While truth – scientific or otherwise – is never arrived at through a show of hands, it’s worth asking readers a basic question: do you tip? In particular, do you tip your commercial contacts at year end?
Some of you may have restaurant waiters and bartenders to whom you’re extra generous. For others it’s cleaning people, postmen, or those who deliver the newspapers each day. For parents it’s frequently babysitters, superintendents for apartment dwellers, and for foodies it’s often maître ds.
Lacking any kind of reasonable capability to tally answers from readers, it will just be assumed that most of you tip. Extra evidence (on a personal, anecdotal level) supporting the previous claim is that each December the individual who delivers the newspapers, and whom I've never actually met, inserts a Christmas card which includes an envelope with her return address stamped on it. The latter is a hint that the she would not only like a tip, but has reason to expect one. Some cash is always sent her way given my appreciation for newspapers delivered extra early, and that are always wrapped in plastic.
The simple truth is that Americans tip, and they do so generously. If not, as in if they had a tendency to ignore good service rendered, there wouldn’t exist these kinds of expectations. Along the previous lines, for years the New York Post has published year-end tipping guides for readers. If Americans weren’t broadly giving, newspapers like the Post wouldn't provide gratuity guidance, plus the various jobs mentioned would be much more difficult to fill.
Which brings us to a popular narrative that big corporations, for being big corporations, routinely short-change their workers. Some readers can doubtless cite the commentary verbatim: corporations and shareholders keep the profits for themselves while showing little regard for the workers whose efforts are the driver of company success. As the endlessly predictable Paul Krugman put it in Friday's New York Times about the wage impact of corporate tax cuts, "the consensus among tax economists is that most of the break will accrue to shareholders as opposed to workers. So it’s mainly a tax cut for investors, not people who work for a living." In Krugman's defense, it's not unheard of to watch Fox News only to hear some pundit say wages have been stagnant since the 1970s. Or, as conservative theorist Peter Wehner described it in a quickly forgotten e-book (Room to Grow) from 2014, "the odds of moving up or down the income ladder in the United States are roughly the same as they have been for decades."
Ok, but if wages and upward mobility in the U.S. are so rigid, why is the U.S. regularly showered with imports? We can only buy insofar as we have the means to buy, and Americans hoover up the world’s production with great gusto. Americans are also known for running up lots of debt, credit card and otherwise. But if their wages are stagnant as the conventional wisdom suggests, does anyone seriously think savers would direct so much of their savings toward Americans, and at such low rates of interest?
Seemingly forgotten by the gloomy on both sides is that statistics have a way of deceiving. If the American worker had truly been suffering wage stagnation all these decades then it’s fair to say that immigration into the U.S. would have ground to a near halt decades ago. The previous decline would have taken place alongside major declines in imports, along with individual debt. Each is an effect of rising wages – for rather obvious reasons – and each has risen with great constancy over time.
After that, those who believe in the narrative of wage stagnation need only look around. If it were true, why then is competition for top talent on Wall Street and Silicon Valley so keen? And if the two examples smack of elitism, readers need only walk into a McDonald’s or Starbucks to see that each offers all manner of benefits (including college education at Starbucks) as a lure for entry-level workers. Traveling back in time roughly 100 years, Henry Ford famously raised the wages of his hourly employees well above what the market would bear simply because employee turnover was proving way too expensive for the automobile visionary.
All of which brings us back to tipping. Readers need only ask themselves why they do it. Generosity is surely a factor. Expectations or tradition play a role too. No doubt among some, tipping is a survival concept rooted in avoiding bad service. For others it’s a positively selfish desire to not just be appreciated by those who meet their needs, but to ensure ongoing appreciation. Americans enjoy being generous and venerated at the same time. Some love to be fawned over. The reasons for tipping are endless, but arguably the principal driver of it is a desire to compensate in return for a job well done. And in compensating for good service, we're hoping the good service will be repeated again and again.
Applied to corporations, does anyone seriously think they’re different than we are as people? As people we once again tip with great regularity. It defines us. What’s important here is that corporations are just people. And if the American people see the value of rewarding good service, can the pundit class really be so naive as to assume corporations lack the basic knowledge to understand that happy, well-compensated employees are crucial to company success?
So while it’s fair to say that an individual known to never tip at a restaurant will still be served, it’s also fair to say that with time this individual who seemingly wants something for nothing will be avoided by the best waiters, and will likely experience slower service. Why go out of one’s way to please someone who won’t reward you in return? Some would logically quit restaurants populated by stingy customers.
Ok, but can anyone reasonably say corporations are any different? Figure that the successful ones are that way precisely because they’ve attracted the best and brightest employees. By extension, does anyone seriously think well-run corporations, having gone to great lengths to attract the best and most conscientious, would then proceed to exploit and underpay those workers? If so, how long before the good and great are lured away by more enlightened companies who understand that nothing is more expensive (think turnover) than an underpaid employee? And wouldn't it be hard for corporations known to stiff their employees to attract the most crucial drivers of their success in the first place?
The main thing is that we as individuals know well the benefits that come from rewarding the good. They’re endless. Rest assured that corporations understand what we do. So while it’s fun to cite statistics about wage stagnation, lack of upward mobility and exploitation by the powerful, reality happily paints a much different picture about the American people, along with the corporations they work for. Americans tip, and so do American companies.
John Tamny is a Forbes contributor, editor of RealClearMarkets, Director of the Center for Economic Freedom at FreedomWorks, and a senior economic adviser to Toreador Research & Trading. He’s the author of Popular Economics (Regnery Publishing, 2015), Who Needs the Fed? (Encounter 2016), and then his next book, The End of Work (Regnery) about the ongoing explosion of jobs that don't feel like work, will be released in 2018.
