Why does tipping still exist?

Tipping is a 40 billion dollar industry.

That is double than NASA’s budget and larger than the fitness industry.

Why does one tip at say a Hyatt but not at McDonald’s?

How come we tip in some situations and not in others?

Here’s the thing: Tipping has nothing to do about service. Tipping is all about status roles. Who’s up? Who’s down?

Tipping sends a signal to everyone around you that I can afford this.

We know now that tipping doesn’t actually increase employee’s pay.

And so, we are seeing people like Danny Meyer change the way we think about tipping.

Status roles play such a big part of everything we do. Once you begin to see it, you begin to see it everywhere.

HT Freakonomics