As Economy Plummets, Tips Go Along for Ride

As the economy sags, service workers find their tips decreasing.

Dec. 16, 2008 — -- Ceasar Morales doesn't have high hopes for his annual tips this holiday season.

The bellhop at New York's swank Trump International Hotel, where rooms start at $495 a night, told ABCNews.com that since the economy has gone into a recession, tips from guests have plummeted.

"Guests -- even those who stay here once a month -- are now just saying, 'sorry' and leaving without tipping me," said Morales, who has worked at the hotel for more than 11 years. "Or if they used to slip me a 20, now it's a 10 or a five-dollar bill, instead -- it's a big difference."

Morales, like many workers who count on tips and holiday bonuses to make ends meet, said that he estimates his tips have been slashed in half this year. He said he's worried about how he'll take care of his two children who have just started college.

Construction worker Brian McFarlane said that he, too, feels the pinch this year and knows he won't be getting his year-end tips.

"Last year, we got about $1,000 in bonuses and tips," he said. "This year, they've basically told us it's not going to happen.

"I see what's going on with the economy so I do understand why we're not getting the money, but it still means less cash for eating out or extra spending," said McFarlane.

One New York City laborer, who asked not to be named, said that the lack of tipping is "really bad."

"Nobody is tipping anymore," he said. "That extra help we count on is gone."

Michael Lynn, a professor of consumer behavior and marketing at Cornell University, said that what Morales and McFarlane are reporting is anticipated to only get worse in the coming weeks.

"Wealthier people tip more and people who are less price-sensitive tip more," said Lynn, who has done research on tipping behavior. "Both of those things lend support to the idea that tips would go down in the bad economy."

"People's wealth goes down and they become price-sensitive when the economy plummets," he said.

"I'd anticipate that doormen are going to receive smaller annual gratuities this season," he said. "What the norm is this year is probably not higher and maybe even a lot lower than last Christmas."

But doormen and bellhops, said Lynn, are just some of the many workers who will receive thinner envelopes than in years past.

Servers at restaurants, for example, may be getting hit the hardest.

"Fewer people will be going to full-service restaurants, so there will be fewer people to wait on," said Lynn. "And those who are going will probably be spending less, and with lower bill prices mean smaller percentages for tips.

"It's really a triple whammy for servers," he said.

A Guide to Tipping: When It's OK to Skimp and When It's Not

But etiquette expert Lizzie Post, the great-great granddaughter of Emily Post, said tipping servers is one place where it's not OK to scale back -- bad economy or not.

"The regular daily service tipping, like if a [porter] hails you a cab and you give him a dollar, or if you go to a restaurant and a server waits on you -- those types of tips should still be happening no matter what," said Post.

"Especially when it comes to servers in a restaurant because they don't make minimum wage, which is why it's mandatory to tip even if you get bad service," she said.

But when it comes to annual tips during the holidays -- a custom Post says is essentially a generous "thank you" for the year's services -- scaling back is permissible.

"It's OK to scale back on holiday tips during tough economic times," said Post. "Some people may just cut back or eliminate the tips altogether."

Post says that when figuring out who gets what at the end of the year, the first thing to think about is your budget and then prioritize by determining which people have helped you the most this year.

Aware that people may be worried about being criticized for being stingy if they decide to give a smaller tip or none at all, Post suggests writing a note explaining your difficult financial situation while still expressing your gratitude for the person's hard work.

"Send a note along with the [smaller] tip and say that you know it's not what it was in the past, but please don't let it be a reflection of your hard work, and thank them again," said Post.

But with the economy hitting everyone hard, Post said she's heard of fewer backlashes than one might expect from those who might be getting fewer tips this year.

"People have been telling us that when they did call ahead or send notes to warn that tips or bonuses might be less this year, service providers were just grateful to be needed," she said.

"Many of these people are just happy to have their jobs at this point," said Post.

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