December 21, 2022
This short reflection was co-authored with my former student, Janna Lu.
Tipping is ubiquitous in the American service industry. We tip delivery drivers, waiters, bartenders, taxi drivers, manicurists, etc., but not nurses or doctors.
Why? Why tip waiters, but not nurses?
Presumably, the cost of providing shoddy service is much higher in healthcare than in food. After all, a patient is far more likely to die from botched heart surgery than from an overcooked burger (or even an undercooked one, for that matter).
Neither waiters nor nurses are the full residual claimant of their services, as they represent the restaurant and hospital, respectively. If either employee offered shoddy service, you would take your business elsewhere, inflicting losses on the respective employers. At the same time, managers seemingly cannot monitor very effectively. Both waiters and nurses can dilly-dally in providing the requested service, loiter on their breaks, or fail to take due diligence without invoking the ire of the monitor. At least on the surface, waiters and nurses seem similar enough. Not to mention that the stakes tend to be higher for nurses.
The difference lies in the type of good that each worker offers: waiters supply an experience good, while nurses provide credence goods. Restaurant patrons can evaluate the quality of the food they’ve consumed. By contrast, in healthcare, consumers can’t reliably measure the quality of services they’ve received—either before or after the fact. For instance, a comatose patient clearly can’t monitor the services provided by the nurse. Even fully conscious patients will often lack the knowledge to evaluate the efficacy of a medical provider’s actions.
So rather than relying on customer monitoring, nurse managers monitor the service provided by nurse subordinates, who must provide routine accounts of their behavior and patient statuses. Nurse managers typically hold advanced degrees in nursing and have multiple years of experience, so they incur a lower cost, relative to patients, of monitoring the work of nurse subordinates. In turn, they report to the Director of Nursing or Chief Nursing Officer (CNO), who is part of the hospital administration and is responsible for the performance of the nursing units and customer satisfaction. If a nursing unit doesn’t do well, the hospital administration holds the nurse manager responsible.
That it’s sometimes lower cost for managers to monitor relative to consumers is bolstered by the fact that we tip waiters, but not line cooks. Relative to waiters, the output of line cooks is easier to monitor. It is low cost to judge cooks on their (say) hourly output. What’s more, a shirking cook tends to reduce the output of others in the kitchen, so under-performers don’t go undetected for long. Waiters, on the other hand, don’t affect the output of others directly. A waiter’s workload also changes depending on the time of the day: the Friday dinner shift is often busier than the Thursday dinner or Friday lunch shift. Tips compensate for the difference in workload. When restaurants moved towards service charges or divided the tips with the cooks, the real wages of servers (base wage and tips combined) decreased.
Thus, we would expect tipping to occur more frequently for experience goods and when monitoring by managers is more costly than policing by patrons.