Gratuities Or Not?

"Overall, the current findings suggest that, if any restaurants are going to lead the movement away from tipping, it should be upscale restaurants and those restaurants should replace tipping, not with service charges, but with service-inclusive pricing."
"Indeed, the data suggest that only upscale restaurants can abandon tipping without suffering a reduction in overall customer satisfaction and only if they replace it with service-inclusive-pricing."
"These findings indicate that restaurants at all price tiers should expect the elimination of tipping to reduce online customer ratings. The only exception is expensive restaurants replacing tipping with service-inclusive-menu-pricing; in that case only can tipping be eliminated without reducing online customer ratings."
"Many restaurateurs hope to offset such costs [increase in minimum wages] by replacing tipping, which generates revenue management cannot legally access, with service charges or higher menu prices, which generate revenue management can control and distribute more equitably between front- and back-of-house employees."
"[Research] adds to a limited body of evidence that tipping increases overall customer satisfaction relative to that under alternative compensation/pricing systems -- especially when compared to service charge systems at less expensive establishments."
Hospitality research team, lead: Michael Lynn, Cornell University

Tipping benefits customers, while its elimination can harm their sense of self esteem.

We like to feel good about ourselves, and being generous to others helps us feel we're doing the 'right thing', it would seem. And when you're taking a taxi, being served in a restaurant, or tipping a bell-hop for example, it seems the right thing to do in the knowledge that these are low-wage services leaving those being tipped dependent on the generosity of those whom they're serving to supplement their earnings. There is a standard for tipping in the West, and people generally adhere to it, viewing it as a small part of the generalized social contract.

A research paper published in the International Journal of Hospitality Management had those involved in this study convinced that tipping makes people feel they have done the right thing. And that to institute a no-tipping rule would have negative effects. If there is no method by which customers who have been well-served can indicate their appreciation beyond a simple 'thank you', by proffering a cash award to a server, the feeling would be that server would lack motivation to continue providing good service.

So the impulse to tip isn't entirely altruistic in nature, obviously. Customers become concerned that with no incentive to the server through a cash award to provide good service, the level of care in serving would deteriorate. The study authors carried out by researchers at Cornell University point to tipping as a form of "altruistic conspicuous consumption" whose result is that in having the tipper feel good is psychologically beneficial, leaving people with the impression they are generous to others less wealthy than themselves.

Their research also led them to the conclusion that customer satisfaction would be hugely reduced were tipping to be left out of the equation. Customers actually self-report on their eating-out experiences and are inclined to feel better served where tipping is customary, attested to by online ratings. Where restaurants have experimented with alternatives to tipping, the comments tend to be more critical in nature; something is missing, that feel-good attitude.

Implementing a no-tipping policy for a restaurant leads to a reduction in customer satisfaction, according to the research. Which concludes that should eating establishments want to entirely satisfy their clientele, allowing free and voluntary tipping is the key instead of building tips into the meal price or by addition to the bill. The issue is a live one at a time when minimum wages have escalated so that restaurant owners try to make up for added operating expense by absorbing tips into general revenue that otherwise are directed to wait staff.

Data used by the research team was provided by the website ReviewTrackers with about ten thousand ratings of 41 restaurants at all price levels in a two-year period. The ratings gathered there had been posted originally on websites more familiar to must users, such as Yelp, Google, Facebook, or TripAdviser. This, at a time when one in five restaurants had committed to no-tipping policies, and other restaurants are moving in the same direction.

Needless to say the issue of tipping is a cultural one. And not all cultures agree with tipping. In Japan, famously, it is considered insulting to tip anyone in the service industry. There is pride in providing outstanding service, and it is expected by society that service will be outstanding. To imply that someone in the service industry requires an impetus provided by an additional cash reward is not looked on kindly in that culture.