Tipping spread to America as a status symbol and only became widespread after Prohibition hit restaurant profits

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Tipping spread to America as a status symbol and only became widespread after Prohibition hit restaurant profits

the gist

Tipping began in Tudor England, where a servant might get extra money for excellent service, and by the 1600s guests at private homes were expected to leave vails for the host's staff. London coffeehouses adopted the habit, and in the 1850s and 1860s wealthy Americans imported it to seem aristocratic. Many Americans resisted it as undemocratic, and six states passed laws banning tipping, the earliest in 1909 in Washington and the last repealed in 1926 in Mississippi. Tipping took hold when Prohibition in 1919 cut restaurants' alcohol revenue, so owners welcomed tips as a way to cover staff pay.

how it works

Tipping was originally a way to signal superiority: giving money to inferiors reinforced social rank, the idea behind noblesse oblige. Egalitarian Americans rejected that. When Prohibition removed alcohol sales, restaurants lost a big share of revenue and shifted part of the cost of staff onto diners through tips.

so what

Tipping is often assumed to exist because servers are poorly paid, but the historical record points elsewhere: waiters were fairly well paid when tipping became institutionalized. The custom was built on status and then on the financial squeeze of Prohibition, which is why it persists as a wage workaround in the US today.

the bigger pattern

Wages and customer payments often get rearranged when a business loses a revenue stream. Similar shifts happened in other service trades, where the customer ends up covering part of the worker's pay.

fun fact

Six American states once made tipping illegal, with the earliest law passed in Washington in 1909.

D. W. Griffith’s A Corner in Wheat (1909)

the gist

In 1909 D. W. Griffith made a 14-minute film about a speculator who corners the wheat market and doubles the price of bread. A farmer sows his field while a 'Wheat King' gambles in the Chicago wheat pit; bakers raise the loaf from five cents to ten and the poor line up for bread. Griffith cut back and forth between the farm, the feast and the breadline, a technique called parallel editing, so audiences saw both ends of the economy at once. The film drew on Frank Norris's stories and on a real scheme: months earlier Chicago financier James Patten had cornered wheat, sent bread prices up and made about $5 million, roughly $185 million today.

how it works

To corner a market, a trader buys up most of the available supply and the futures contracts that promise more. Anyone who has to deliver the commodity must then buy from the cornerer at whatever price is demanded. The trader profits until the stock is released or the scheme collapses.

so what

A century on, it still shows how markets can be rigged by someone who controls supply, and how the people at either end, farmers and eaters, pay for it. It also helped establish editing as a way to argue a point, not just tell a story.

the bigger pattern

Corners have recurred whenever supply could be locked up, from the Hunt brothers' attempt on silver in 1979 to 1980 to the 'Black Friday' gold panic of 1869. Many such schemes end by collapsing, and the response is often new rules on speculation.

fun fact

In the film the Wheat King dies by falling into a grain elevator and being buried in the wheat he hoarded, an ending borrowed from Norris's novel The Octopus.

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