Square, Tips, And The Guilt Economy

The truth behind the new tipping landscape

Matt Croak Code


Photo by Dan Smedley on Unsplash

I, like most millennials, am a proud tipper.

I understand that in a lot of places in the US, servers are paid peanuts. There are some areas that require a higher minimum wage for tipped employees than most, but not everywhere. Federally, the minimum wage for tipped employees is less than $3 an hour.

So yeah, I always give 20% as a tip for a server — even if they make a mistake, or take a little longer than I’d like, what have you. Life happens, serving is stressful.

Unless you are actually rude to me or my party, I don’t think I would tip less than 20%. To my knowledge I’ve never had such a bad encounter that I felt the need to not tip 20%.

I believe this type of tipping falls under the category of just being, well, decent. If you can’t afford a decent tip, you can’t afford to go out to eat.

Order in. Make your own food.

When it comes to those terrible tablets, however, I am much less, ahem, tippy. While I feel tipping servers is part of being decent, I feel that these tablet tipping mechanisms are a catalyst for the Guilt Economy.

The Guilt Economy

A growing field of interest among economists is studying how emotions impact economic interactions. The below excerpt is from Science Direct.

“Many emotions in economics are modeled using psychological game theory and belief-dependent preferences (Geanakoplos et al., 1989, Battigalli and Dufwenberg, 2009). One of the belief-dependent preferences is guilt aversion.”

Guilt aversion is the key phrase here. This just refers to the reality that most people don’t like feeling guilty. People will make financial decisions that help them avoid feeling guilty. This largely comes in the form of charity.

An extreme example of the economic influence of guilt aversion is illustrated by a man named Jimmy Saville.

Jimmy Saville