People Tipped More During the Pandemic. Will That Continue?

Americans seemed more inclined to tip - primarily online - during the pandemic.  

The question is whether that behavior will continue in the post-Covid era. JL

JJ McCorvey reports in the Wall Street Journal:

Card-payment data indicate that Americans tipped more during the pandemic. The share of transactions processed by Square Inc. that included a tip increased to 66% on March 1 from 63% a year earlier. The gross amount in payments processed by its sellers was $29.8 billion for the first quarter of this year. The most significant change in gratuities occurred with orders made online or over the phone. For those types of transactions, tipping frequency jumped from just below 50% to nearly 87%

Americans are getting more signals that it is safe to visit bars and restaurants again. The reopening will test whether new tipping norms continue after evolving during the Covid-19 pandemic.

Card-payment data indicate that Americans tipped more during the pandemic. The share of transactions processed by Square Inc. that included a tip increased to 66% on March 1 from 63% a year earlier. The gross amount in payments processed by its sellers was $29.8 billion for the first quarter of this year.

The most significant change in gratuities occurred with orders made online or over the phone. For those types of transactions, tipping frequency jumped from just below 50% to nearly 87%, a possible sign that Americans have become more willing to add a gratuity for takeout orders and other services performed remotely.

Square, however, said the average tip amount as a percentage of the total tab fell to around 17% from 21% before the pandemic began.

“It is possible, but seems unlikely, that the same individuals are both tipping more often and leaving smaller tips now than they did before the pandemic,” said Mike Lynn, a researcher and professor at Cornell University’s School of Hotel Administration who studies tipping.

Mr. Lynn suggested that new tippers might hesitate to contribute a 20% gratuity, which would lower the average size of tips.

An opposite effect was found in a recent analysis by Federal Reserve Board research assistant Sarah Conlisk of taxi rides taken in Chicago.

Ms. Conlisk wrote in a report that tips left by cab passengers using credit cards increased by 2 percentage points to 28% of the total fare. But the overall likelihood that a passenger left a tip decreased by 5 percentage points from a pre-pandemic average of 95%. Ms. Conlisk found that the increase in total tips tended to come from wealthier neighborhoods, highlighting the economic disparities exposed by the pandemic.

One category that saw tipping go up was food delivery. Data from the delivery service Grubhub Inc. showed diners tipping 15% more than usual on average.

The effect of pandemic lockdowns and closures on cash tips is unclear. According to a survey of service workers by One Fair Wage, a nonprofit organization that seeks to improve wages, 80% reported that their tips declined during the pandemic, with two-thirds of them saying tips fell by at least 50%.

“The impact of the pandemic was not felt equally by everyone,” said Zarak Khan, senior behavioral researcher with Common Cents Lab, which promotes financial health and literacy. “Some people were in a better position to tip.”