On the point of tipping

No, this post isn't on the topic of our new baby, or a missive lamenting how we've reached our breaking point in the week hours of the morning. Today's topic is gratuities.

Why do we tip? If you're interested in the subject, a recent article from the Wall Street Journal offered a nice, historical perspective on tipping. Like many finance-related topics I find thought-provoking , this one gets at the economics and theory behind efficient markets. It was written on the subject of why we give gratuities and used Starbucks as an example company.

Of course, Wikipedia has an entry for gratuities as well. Some valid arguments against tipping as Americans know it (from the aforementioned sources):

• tipping encourages tax evasion
• tippers often factor superficial or non-performance factors into the tip (e.g., the quality of the food, the physical attractiveness of the server/tippee, the size of the bill, etc.)
• tipping encourages servility or submissiveness. Is that so bad? Submissiveness is practically absent from our culture today. I'd argue it is bad, only to the extent that it encourages intellectual laziness.

For me, I think it really comes down to the struggle between a few ideas. If we want to inspire high performance, especially in service-related businesses, what better way is there than for the recipient of the service to reward the server?

I'll ask the question, would it be better to base our gratuity on the amount of time the server spends on serving us? On the size of the bill (considering that more expensive menus often necessitate more skilled servers)? What is the best proxy for rewarding the quality of service we receive?

How do you determine how much to tip?

Back to Starbucks. Should we tip baristas that work for an employer that is known to offer well-paying jobs with respectable benefits? As the wsj article asked, who are we subsidizing when we tip? The employer or the employee?