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Tipflation | The tip inflation phenomenon in America that is spreading to Europe

TRAVEL NEWS – 24 August 2022: The suggested tip on payment terminals and receipts in America en Canada continues to rise. Not only are the requested percentages much higher, tips are also being asked in more and more places. The phenomenon is called Tipflation (tip inflation).

Also read: Traveling through a year America en Canada - Wereldreizigers.nl is on the way!

What is tipflation?

Where a 10 to 15% tip in a restaurant was previously seen as the norm, North Americans (and travelers) are now increasingly being presented with percentages of 20 to 30%. This phenomenon is also calledtipflation" or "tip inflation" named. Simply put, it's inflation on tipping.

Tipping at the gas station, hairdresser and bakery is also becoming more common in the US and Canada

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Previously, tipping was only expected in restaurants. Nowadays you even see tip requests at the gas stations, the hairdresser and the bakery. It is a persistent phenomenon that also appears to be difficult for Americans and Canadians. It even made the national news in Canada.

Also read: US East Coast Highlights – New York to Key West | Roadtrip USA (19)

The tip-inflation knife cuts both ways. Firstly, you are confronted with it more and more and secondly, the percentages that are asked are increasing.

You can read exactly how that works below.

The tipping culture in America

It is customary in America to tip in restaurants, bars and taxis, among other places. That has been the case for a long time. It is legal in America to hire employees only $7,25 an hour to pay. This minimum wage has been unchanged since 2009 and you cannot live normally on this. As stupid as that may sound, tips have therefore become an important part of the wage, and it is therefore considered normal in the service professions.

Tipping in America and Canada is normal
Tipping in America and Canada is normal

The tipping culture in Canada

Where in the US you can hardly live on a minimum wage, it is different in Canada and (western) Europe. The minimum wages are on average a lot higher there, so tipping is no longer as 'necessary' as it is in the US.

It is customary in Canada to tip in restaurants and bars. Still, Canadian residents and people traveling to the country are increasingly seeing the 'tip screens' with huge percentages of tips that are requested. At the bakery, at a coffee shop and yes, even at the gas station they have already been spotted (also by us).

More and more Canadians are dealing with it and not everyone is happy about it. People feel very burdened, that's how we read and hear in this the news.

Also read: Canada tour starts – Route and warm welcome | Roadtrip Canada (38)

How your choice is influenced

It is not an easy task to tip. While your customer's choice may feel like your own choice, the amount of tip you give can be strongly influenced by a theory that nudging or choice architecture is called. This is how choices are presented to us.

If grades are higher by default, we think a higher tip is more appropriate.

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Preset Choices

The pre-set tip choices at the end of your transaction are an example of this choice architecture. If grades are higher by default, we think a higher tip is more appropriate.

Photo by Anis Heydari / CBC

Feeling compelled to tip more

While tipping is still voluntary in most cases, many people are becoming increasingly uncomfortable with it.

You will see the message that tips are expected. You will also be shown some proposals. This is the so-called 'norm' for this transaction.

The first number you see, or the range you see in front of you, influences your decision and your perception of what is the right tip to give in that particular context. So if those numbers are higher, we think a higher tip would be more appropriate in this context.

Not tipping is made more and more difficult for you

Often the option to give a lower tip or no tip is not even immediately visible on the screen. You will therefore have to click on the screen several times to complete the transaction without tip. For example by clicking the 'back arrow' or 'other options'. All this under the watchful eye of the person providing you service and perhaps other waiting customers.

Tipflation, tip inflation, tip inflation in Canada and America | Danielle Nerman / CBC
Tipflation, or tip inflation in Canada | Photo by Danielle Nerman / CBC

And that's exactly where things have gone wrong lately. Many people feel uncomfortable or burdened and therefore quickly choose one of the options that will help them most easily to the end of the transaction. To get rid of it.

Tip 'pay in advance'

Another drawback is that fast-food restaurants, bakers and other service professions increasingly ask you to place your order and pay immediately. At the moment you have not yet had service, have not tasted the food and you cannot judge whether the service provided has been satisfactory.

However, this is already the moment that you are expected to tip. The tip is therefore paid in advance. If afterwards it turns out that you are not satisfied, there is no going back, because the transaction has already been completed.

Research on Tip Inflation in Europe

Wereldreizigers.nl has asked for feedback via various travel-related Facebook groups to see if the tip inflation phenomenon also occurs in Europe.

It is rare in Europe

Only 8% of those surveyed indicate the tip screens'also seen in Europe' to have. 13% 'do not know' in 79% of those surveyed say 'not knowing the screen'. This is remarkable since we ourselves were under the impression that this phenomenon would not occur in Europe at all. After all, eight percent is a lot higher than nothing at all.

Busy, touristy places

The travelers who reported seeing the screens mainly saw it in famous and busy places. The tip screens have been spotted by a handful of travelers in Rome, Barcelona and Paris. There are also some reports of these tipping screens in Amsterdam. Yet this still seems to be limited to only a few places in the city.

When asked whether tip percentages in Europe have also increased, such as the tip inflation that we see in America and Canada, more than 90% indicated that they did not recognize this.

How tip is distributed

Please realize that (with the exception of the Netherlands and Belgium) both the employee and the employer can control the distribution of tips. In cases where the employer does this, there is a chance that he/she will only divide a part of the tip income among the employees. In some cases, this is even laid down in an employment contract. They also call this 'the house-cut' (part for the house). You as a consumer have no idea how large or small this share is for the house.

Tipping abroad | Tipflation, tip inflation
Tipping abroad | Tipflation, tip inflation

Tipping is not always right

Unfortunately, in some cases, restaurant owners and employers are included in the tip distribution. Fortunately, this is not allowed in the Netherlands, but in many other countries no legal rules have been drawn up for this and part of the tip can therefore still end up in the pocket of the company and not with the employees.

This does not make the proliferation of tip options any easier for us as a traveling consumer. As a consumer you cannot know how the tip is distributed at the back and whether it ends up with the right people.

We will therefore keep a close eye on how tipflation / tipflation will develop further in both America and Europe. Maybe more on that later.

Also read: Column: Shootings, Trump crazies and political unrest | Roadtrip USA (16)

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