A report from the British Institute of Economic Affairs has described the American practice of tipping as ‘out of control’, warning that its expansion into other countries threatens to undermine established wage structures. The report, published on Monday, analyses the growth of gratuity expectations in sectors where tipping was traditionally absent, such as fast food and self-service kiosks.
The institute’s research indicates that average tip amounts in the United States have risen by 45 per cent over the past decade, with some establishments now prompting customers for gratuities before service is rendered. This trend, the report argues, shifts the burden of remuneration from employers to consumers, effectively eroding the concept of a guaranteed minimum wage.
Dr. Catherine Reed, the report’s lead author, stated: “What began as a reward for exceptional service has become a socially enforced expectation that replaces proper wages. In countries where tipping is less entrenched, its importation risks creating a two-tier labour market where vulnerable workers depend on customer generosity rather than employer responsibility.”
The report highlights that in the United Kingdom, where a service charge is often included in restaurant bills, the American model has begun to appear in coffee shops and delivery apps. British hospitality workers earn a statutory minimum wage of £10.42 per hour, compared to the US federal minimum of $7.25, though many states have higher rates. The institute warns that if gratuities become expected in new sectors, employers may use them to justify lower base pay.
A spokesperson for the US Department of Labour declined to comment on the report. However, the National Restaurant Association has defended tipping, arguing that it rewards hard work and allows employees to earn more than minimum wage. The report counters that this system introduces instability and inequality, with workers in high-end establishments earning significantly more than those in low-cost venues.
The institute’s findings come amid growing debate in both the US and Europe about labour practices. In the United States, some states have moved to eliminate the tipped minimum wage, while in the European Union, the European Commission has proposed a directive on adequate minimum wages that would discourage reliance on gratuities.
The report concludes that unless policymakers act to protect wage structures, the globalisation of American tipping culture could lead to a race to the bottom in pay conditions. It recommends that countries adopt clear regulations distinguishing between voluntary tips and service charges, and that employers be required to pay a living wage irrespective of gratuity income.
