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The Racial Tipping Point—A Commentary by Ian Ayres ’86

The following commentary was published in The New York Times on March 20, 2008.

The Racial Tipping Point
By Ian Ayres ’86

A few years back, I got interested in taxicab tipping – and what influences how much people tip. So together with Fred Vars and Nasser Zakariya, I collected data on more than 1,000 cab rides in New Haven, C.T. and crunched the numbers. The study (published in The Yale Law Journal) found — after controlling for a host of other variables — two independent racial effects:

1. African-American cab drivers, on average, were tipped approximately one-third less than white cab drivers.

2. African-American and Hispanic passengers tipped approximately one-half the amount white passengers tipped.

African-American passengers also seemed to participate in the racial discrimination against African-American drivers. While African-American passengers generally tipped less, on average they also tipped black drivers approximately one-third less than they tipped white drivers.

Passenger discrimination against African-American drivers was not subtle:

African-American drivers were 80 percent more likely to be stiffed than white drivers (28.3 percent vs. 15.7 percent).

But as in all empirical studies, you have to ask whether the results are robust. Do black servers generally receive lower tips, and if so, why?

Our New Haven data did not have good information on the quality of driver service. We did a small amount of secret auditing of the drivers in our study to see if there were gross differences in the quality of service they provided. Our testers:

… subjectively rated the quality of service higher for black drivers than for white drivers (with an average rating of 4.5 out of 5 for black drivers versus an average of 3.3 for white drivers).

But we only succeeded in completing 10 audit rides with participating drivers — so at the end of the day, it was difficult for us to assess whether minorities received poorer tips because of providing poorer service.

However, a new study co-authored by the world’s leading number cruncher on tipping, Michael Lynn, has found a similar effect in a Southern restaurant. His article, “Consumer Racial Discrimination in Tipping: A Replication and Extension” is based on 140 surveys that he and his co-authors:

…collected during three lunch shifts (11:00 a.m. to 4:00 p.m.) at a [large national chain] restaurant located in the southern United States.

Focusing on just blacks and whites, the study once again found that:

Consumers of both races discriminated against black service providers by tipping them less than white service providers.

A cross-tab of the raw data (generously emailed to me by Lynn) shows that white customers tipped black servers almost four percentage points less than white servers and that black customers tipped black servers half a percentage point less.

But unlike my taxicab data, Lynn’s survey asked customers for their perception of service quality, food quality, and atmosphere quality. He also was able to control for the size of the group, the bill size, and a host of other variables.

Lynn emailed me:

After controlling for these other variables … the server race effect is comparable across customer race.

But as a law professor what is most interesting about Lynn’s article is his suggestion that an employer might be held liable under Title VII of the Civil Rights Act for establishing a tipping policy that has a disparate impact against African-American employees.

Lynn has a pretty good argument that restaurant policies are a “but-for” cause of at least some of the racial disparity. If the restaurants posted “no tipping” signs or instituted “service compris” (instead of putting a place on the credit card receipt for customers to write in the tip), the size of the racial disparity would almost certainly decrease.

But the harder question is whether the racial disparate impact of tipping is legally justified by the legitimate interest of businesses to enhance customer service. Not all employer practices that produce racial disparities violate Title VII. But the employer bears the burden of proving that the policy of promoting/allowing tipping is “consistent with business necessity.”

Today we think of tipping as beyond the scope of legal regulation. But in researching my Yale article I was surprised to learn that in the early twentieth century, progressives in seven states passed anti-tipping statutes that, to varying degrees, outlawed tipping.

Critics referred to the practice as “un-American” and incompatible with democracy. Former Yale law professor (and U.S. president) William Howard Taft was the “patron saint of the anti-tip crusade,” and Ralph Waldo Emerson roundly condemned the practice:

I sometimes succumb and give the dollar, yet it is a wicked dollar which by and by I shall have the manhood to withhold.

Tipping was attacked as bribery and as “the training school of graft.” In “The Itching Palm,” a 1916 manifesto against the practice, William Rufus Scott said that tipping is a form of “flunkyism” defined as “a willingness to be servile for a consideration.”

Lynn’s small study of just 140 tips may illuminate another potentially unattractive aspect of gratuities — that they may facilitate a species of employment discrimination. There is a probably apocryphal story that the word “TIP” originated in British pubs, where signs with these three letters were posted on boxes as a reminder that gratuities were welcome. The letters were an acronym for the phrase “To Insure Promptness.” But the evidence from Lynn’s and my earlier studies are suggestive of a new acronym: “To Insure Prejudice.”