As economy dips, so does customers' generosity

Hair isn't the only thing being trimmed at Head Bangers The Salon in Pendleton, Ind.

Customers searching for ways to fight high gas and food prices are doing some trimming of their own — in tips.

"Even the regulars are cutting back," stylist Joanna Anderson said. "Usually they are apologetic and say they wish they could give more. But they just can't right now."

Many workers depend on tips for a substantial part of their income, and those hairdressers, bartenders, cab drivers and food servers have been among the first to be hit hard by the slowing economy, experts say.

Those workers are feeling a pinch because talk of a recession has consumers putting the brakes on extra expenses.

"It's simply panic, and people cut back in anticipation of what may or may not come," said financial commentator Lila Rajiva, co-author of Mobs, Messiahs and Markets: Surviving the Public Spectacle in Finance and Politics.

When the economy slows, dining out is the first area where people cut back., said John Livengood, president and chief executive of the Restaurant & Hospitality Association of Indiana.

"People still eat out because they have to, but they find ways to cut back on how much they spend," he said. Namely, the extras, such as appetizers, desserts — and tips.

Restaurants, where workers rely on tips, are seeing an overall downturn in business. Fifty-four percent of Americans are eating at restaurants less, according to a survey of 1,000 people by RBC Capital Markets. If they do dine out, many are going for cheaper options such as fast food.

That leaves waitress Janet Roush, of Anderson, Ind., fighting for what money she can earn from those who do go to the restaurant where she works.

She said customers don't seem to be as generous as in past years, no matter how good the service is.

"We've got plenty of people coming in here, but they aren't giving me the love, if you know what I mean," Roush said.

That means she has to be more cautious with her spending.

"I'm not looking forward to spring. We've got school clothes to buy," said the mother of a 13-year-old daughter and 9-year-old son.

Kayda Willis, who works at the RAM brewery and restaurant in Indianapolis, said she has noticed fewer customers, but regular visitors continue to tip well.

She makes an hourly wage of $2.13 and said tips are basically her income. She said she tries to give customer service above and beyond the norm and hopes to make diners forget about $3-per-gallon gas prices.

"You've got to put in to get back, and that's how you work the economy," she said.

After watching customer tips slip into the 5% to 10% range, Yakub Ulutas, an Atlanta restaurant manager, started a website called Its mission is to educate people about the importance of tipping, especially in a sluggish economy.

The site urges consumers to remember those workers who don't earn a steady salary but work for the generosity of customers.

Scott Lowe said his tips are fine from the customers who show up at the Broad Ripple Tavern in Indianapolis, where he tends bar. He just wishes there were more customers.

"You can look down Broad Ripple Avenue on a Friday or Saturday night, and it used to be packed," he said. "Friday night has just been kind of a ghost town around here."

For one, Lowe has noticed fewer college students coming in.

"Parents must be putting the clamp down on the credit cards," he said.