipping norms vary across countries the way they do? And then I went into what are the effects of different tipping policies?
--:-- William Michael Lynn: What are its effects on servers? Does it actually motivate servers to provide better service? What are the effects on consumers?
--:-- William Michael Lynn: There's just a whole range of different research questions that it's possible to ask about it.
--:-- William Michael Lynn: And even though I've been studying this for 40 years, there's a lot that we still don't know.
--:-- William Michael Lynn: There's only so much one person can do, right? But I'm doing my best.
--:-- William Michael Lynn: Why do people tip? Multiple reasons. To reward good service, to help make up for low wages, to get better service in the future.
--:-- William Michael Lynn: Most importantly, it's for social approval.
--:-- William Michael Lynn: Let's talk about what the future looks like. You must be seeing, I would think, that we're being asked to tip in a lot of places that we didn't used to be.
--:-- William Michael Lynn: There are places where I am doing all the work, the customer is doing all the work, and then the screen flips around and it asks for a tip.
--:-- William Michael Lynn: Is it actually becoming more common that we're asked to tip in places that we didn't used to be? Or am I crazy?
--:-- William Michael Lynn: If you're crazy, I am too. Because I'm seeing the same thing.
--:-- William Michael Lynn: I don't know of any systematic study that documents how much more prevalent tipping requests are today than five years ago.
--:-- William Michael Lynn: But anecdotally, my own experiences tell me, yeah, I'm being asked for tips a lot more frequently and in places that I wouldn't have ordinarily expected it.
--:-- William Michael Lynn: The other day, I went to what was essentially a convenience store. I pulled out from their refrigerator a Mountain Dew, went to pay for it, and they asked me for a tip.
--:-- William Michael Lynn: What's more, those tips started at 20%. Did you tip? No.
--:-- William Michael Lynn: Did you feel guilty about not tipping? That's the real question.
--:-- William Michael Lynn: Yeah, no, I didn't feel guilty at all.
--:-- William Michael Lynn: Yeah, I'm exactly the same. If I've done all of the work, I mean, I hear people get very stressed about this.
--:-- William Michael Lynn: You know, they flip the screen, but they haven't done anything. What am I supposed to do?
--:-- William Michael Lynn: And people really get in their feelings. And it seems to me like one possible solution is to not tip and just have very few feelings about it.
--:-- William Michael Lynn: You're okay. You did the work.
--:-- William Michael Lynn: Yes, but I told you earlier that social approval was the main motivation for tipping.
--:-- William Michael Lynn: And that person looking at you wants a tip and it's hard to say no to them face-to-face.
--:-- William Michael Lynn: The why am I able to do it? In part, it's because I know that just because they're asking for a tip doesn't mean that other customers are giving it.
--:-- William Michael Lynn: Most restaurants today will ask you for a tip when you go for carryout.
--:-- William Michael Lynn: But I know from surveys that only about 30 of consumers leave a tip in that context.
--:-- William Michael Lynn: If two of the people are not tipping I won't be alone in saying no.
--:-- William Michael Lynn: And that service provider can't be too upset with me.
--:-- William Michael Lynn: It makes me feel a little less social pressure than I think the typical consumer feels.
--:-- William Michael Lynn: What's driving this change? You're saying you see a change. You're the expert.
--:-- William Michael Lynn: I think most of us, based on the conversations we had with our team this week, I think most of us are seeing this.
--:-- William Michael Lynn: But what's behind it? So many different things.
--:-- William Michael Lynn: I wish it was something simple. Let's start with during COVID, people started tipping larger amounts in service context where they didn't usually.
--:-- William Michael Lynn: She ended up tipping us $2,020. And I think she has a little good sense of humor writing 2020 as well.
--:-- William Michael Lynn: It's probably the only positive 2020 that we'll have this entire year.
--:-- William Michael Lynn: So I don't tip for a restaurant carryout, but during COVID, I would.
--:-- William Michael Lynn: Why? As a way of helping the business and pay its employees, as a way of compensating people for the risk associated with working during COVID.
--:-- William Michael Lynn: And I wasn't alone. We've got lots of data showing that basically people became more generous in their tipping during COVID.
--:-- William Michael Lynn: That may have taught businesses that consumers are willing to tip in context that they hadn't originally thought they would be.
--:-- William Michael Lynn: Some of it has to do with the new technologies. Think about it. We've had counter service tipping for a long time, but it was in the form of a tip jar.
--:-- William Michael Lynn: Yes, yes. But the nice thing about a tip jar from a consumer perspective is you can easily see what other people are doing, not just the ones immediately in front of you, but all the other customers prior to you during the day.
--:-- William Michael Lynn: Because the tip jar is going to be empty, full, half full. You can see how much people are tipping.
--:-- William Michael Lynn: But with the new technology, the screens don't tell you what other customers have done.
--:-- William Michael Lynn: And so you're hit with this request and you look at it and think, I'm feeling pressure to tip.
--:-- William Michael Lynn: Other people did no doubt feel the same pressure and they're probably succumbing. They're probably tipping.
--:-- William Michael Lynn: Given that assumption, they feel more pressure to tip than ever before.
--:-- William Michael Lynn: What that means is that the screens get people to tip in a way that the tip jars didn't.
--:-- William Michael Lynn: And that motivates the business to keep making the request, to ask for the tip.
--:-- William Michael Lynn: But some of it has to do with economics. Today, we have full employment. We also have inflation.
--:-- William Michael Lynn: As a business, I want to get employees. I'm competing with other people. The way to do that is to pay my employees more.
--:-- William Michael Lynn: But to pay them more, I have to raise prices. and raising prices during times of inflation when other prices are already high and consumers are complaining is problematic.
--:-- William Michael Lynn: So tipping is a way of getting extra revenue to pay your employees to help attract employees in this time of full employment.
--:-- William Michael Lynn: And at the same time, only asking for that money from those customers who can afford to give it and are willing to give it.
--:-- William Michael Lynn: Do you think that this is the new normal, that the screen flips around and you're expected to leave a tip?
--:-- William Michael Lynn: Or at some point, do enough people start to, as we are now, get tired of this and the business says, okay, just like the tip jar, it's not working anymore. It's not worth it.
--:-- William Michael Lynn: That's a good question, and I don't know the answer.
--:-- William Michael Lynn: Surveys are telling us that about 60% of consumers today think it's gotten out of hand and they're unhappy with tipping culture in the U.S.
--:-- William Michael Lynn: That's much higher than it used to be. but whether it's going to affect their behavior enough to change businesses, practices, I think it's too early to tell.
--:-- William Michael Lynn: What would you advise our listeners who have strong feelings about tipping? Pro, con, we're being asked to do it too much.
--:-- William Michael Lynn: What do you think people should do?
--:-- William Michael Lynn: I suppose follow their own hearts. Look, I'm a social scientist. I'm not an etiquette expert.
--:-- William Michael Lynn: I do want to remind people that tipping is a voluntary activity. Tipping is not legally required.
--:-- William Michael Lynn: When someone asks you for a tip, they clearly want it, and failure to give it to them is going to make them unhappy.
--:-- William Michael Lynn: But just because they're asking for a tip does not mean that other people are giving it.
--:-- William Michael Lynn: In fact, most of these new contexts where people are asking for tips that are not traditionally tipped services, roughly a third of people are giving the tip and two thirds are not.
--:-- William Michael Lynn: So if you decide not to tip in that circumstance, just know that you're not alone.
--:-- William Michael Lynn: That in fact, you would be among the majority. And perhaps that'll make you feel less social pressure.
--:-- Noel King: That was William Michael Lynn of Cornell's Hotel School.
--:-- Noel King: Today's episode was produced by Amanda Llewellyn and edited by Matthew Collette.
--:-- Noel King: It was engineered by David Herman and fact-checked by Laura Bullard.
--:-- Noel King: I'm Noelle King. It's Today Explained. Thank you.
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