With the holiday season upon us, many Canadians are reassessing their spending habits in the face of the country’s high cost of living.
Canadians are projected to spend 11 per cent less this holiday season compared to 2022, according to Deloitte Canada. Nearly 80 per cent of Canadians expect interest rates and inflation to impact their holiday budgets.
In addition, some Canadians are still recovering from last year’s festivities. One-quarter of Canadians still haven’t paid off their holiday spending debt from last year, according to a survey commissioned by Global News.
As such, Canadians are being forced to be more discerning in their holiday spending. Restaurants are usually one of the first things to be cut from spending budgets — Restaurants Canada noted a decline in food service sales throughout 2022 compared to 2019. Since restaurants receive a big share of consumers’ holiday spending, they are likely to be impacted by tightened budgets.
This, of course, extends to tipping — with the current affordability crisis and tip inflation, Canadians can’t afford to tip extra this holiday season.
Tip creep and inflation
Many Canadians are frustrated with current tipping culture. A recent Angus Reid survey found three in five Canadians are being asked to tip a higher percentage — ranging from 18 to 30 per cent — for a wider range of goods and services.
These two phenomena — known as tip creep and tipflation — have been hurting shoppers financially. In the context of the cost-of-living crisis, this is only worsening affordability issues.
The COVID-19 pandemic also exacerbated tip creep and tipflation. A survey conducted by Restaurants Canada in April 2022 found that 44 per cent of respondents tipped higher when dining in-person, compared to before the pandemic.
While research has shown that customers tip servers to reward them for good service, 78 per cent of Canadians believe tipping no longer functions as a way to show appreciation for employees; instead, they feel it is expected of them, no matter the quality of service.
Tipping is so ubiquitous in Canada, that point-of-sale devices now default to including tip. Tipping makes sense if an employee helps a shopper, but a self-checkout kiosk asking the shopper to tip is plainly ridiculous.
Are no-tip models the future?
Tip creep and tipflation have led to widespread tipping fatigue among Canadians, with more than half expressing a preference for a no-tip, service-included model that ensures higher base wages for employees.
However, not all Canadians support the service-included model. In my ongoing research, I’ve discovered that some shoppers oppose this approach because they want to maintain control over how much they reward good service.
My co-researcher and I asked individuals to explain their reasons for avoiding restaurants with a no-tip policy. Almost 40 per cent of their responses related to losing control of rewarding or penalizing service quality.
A no-tip policy typically raises menu prices by a flat 20 per cent, which not only acts as a defacto tip, but also robs customers of the ability to personally reward excellent service and, by extension, penalize subpar service.
Our findings revealed that 30 per cent of the reasons given were tied to the price hike, while the remaining 30 per cent were associated with concerns about potential poor service from establishments adopting this policy. This means a no-tip model is not a likely solution. Instead, there are other ways tipping can be managed to promote Canadians’ financial well-being.
Tipping during the holidays
There are three ways Canadians can navigate the thorny issue of tipping this holiday season. First is reminding shoppers that tipping is discretionary. Canadians should not feel pressured into tipping unless they wish to reward workers for good service.
Canadians must not feel that they need to tip employees to allow them liveable wages. Canada is not the United States, which has an abysmal minimum wage of US$2.87 for tipped workers. In Canada, only Québec still maintains a tipped wage — the other provinces have minimum wages ranging from $14 to $16.77 an hour.
These rates come much closer to the country’s liveable wage compared to the U.S. But, in any case, businesses should be the ones responsible for ensuring employees are paid appropriately, not the public.
Second, shoppers must remember they always have a choice in choosing what amount to tip workers. Business owners may choose default tip percentages on point-of-sale devices, but customers are always able to change them. Shoppers need to hold owners (not employees) responsible for their decisions.
Third, if an owner or their employees want to encourage tipping, they should disclose how the tips are distributed between owner and staff and among customer-facing and back-end staff. Such disclosures will make shoppers feel respected and allow staff to truly earn their tips.
Vivek Astvansh, Associate Professor of Quantitative Marketing and Analytics, McGill University
This article is republished from The Conversation under a Creative Commons license. Read the original article.
