Americans Tip Less as Rising Costs and Tipping Fatigue Hit Restaurants

Americans Tip Less as Rising Costs and Tipping Fatigue Hit Restaurants

Edited by: TJVNews.com

Tipping trends in the U.S. have shifted significantly, with average gratuities at restaurants dropping to their lowest levels in at least six years. According to a recently published report in The Wall Street Journal, the decline is driven by customer fatigue over rising prices and frustration with tipping prompts in unexpected settings. As these changes ripple through the industry, restaurants are struggling to balance rising costs with dwindling patron spending.

The average tip at full-service restaurants fell to 19.3% in the third quarter of 2024, according to data from Toast, a provider of restaurant payment systems. This figure represents a marked decline from the peak of 19.9% in early 2021, when many Americans, emerging from COVID-19 lockdowns, tipped more generously to support struggling restaurant workers.

Consumer attitudes have since shifted, The Wall Street Journal noted, with fewer diners feeling inclined to leave higher gratuities. A survey conducted by restaurant technology company Popmenu revealed that only 38% of consumers tipped 20% or more in 2024, a stark drop from 56% in 2021. The reasons for this change include heightened sensitivity to rising menu prices and a broader frustration with tipping culture.

Restaurants have faced steep increases in ingredient and labor costs, forcing many to raise prices or implement mandatory gratuities and service fees. These measures, while designed to support operational costs, have left some diners feeling alienated. “Instead of that second or third drink, people will go home,” said Andrea Hill, director of operations for HMC Hospitality Group, which operates Hooters restaurants in Chicago told The Wall Street Journal.

A BBQ Bacon Cheddar burger at a downtown Chicago Hooters location, for example, costs $12.49—part of the price increases customers are now contending with. Rising bills have created a strain on both diners and restaurant staff, as servers report earning less per table due to smaller gratuities and reduced spending on extras such as drinks or desserts.

The economic pressures on the restaurant industry in 2024 were severe. Americans dined out less frequently than in 2023, leading to a wave of bankruptcies among restaurant chains and operators. According to an analysis of BankruptcyData.com records cited by The Wall Street Journal, 2024 saw the most restaurant bankruptcies in decades, apart from the pandemic’s peak in 2020. High-profile casualties included casual-dining staples such as Red Lobster and TGI Fridays.

The downturn also impacted restaurant workers, with federal data showing they worked fewer hours per week on average in 2024 compared to the previous year. Waitstaff, bartenders, and cooks have faced reduced earnings as fewer diners tip generously or order multiple courses.

A growing frustration with tipping culture has exacerbated the issue. Digital payment systems now frequently prompt consumers to leave gratuities at places where tipping was historically rare, such as airport concessions and gas stations. This has left many diners annoyed, according to The Wall Street Journal, and contributed to a broader reevaluation of tipping norms.

John Reilly, a doctor in Washington, D.C., told The Wall Street Journal that while he considers himself a generous tipper, rising menu prices have forced him to reassess. “Restaurants have not been doing well here in D.C., and price definitely has much to do with it,” he said.

Organizations such as One Fair Wage contend that the tipped-wage system forces customers to subsidize restaurants by ensuring tip-earning workers receive a livable income. Based in New York, the advocacy group campaigns for a universal minimum wage for all workers, with tips serving as an additional, optional bonus rather than a necessity. “Tip-earning workers deserve the same minimum wage paid to other employees, plus any gratuities customers might offer,” One Fair Wage asserts, according to The Wall Street Journal.

Recent victories in Chicago and Washington, D.C., have bolstered the movement. In these cities, minimum wages for tip-earning workers are set to match standard minimum wages within a few years. Inspired by these successes, One Fair Wage is targeting similar legislative or ballot measures in states including New York, Illinois, Ohio, Arizona, and Maryland in 2024.

The restaurant industry, however, is sounding alarms about the potential fallout from eliminating tipped wages. The National Restaurant Association, a trade group, has warned that the shift could harm operators, servers, and diners alike. Mike Whatley, the association’s head of state affairs and local advocacy, stated that the group and its members are committed to fighting these changes.

The economic impact is already visible in Washington, D.C., where voters approved the elimination of the tipped-wage system in 2022. According to a local trade group cited by The Wall Street Journal, 70% of restaurants in the city have raised prices since the measure’s passage, with price increases averaging 9%. Many establishments have also introduced mandatory service fees or gratuities to offset higher payroll costs.

The financial burden on restaurateurs is substantial. Fritz Brogan, who co-owns five bars and restaurants in Washington, D.C., told The Wall Street Journal that rising wages have forced him to increase menu prices and cut employee hours. At his Mission Navy Yard location, for instance, the cost of an espresso martini has risen to $15, up from $13 in 2023.

Brogan estimates that next July’s scheduled minimum wage increase for tipped workers to $12 an hour will add $400,000 to his payroll costs across his 350 hourly staff. He is considering implementing additional service charges to manage these expenses, though he acknowledges the potential downsides. “The last thing people want is to be doing calculus at the end of the night,” Brogan said.

For diners, the new fee structures and higher prices are a source of growing confusion and irritation. Washington, D.C., resident Mohit Ganguly shared his frustration with The Wall Street Journal, noting that it’s easy to overlook mandatory service fees on restaurant bills. “Tipping 15% to 20% on top of that feels superfluous,” he said, reflecting a sentiment that many customers share.

As the debate over tipped wages continues, the restaurant industry finds itself at a crossroads. Advocates for wage reform argue that eliminating the tipped-wage system will provide workers with greater financial stability and reduce inequities in pay. Industry leaders, however, caution that the additional costs could further strain businesses already grappling with inflation and changing consumer habits.

For both workers and customers, the evolving landscape raises questions about fairness, transparency, and the future of dining culture. As The Wall Street Journal report emphasized, the challenge lies in balancing the need for equitable wages with the financial realities of running a restaurant—while ensuring that dining out remains a viable and enjoyable experience for all parties involved.