How tip credits affect consumer tipping behavior

In the United States, employers can count servers' tip earnings toward the satisfaction of minimum wage re-quirements, so that servers are often paid a sub-minimum wage. The difference between the regular and server minimum wage is known as the tip credit and it has come under attack on the grounds that it contributes to server poverty. However, if tip credits increase consumer tipping, then reducing or eliminating tip credits may not increase servers' incomes as much as expected. The current study finds that consumers from states with larger tip credits say they tip restaurant servers more and that this effect is serially mediated by perceptions of low server wages and altruistic tipping motives. These findings contribute to theory by supporting the role of altruistic motives in tipping and to practice by raising a cautionary, yellow flag to those contemplating re-ductions in the tip credit.

Automated summary

In the United States, employers can count servers' tip earnings towards minimum wage requirements, resulting in servers often being paid less. A study finds that consumers in states with larger tip credits are more willing to give restaurant servers higher tips, and this effect is mediated by perceptions of low server wages and altruistic tipping motives.