129. Should Tipping be Banned?

It's awkward, random, confusing -- and probably discriminatory too.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Stephen J. Dubner?

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• 1:27Stephen J. Dubner?

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• 2:33Stephen J. Dubner?

  Hey Levitt.

• 2:34Speaker 01

  Hey Dubner.

• 2:35Stephen J. Dubner?

  When I say the word tipping, what do you think of?

• 2:39Speaker 01

  I think of discomfort.

• 2:41Stephen J. Dubner?

  Discomfort for whom?

• 2:43Speaker 01

  Oh, for the tipper, for me. I don't like to tip. I think tipping's unpleasant.

• 2:49Stephen J. Dubner?

  Now, it's not that you're an ungenerous person. I find you quite generous.

• 2:52Speaker 01

  Yeah, no, I just don't like social interactions that much. And I don't like the idea that I'm not sure how much to tip, or what's fair, or what's right. And it leads me in the exact opposite direction. Whenever there's someone who's doing a job that deserves to be tipped, or that socially we think should be tipped, it's always my inclination to not let them do their job. So I always want to carry my own bags in airports or in hotels. And obviously, I can't serve my own food at the restaurant. But if I could, I'd go right in the kitchen and make my own food.

• 3:30Speaker 01

  Can I say something about you?

• 3:32Stephen J. Dubner?

  Sure, Levitt, go ahead.

• 3:33Speaker 01

  So I always thought I was a good tipper until I hung out with Dubner. Man, you throw the money around like it's going out of style. It's embarrassing to be around you. It's so embarrassing. Oh, man, we get in some car, some sedan, to take us 15 minutes from one place to the next, and you're flashing 20s and 50s and stuff like that.

• 4:01Speaker 02

  From WNYC and APM, American Public Media, this is Freakonomics Radio, the podcast that explores the hidden side of everything. Here's your host, Stephen Dubner.

• 4:25Stephen J. Dubner?

  So Steve Levitt, my Freakonomics friend and co-author, thinks I am a grotesque tipper. For the record, I believe he's exaggerating. But yes, I do routinely tip people who work hard for a living, especially when they're not getting paid all that well. That said, I agree with Levitt that tipping can lead to discomfort, can be confusing. Why do you tip a hotel doorman but not the person behind the reception desk? Why do you tip a baggage handler at the airport but not the flight attendant? How much is enough for a tip? How much is too much? And if you're on the receiving end, how do you get the biggest tips? This is a question that everybody has an opinion about. We talk to people all over the country who work for tips.

• 5:10Speaker 03

  My name is Tanya. I'm a server, and I'm in Minneapolis, Minnesota.

• 5:13Speaker 04

  I'm Johnny Glawie, and I'm a valet. Krista Olsson. I've been bartending for over a decade. I'm a barista.

• 5:22Speaker 05

  Coffee barista. I am a server. A server.

• 5:25Speaker 04

  I'm a server at Danny's.

• 5:28Speaker 05

  I'm a hairstylist.

• 5:29Speaker 06

  A barber at Hymis Abadashri. I've worked many jobs for tips, as a barista, as a bartender, and as a doorman.

• 5:37Speaker 07

  My name is Iris Green, and I'm a stripper.

• 5:42Speaker 08

  You know what's really interesting is if you see somebody smoking, they're usually going to be a good tipper.

• 5:48Speaker 04

  The older, the fatter, the better. You can get a guy that looks like a bum that turns out to be a super guy, and you get a guy that looks like a millionaire, and he won't tip you a thing, you know?

• 6:00Speaker 09

  Black cardholders from the American Express, 10% to 15%. I understand he got rich by being frugal, but that doesn't fly. And look at their shoes. The shoes? The shoes. Shoes can say a lot.

• 6:18Stephen J. Dubner?

  Tipping is an idea that economists traditionally have a hard time with. Why should I give more of my money to someone else on top of what I've already paid for a meal or a ride to the airport? And what is a tip exactly? A fee? A tax? Is it altruism? We needed to find someone who could answer all of our tipping questions.

• 6:41Speaker 10

  My name is Mike Lin. I'm a professor at the Cornell Hotel School. I do research mostly on tipping behavior.

• 6:48Stephen J. Dubner?

  There you go. Why does Michael Lin find tipping so interesting? In his words, it's, quote, "not only because it is widespread, but also because it is an expense that consumers are free to avoid." And how big is this expense?

• 7:07Speaker 10

  I haven't done it recently with the most up-to-date records, but approximately 40 billion a year is tipped in the United States.

• 7:16Stephen J. Dubner?

  Forty, four, zero, 40 billion dollars a year?

• 7:20Speaker 10

  Yes.

• 7:21Stephen J. Dubner?

  Holy cow. I'm clicking around here. I see that the budget for NASA is under 20 billion, so we could build two Nasas for tipping. So that's a pretty astonishingly large amount of money for what is essentially a voluntary financial transaction, yes?

• 7:39Speaker 10

  I think so, yeah.

• 7:44Stephen J. Dubner?

  Lin has written 51 papers on tipping behavior. Here's one title. "Are Christian/religious People Poor Tippers?" The answer to that is yes, relatively speaking. Here's another paper. "Sweetening the Till: The Use of Candy to Increase Restaurant Tipping." Yes, Michael Lin found that candy correlates with higher tips. As you can probably sense by now, Lin has studied all sorts of factors that may or may not influence tipping.

• 8:13Stephen J. Dubner?

  If we could, we could almost do this as a sort of a lightning round if you're comfortable giving short answers. Talk to me about how tipping varies based on the following factors. Let's start with attractiveness of the server.

• 8:27Speaker 10

  Attractive waitresses get better tips than less attractive waitresses. Men's appearance, not so important.

• 8:33Stephen J. Dubner?

  Okay. And what about a waitress versus a waiter generally?

• 8:36Speaker 10

  Hard to say. In general, I would say waiters get better tips from women than men. Waitresses get better tips from men than women.

• 8:48Stephen J. Dubner?

  And what about, let's say, among women, hair color? Blonde is better than brunette or red, or no?

• 8:54Speaker 10

  Yes. Blondes get better tips than brunettes. Slender women get better tips than heavier women. Large-breasted women get better tips than smaller-breasted women. Surprisingly, at least in the studies I've done, women in their 30s get better tips than either younger or older women.

• 9:16Stephen J. Dubner?

  So a skinny, good-looking, big-breasted woman in her 30s is going to get big tips?

• 9:23Speaker 10

  I would simply replace the word skinny with slender.

• 9:28Stephen J. Dubner?

  Slender. A slender, good-looking, big-breasted woman in her 30s gets big tips. Color me shocked, I have to say.

• 9:35Speaker 10

  Yes.

• 9:40Speaker 11

  I have tried using my feminine wiles before and with mixed results. When I really made an effort at that, it tended to work.

• 9:50Speaker 12

  You know, you just flash your smile and you make sure your hair and your makeup is done, even if you're sweating like a pig. As long as your hair and makeup's done, you'll be all right.

• 10:00Speaker 07

  I pretended to be French for a while and I put on this accent like this and I said I was from France and I have been in New York for, I don't know, six months and I love it, but it got so tiring though. I was exhausted. It worked, though.

• 10:29Stephen J. Dubner?

  So how does Michael Lin know what he knows? Well, he's studied tipping since he was a grad student.

• 10:35Speaker 10

  The first study I did on tipping was outside of an IHOP.

• 10:39Stephen J. Dubner?

  Then, as now, he looks for as much data as he can get. Even today, he'll still stand outside a restaurant interviewing customers as they leave.

• 10:48Speaker 10

  Asking them questions about their perceptions of the dining experience, how much their bill was, how much they tipped. Some of it is having servers keep records of their customers, including their bill size, tip amount, and race. But a lot of it is either online or telephone interviews with customers, asking about their general habit, tipping habits and tendencies.

• 11:12Stephen J. Dubner?

  He focuses on restaurant servers, since they take in about 70% of all tips in the US. The server-customer relationship begins the minute you sit down.

• 11:23Speaker 10

  Introduce yourself by name. Not in some remote, mechanical kind of way that says, "Hi, I'm Mike, I'll be your server." But if you can genuinely have a conversation with that table, and as a part of that, introduce yourself by name, that's good.

• 11:39Stephen J. Dubner?

  Well, let's hear you introduce yourself the right way, because the way you just said it is the way I hear it a lot. And I have to say, it doesn't make me want to cozy up and dump a 20 in his pocket.

• 11:47Speaker 10

  That's true. Please understand, I'm no longer a waiter. The reason I didn't get good tips when I was a waiter is I'm not the most sociable of people, so I'm not sure I can do it right.

• 12:01Stephen J. Dubner?

  I'm sure you-- come on.

• 12:03Speaker 10

  But I think that if you go up to a table and go, "Hi, my name's Mike," I'm going to be-- now, see, it's starting to sound mechanical. I don't know how you do it, especially if you're having to do it over and over again without being mechanical.

• 12:19Stephen J. Dubner?

  So that's interesting. Even the tipping sage cannot master the game. This is a complicated art, no? What else? What are the other habits, or traits, or tricks that a server can do generally to increase? You said a little bit of a touch is good. I'm guessing a lot of a touch is not so good.

• 12:39Speaker 10

  Although, I did do one study where I had a server touch customers and either count 1,1,000, 2,1,000, remove his hand, or touch and count 1,1,000, 2,1,000, 3,1,000, 4,1,000, and then remove his hand. Obviously, the counting was meant to be silent.

• 13:00Stephen J. Dubner?

  Yeah.

• 13:01Speaker 10

  But the point is, that four seconds actually seems like a long time. And it turns out that he got higher tips in both conditions. It didn't matter how long, as long as he touched.

• 13:10Stephen J. Dubner?

  As long as there's a touch, yeah. And where was he touching them?

• 13:14Speaker 10

  On the shoulder, when he went to deliver the check at the end of the meal.

• 13:27Speaker 05

  I mean, particularly, it depends on the job. But at this job, yeah, I definitely touch people on the shoulder. Often, when there's a big party and I need to lean in, I'll just tap them on the shoulder and be like, "Hey." My boyfriend, he was also a server. We worked together for many years at the same place. He would bend down, you know? But I always thought that was a weird thing to do as a girl. I don't know.

• 13:49Speaker 11

  I've never been one of those people that does, you know, that tried leaning down and talking to people, or touching people. I just could never quite get into that rhythm.

• 14:01Speaker 07

  If I'm gauging a client, and he's much older, and he wants to sort of make sure that you're okay, and you're going in the right direction in your life, and he's taking kind of a fatherly approach to you, at the end of a dance, or at the end of a champagne room, you know, you might touch his shoulder and say, "Thank you, sweetie," and ask him if he wants to take care of you. And he always flashes a really big smile, because if you don't, you're not getting anything.

• 14:29Stephen J. Dubner?

  What about, you know, sometimes a server will write the little note, you know, "Thanks," or a smiley face, or whatnot. Does that work?

• 14:36Speaker 10

  Sure. Yes. Smiley faces have been shown to increase tips of waitresses, not of waiters. Drawing other pictures, like of a sun, increases tips. Squatting down next to the table, or pulling up a chair and sitting at the table if there's room, will increase tips.

• 14:52Stephen J. Dubner?

  And when they increase by how much are we talking?

• 14:54Speaker 10

  In one study, the server got $1 more per table when he squatted down next to it. And it turns out, this was one of my former students. I asked him, "What do you do to get better tips?" He goes, "Oh, well, I squat down." And I said, "You really think that helps?" His response was, "Sure, I know it does." And I asked him if he'd be willing to test his theory. He said, "Sure." So, he agreed to randomly assign his tables to conditions. He would squat or not squat. And sure enough, he was right. With those tables he did not squat at, he got $1 less. So, it cost him money to help me do this research. But I put him as an author on the paper. It's a small compensation.

• 15:48Stephen J. Dubner?

  So, clearly, there are all sorts of little things that can nudge a tip up or down. But forget all those little things for a minute. What about the big issue? How good is the service? The conventional wisdom says that good service brings a good tip and vice versa. True? Not true, says Michael Lin.

• 16:10Speaker 10

  First off, I've done a lot of research looking at the size of tip and how it relates to the customer's perceptions of service quality. And a consistent finding is that there is a relationship. People do tip more, the better the service they get. But that relationship is very weak. It's a correlation, the average correlation is point two. That means about 4% of the variability of the differences in the percentage tips left by different dining parties can be explained by their service ratings. So upfront-

• 16:43Stephen J. Dubner?

  It's astonishingly low, isn't it? Not just a little bit?

• 16:46Speaker 10

  Yes, it's astonishingly low. So it's absolutely the case that tips are not as strongly related to service as you would expect. Absolutely, I believe that that's got to reduce the incentive value of tipping. Having said that, though-

• 17:03Stephen J. Dubner?

  Yep.

• 17:04Speaker 10

  Even though the actual relationship between tips and service is low, servers think there's a relationship and that's enough to motivate them to deliver good service.

• 17:23Stephen J. Dubner?

  That's surprising, isn't it? How weak the relationship is between service and tipping? On the other hand, maybe we shouldn't be so surprised. It reminds me of some of the research on altruism. If you ask people why they give money to a certain cause, they'll talk about how meaningful the cause is. But if you look at the actual numbers, you see that the cause takes a backseat to who's doing the asking. Like Michael Lynn's research on tipping, it turns out that a pretty blonde woman has advantages collecting charity, too. So a lot of our behavior that we may think is because of reason X may actually have a lot more to do with reason Y.

• 18:07Stephen J. Dubner?

  Coming up on Freakonomics Radio, an argument for why tipping is just bad.

• 18:13Speaker 13

  We found that even after controlling for these other things, we still find this positive relationship with, between tipping and corruption.

• 18:24Stephen J. Dubner?

  And an argument for why tipping is really, really bad. It's discriminatory.

• 18:35Speaker 12

  I lost my job because my manager said that I didn't fit the look of the company or like the restaurant. And so I don't know if it was because, you know, I'm a lot more curvier than the other girls or because my skin is darker. I don't know. This new manager, he was an asshole.

• 19:01Stephen J. Dubner?

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• 19:46Stephen J. Dubner?

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• 20:04Stephen J. Dubner?

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• 20:47Stephen J. Dubner?

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• 21:09Stephen J. Dubner?

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• 21:43Speaker 02

  From WNYC and APM, American Public Media, this is Freakonomics Radio. Here's your host, Stephen Dubner.

• 21:57Stephen J. Dubner?

  Michael Lin is a scholar of tipping at Cornell. He's examined just about every little thing that can affect tips. Some of his most interesting research looks at how people of different racial and ethnic groups tip and get tipped.

• 22:15Stephen J. Dubner?

  What can you tell us about race of the tipper? So there's, you know, waiters talk about that certain racial and ethnic groups and I should say, national groups always tip, you know, worse than others. What do you know about that?

• 22:27Speaker 10

  Blacks tip less than whites in this country. They're more likely to leave without tipping at all. If they do leave a tip, it's on average, a smaller amount. They're more likely to be flat tippers and not tip a percentage of the bill. It's partially, a little bit mediated by socioeconomic status. That is, blacks also have lower educations and incomes in this country than whites, and people with higher incomes and educations tend to tip more. So that's part of the reason that blacks tip less, but it's only a tiny part.

• 23:02Stephen J. Dubner?

  What's the other part? What do you know about why that is, then?

• 23:05Speaker 10

  I can tell you it's not exclusively an issue of service discrimination, because I find even controlling for the customers' perceptions of service quality, blacks tip less than whites. The most powerful explanation is that it is a difference in perceived injunctive and descriptive tipping norms.

• 23:25Stephen J. Dubner?

  Ooh, I didn't understand that.

• 23:27Speaker 10

  All right. An injunctive norm is a norm about what you should do.

• 23:33Stephen J. Dubner?

  Okay.

• 23:34Speaker 10

  And a descriptive norm is a norm that describes what people do do.

• 23:38Stephen J. Dubner?

  I see.

• 23:39Speaker 10

  Okay. What I've found is that blacks in this country, only about a third of them, if you ask, how much are you expected to tip in a restaurant context, only about a third of blacks will say, give an answer in the 15% to 20% range.

• 23:55Stephen J. Dubner?

  I see. And that compares how to whites and...

• 23:57Speaker 10

  Two-thirds of whites.

• 23:58Stephen J. Dubner?

  Interesting. It makes sense that social norms vary from group to group, right?

• 24:04Speaker 10

  Yes.

• 24:05Stephen J. Dubner?

  So I guess it's not so surprising in some way.

• 24:06Speaker 10

  That's right. It's not completely surprising. But what's surprising to me is, knowledge of the injunctive norm explains only about a third of the black-white difference in tipping. When I include differences in descriptive norms, because I could know, oh yeah, you're supposed to tip 15%, but nobody really does that, right?

• 24:26Stephen J. Dubner?

  Yeah.

• 24:27Speaker 10

  That would be being aware of the injunctive norm, but having a different perception of what the descriptive norm is. And it turns out that there's also a black-white difference in perceptions of what people do. If I take both of those perceptions of the injunctive and descriptive norms, I can account for about half of the black-white difference in tipping.

• 24:49Stephen J. Dubner?

  Hmm, hmm, wow.

• 24:50Speaker 10

  What's beyond that? I'm stumped. I mean, I've tested everything I can think of. If any of the listeners have ideas, have them email me, because I'm looking for areas to, you know, to test next.

• 25:04Stephen J. Dubner?

  All right. That's fascinating. So first of all, what is your email?

• 25:07Speaker 10

  W M L three at Cornell dot E D U.

• 25:19Speaker 14

  They call me Jack Rabbit. They call me Jack Rabbit. I am an exotic dancer.

• 25:23Speaker 15

  My name is Yvette Morgan, and actually, I'm a host at a restaurant.

• 25:30Speaker 14

  Basically, because, I mean, I'm not speaking for all blacks, but we have a mindset of the fact that whatever we're doing for that service, we're getting paid. So a tip is basically a gratuity, which is an extra. And then, I guess, in other cultures, they see it as a form of income. I know, for example, when I talk to some people that I know that are white, you know, when it comes to restaurant tipping, they always presume the fact that, well, they don't make any money, so the tip is all they count on. So they view it differently.

• 26:02Speaker 15

  It's your attitude. It's your attitude. I mean, I'm not saying that black people have bad attitudes, but if you don't, you know, you can make good tips if you have a good attitude. I don't care if you're black or white or whatever. If you have a bad attitude, you're not going to make good tips.

• 26:23Stephen J. Dubner?

  What about differences in tipping for black customers toward black versus white servers?

• 26:29Speaker 10

  Both groups, blacks and whites, will tip a white server more than a black server. And that's even controlling for perceptions of service quality.

• 26:36Stephen J. Dubner?

  So a black customer will tip a black server less than a black customer will tip a white server?

• 26:42Speaker 10

  Yes.

• 26:43Stephen J. Dubner?

  All else being equal?

• 26:44Speaker 10

  Yes.

• 26:45Stephen J. Dubner?

  Wow. So it's fascinating. What can you tell us about other racial or ethnic groups? Asians, Latinos, immigrants versus, you know, on and on?

• 26:52Speaker 10

  Sure.

• 26:53Stephen J. Dubner?

  I'll take whatever you have. It's fascinating.

• 26:55Speaker 10

  The data on other ethnic groups is more mixed. There are several studies finding that Hispanics tip less than whites, but there are studies showing no Hispanic-white difference in tipping. I haven't yet teased apart what's going on, why am I getting it sometimes and not others? And the same thing is true with Asians. I do have some studies showing that Asians tip less than whites, other studies showing that they do not. The one thing I can say for certain is that the Asian-white difference, even when it does exist, is very fragile. That is, I can control for things like sex, education, income, and it disappears. The Hispanic-white, when it exists, is often robust.

• 27:37Speaker 10

  I can control for education, income, and it's still there. But I don't find it as consistently as I find the black-white difference.

• 27:45Stephen J. Dubner?

  With all groups, once you control for income, if you can, men versus women as customers, who tips more?

• 27:53Speaker 10

  In general, there's no sex difference.

• 27:56Stephen J. Dubner?

  Is that right?

• 27:57Speaker 10

  Yeah. And even the sex of server, sex of customer interaction that we've talked about previously, it has been observed consistently enough for me to say it's a real effect, but it's not universal. You don't always find that effect.

• 28:10Stephen J. Dubner?

  I see. What about the age of the customer? How do we see that?

• 28:15Speaker 10

  Older customers tend to tip less. They're also more willing, they base their tips on service quality a little bit more than younger people.

• 28:22Stephen J. Dubner?

  Mm-hmm. So let me, you obviously know so, so, so much about this strange but common practice of tipping. If you could rewrite the custom, rewrite the social moray, which is obviously impossible because it arrives over a lot of time with a lot of people participating in it, what would you do? How would you make tipping more either sensible or directly related to the things it should be related to and so on?

• 28:52Speaker 10

  You know, I think I would outlaw it.

• 28:55Stephen J. Dubner?

  You would?

• 28:56Speaker 10

  Yeah. And it might be illegal as it is because of the race of server effect that we had previously discussed. It's conceivable, you can make the argument that tipping is a condition of employment that has an adverse impact on a protected class.

• 29:13Stephen J. Dubner?

  So it's discriminatory?

• 29:14Speaker 10

  It's discriminatory. And the Supreme Court has ruled that even neutral business practices that are not intended to discriminate, if they have the effect of adversely impacting a protected class, are illegal. And so it's not inconceivable to me that there will be a class action lawsuit on the part of ethnic minority waiters and waitresses claiming discrimination in terms of employment. And it's conceivable that tipping might be declared illegal on that basis.

• 29:48Stephen J. Dubner?

  You're talking theoretically, or is this a movement that actually exists?

• 29:52Speaker 10

  Oh, I know of no such lawsuit right in existence, but it's, I've talked to-

• 29:58Stephen J. Dubner?

  Not hard for you to imagine.

• 29:59Speaker 10

  It's not hard for me to imagine. I've talked to lawyers, including people who specialize in labor and employment law, and I've gotten mixed opinions. I mean, some of those lawyers have said, no, the courts would never go there. Others go, no, that is a reasonable theory of the law. That's plausible.

• 30:16Stephen J. Dubner?

  I think it is plausible. My firm would take a good hard look at a case if a server came to us and made that complaint.

• 30:26Stephen J. Dubner?

  Justin Swartz is a lawyer at Outman & Golden in New York City. He represents employees in class action discrimination cases. He's sued some of the biggest restaurants in New York for shorting employees on the tips they deserved. If his firm were to take on a discrimination case like Michael Lynn has proposed, Swartz would pursue two lines of argument.

• 30:49Speaker 16

  First would be disparate impact analysis. The purpose of disparate impact analysis is to eliminate what the Supreme Court calls "headwinds," policies that make it harder for racial minorities or other people in other protected classes to succeed.

• 31:03Stephen J. Dubner?

  With disparate impact, you don't have to prove that discrimination is intentional. It's a proxy for discrimination.

• 31:10Speaker 16

  The idea is that if there's a disproportionate impact on a particular group, here it would be African-American or non-white servers, then the plaintiffs have made the first showing that they need to make in their case.

• 31:21Stephen J. Dubner?

  And the second argument?

• 31:23Speaker 16

  The second step, then, is the employer's burden.

• 31:26Stephen J. Dubner?

  Meaning, it's up to the employer to prove that tipping is a business necessity, not a custom, but a necessity.

• 31:35Stephen J. Dubner?

  Let's say I'm a restaurateur and I come to you and I say, "Look, I know what you do. I know who you represent, and I want to avoid unfairness, and I also want my business to prosper." So let's say I calculate the average tips in my restaurant, and it's 20%. And I hate the fact that waitstaff member A earns 50% more than waitstaff worker Z because waitstaff worker A happens to have these attributes that, for whatever reason, get a lot of tips. Pooling is complicated, for whatever reason. Let's just say I don't want to deal with all that complication, so I'm just going to say on my menu to my clientele, "We're getting rid of tipping because it's inefficient, sloppy, and potentially discriminatory.

• 32:17Stephen J. Dubner?

  Average tips here were about 20%, and therefore, we're just going to ban tipping and instead raise our prices 20%."

• 32:27Speaker 16

  I don't see any problem with that from a labor law perspective. And in fact, that might be the best way for restaurants to insulate themselves from liability.

• 32:38Stephen J. Dubner?

  Now, you may know that some restaurants in the US have already eliminated tipping. They use an automatic service charge instead. If customers want to, they can tip on top of that service charge. One restaurant in San Diego called The Linkery has gone so far as to ban tipping. If you leave extra money on top of The Linkery's 18% service charge, that money will be given to charity. Jay Porter owns The Linkery. He thinks tipping is absolutely ridiculous.

• 33:09Speaker 17

  If tipping had ever been invented and you were starting a restaurant, would you use tipping as the way to compensate your best employees, your most important employees, all your employees? Would that be the system that you would pick in a vacuum to compensate your team? And I think the answer is clearly no, because it's a stupid system.

• 33:31Speaker 17

  So why not do it the right way, even if it's a little scary?

• 33:45Stephen J. Dubner?

  Now, if you live or travel outside the United States, this entire discussion on leaving a tip in a restaurant might seem ridiculous. Much of the world operates on the simple premise of a service charge or a fixed price, no tip expected. The US is empirically tip crazy.

• 34:05Speaker 13

  In the US, we have 31 different service professions being tipped.

• 34:09Stephen J. Dubner?

  That's Magnus Torfason.

• 34:11Speaker 13

  In Canada, we have 26 or 27, which is the same as in India. In the Netherlands, we have 15. Then we have in Norway, Sweden, and Denmark, we have between 5 and 10.

• 34:27Stephen J. Dubner?

  Torfason teaches entrepreneurship at the Harvard Business School.

• 34:30Speaker 13

  In Japan, we have 4, and in Iceland, we have 0.

• 34:36Stephen J. Dubner?

  Guess where Torfason is from? Yes, Iceland.

• 34:40Speaker 13

  So that's on the exact opposite end of the spectrum from the US, which is the country where tipping is most prevalent.

• 34:48Stephen J. Dubner?

  Now, why was he comparing tipping in countries around the world? What does his research show? Well, if you're looking for yet another reason to hate tipping, listen to this.

• 35:00Speaker 13

  The more tipping you see in a given country, the more corruption you generally see in that country as well.

• 35:09Stephen J. Dubner?

  Here's how we came to that conclusion.

• 35:11Speaker 13

  So we started by collecting information about tipping in some 33 different countries and in 33 different service professions. These are waiters, hairdressers, taxi drivers, and so on. And we also looked at the levels of corruption in these countries, looking at how they scored on the Corruption Perception Index, which is publicized by Transparency International. Running a simple correlation, we found that there is a positive relationship between those two, which could have been for many different reasons.

• 35:53Speaker 13

  But we then controlled for a number of other factors, such as GDP, the culture in a country in general, homicide rates, and other measures of legal enforcement. And this relationship stayed significant. In other words, we found that even after controlling for these other things, we still find this positive relationship between tipping and corruption.

• 36:24Stephen J. Dubner?

  Why in the world would this be? Was Torfison surprised?

• 36:28Speaker 13

  Well, so I was not as surprised as many others. I started this research because I had an inkling that there was this dark side of tipping. In the US, we have a strong norm for tipping. And so if you're an upstanding and law-abiding citizen, you're very likely to be also a good tipper, because that's what the norms tell you. And you're also likely to avoid corruption. But across countries, we see a different pattern, where these norms that encourage

• 37:05Speaker 13

  tipping, which is a form of informal payment for services, may be leaking over into other forms of exchange, which are not as positive and not as socially beneficial as tipping.

• 37:32Stephen J. Dubner?

  So in the end, Steve Levitt is right to dislike tipping, isn't he? Even if he's not right for all the right reasons.

• 37:40Speaker 01

  I don't like to tip. I think tipping's unpleasant.

• 37:45Stephen J. Dubner?

  As I said earlier, it's not that Levitt is ungenerous. It's just that tipping is too woolly, too random, too confusing.

• 37:55Speaker 01

  Well, I tip caddies. So when I play golf, I'm extremely generous with caddies.

• 38:00Stephen J. Dubner?

  See, I think my tipping has rubbed off on you, frankly. Because when we met, you didn't tip, you wouldn't tip anybody. You would barely tip in a restaurant.

• 38:08Speaker 01

  Well, I didn't like to talk to people, so I just let you do the tipping because that was easier. But you have a different strategy than me. Every time you get into a car that takes you from someplace to another, as we often do when we're on the road, you tip the guy, which I think is a terrible equilibrium. So I am in a different equilibrium where for the entire year, I do not tip anyone, ever. No mention of it. And then what I've taken to doing now is there's a car service I use a lot to get to the airport. And so what I did is instead of ever tipping, I just sent a bunch of cash to this car service. And I said, will you just give it to the drivers according to what you think would be fair?

• 38:48Stephen J. Dubner?

  I'm sure that was distributed equally, right?

• 38:51Speaker 01

  I don't know what equally, but I will say the reaction of the drivers.

• 38:54Stephen J. Dubner?

  Okay, let me rephrase. I'm sure that was distributed at all. An envelope of cash comes to like the guy. One person at a car company gets, that's how you tip.

• 39:03Speaker 01

  It is funny. So I called up the, I called up the car company and said, I would like to give this money. And the woman said, definitely send it right to me. And I thought it would never be distributed. But what I will say is that the reaction I've gotten from the drivers has been really, really positive. And I sometimes won't see these drivers for months and months, and they will say how thankful and grateful they were that I made this generous gift. I think it really, it really works so much better because the hard part about tipping is what if you don't have the right change? And then you gotta say, oh, hey, I'm really sorry.

• 39:31Stephen J. Dubner?

  Can I tell you something, though? I really think it's the duty of an adult in a tipping society to like prethink that. It's like when I, when I go to a, like if I go away with the family, if we're going on vacation somewhere, we're going to be staying in a hotel, I like load up on the right denomination bill. Because I feel like, here's what I feel like. I want to reward the people who are working hard, whether or not they really deserve it because they're already working hard. And I figure that probably most of those people that I come into contact with in that situation, hotel, car, whatever, are being underpaid for what they're working. That's my view. Maybe I'm wrong. Maybe I'm naive. Maybe I'm a bleeding heart, but that's the way I feel.

• 40:08Speaker 01

  I think that's nice that you work that hard, but I don't work that hard on other people.

• 40:19Stephen J. Dubner?

  Well, let me just say this. I was in Chicago a few weeks ago. I flew out to work with Levitt. I got picked up at the airport by a car, same car service that Levitt uses, it turns out, and my phone rang and it was Levitt. So I said, "Hey, Levitt." And the driver says, "That's Levitt? That's my boy, Steve Levitt."

• 40:40Stephen J. Dubner?

  So apparently, Levitt's strategy works just great.

• 40:49Stephen J. Dubner?

  Hey, podcast listeners. Next week on Freakonomics Radio, we all know that our families make us who we are. And it can be great to have strong family ties. But it seems there's a downside to strong family ties.

• 41:03Speaker 18

  People who rely on the family tend to trust mostly the family and less the outside world. Therefore, they tend to be more inward-looking, and they develop a lower level of social capital or political participation.

• 41:18Stephen J. Dubner?

  Yet another reason to blame your family for everything that makes you unhappy. That's next time on Freakonomics Radio.

• 41:34Speaker 02

  Freakonomics Radio is produced by WNYC, APM, American Public Media, and Dubner Productions. This episode was produced by Susie Lechtenberg with help from Borey Lamb. Our staff includes Catherine Wells, David Herman, and Chris Bannon. Colin Campbell is our executive producer. If you want more Freakonomics Radio, you can subscribe to our podcast on iTunes or go to Freakonomics.com, where you'll find lots of radio, a blog, the books, and more.

• 42:14Stephen J. Dubner?

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• 42:45Stephen J. Dubner?

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• 43:18Stephen J. Dubner?

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• 43:55Speaker 19

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