Americans Are Feeling Less Generous as the Pandemic Ends, but Why?

What is “Tip Fatigue”?

Eric Plam is the CEO and founder of Uptip, a company that facilitates digital tipping. He coined the phrase “tip fatigue” to describe the nation’s current attitude towards tipping.

The COVID-19 lockdowns disrupted the cash flow of many small businesses and restaurants. With revenue slashed, it was difficult for small businesses to pay bills including payroll. During this time, many Americans were feeling generous and seemed happy to tip extra to help struggling employees. Now, it looks like that sentiment is shifting.

Since the start of the pandemic, inflation has reached its highest rate since the 1980s. These days, diners are less likely to leave a generous tip since they are paying more for their coffee or bagel in comparison to last year.

Tipping by the Numbers

Square (SQ) and Toast (TOST) are two of the most popular payment processing services. In a recent report, Toast determined that most quick-service diners are tipping 17% on average, roughly the same as last year. However, customers that order takeout are tipping about 14.5% on average, which is less than during the pandemic.

Square has also shared data showing that tipping is on the decline. Tipping at quick-service restaurants fell from 17.2% in March 2021 to 15.2% in February 2022.

More Ammo for the Minimum Wage Debate

Most service industry workers earn minimum wage or less. These workers rely on tips from patrons to help them make ends meet. With tipping on the decline, this could give more ammunition to the argument around raising the federal minimum wage.

The federal minimum wage still sits at just $7.25 per hour and hasn’t budged since 2009. President Joe Biden and other prominent Democrats want a federal minimum wage of $15 per hour. While this debate trudges on, many states are taking matters into their own hands. Twenty-six states are set to raise their minimum wage in 2022, with California introducing a bill to raise quick-service minimum wage to $22 per hour. Until then, tip fatigue could mean depleted take-home pay.

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