Marriott has been in the news this week for launching new program to prod its guests into leaving tips for its cleaning staffs. The hotel chain is not acting alone on this. It is working with Maria Shriver’s non-profit called A Woman’s Nation (AWN) to highlight the difficulties faced by hotel cleaning staff. Here is a bit from AWN’s website about the program.
A Woman’s Nation (AWN), together with Marriott International (NASDAQ: MAR), announced today that Marriott International will be the first partner in AWN’s The Envelope Please™ initiative, which is designed to encourage and enable hotel guests to express their gratitude by leaving tips and notes of thanks for hotel room attendants in designated envelopes provided in hotel rooms.
Hotel room attendants often go unnoticed, as they silently care for the millions of travelers who are on the road at any given time. Because hotel guests do not always see or interact with room attendants, their hard work is many times overlooked when it comes to tipping. The Envelope Please makes leaving them a gratuity simple and secure.
Or as a headline in New York magazine summarized the program: Multi-Billion-Dollar Hotel Chain Encourages You to Tip Its Workers
There is a no question in my mind that being a hotel maid is a hard way to make a living — particularly at nicer hotels like the typical Marriott. Guests want their room serviced on their schedule; management wants workers to be efficient and service rooms as quickly as possible; and if all goes well, the room attendant gets no real recognition. Combine that with low entry requirements (basically a clean background check and the ability to do physical work), and you get low pay. Tips then would be much appreciated. Even if a maid only gets two dollars per room and services just two rooms an hour, that extra four bucks would be a significant percentage increase. According to the Washington Post, “maids and housekeepers earned a median salary of $19,780, or approximately $9.51 per hour, according to the U.S. Bureau of Labor Statistics.”
But is tipping room attendants a good idea?
Tipping could be a good idea if the hotel staff had a lot of discretion in how they did their work and guest were in a better position to monitor their performance than the hotel manager. It is not clear if either of those conditions is true. If I check into a hotel tonight and then head out for a meeting or sightseeing tomorrow, I am supposed to leave a tip. But now I am leaving a tip on spec; I am hoping to come back to find a nicely tidied room, not rewarding someone for a job well done after I evaluate their work. That is, we are in the reverse setting of a restaurant where the tip ostensibly depends on how well the service staff helps you through the menu and then gets everything to the table in an orderly fashion.
Even if I tipped after seeing how the maid did today, it is not clear how much is due to the maid putting in a special effort versus just sticking to procedure. Check out this chestnut from an old Forbes article (Soft Pillows and Sharp Elbows, May 10, 2004).
Marriott dominates the lodging arena for one simple reason: It is fiendishly good at running a full-service hotel. … [A] key to the company’s success is an attention to detail reminiscent of Ray Kroc’s McDonald’s. It has a 66-item checklist for how to make up a room.
So it doesn’t sound like Marriott’s maids have a whole lot of choice in the doing their jobs. They’ve got to march through their punch list. Further that list makes it easy for a supervisor to monitor their work. Do the maid skip step 17 in room 432? Let’s go see!
If we don’t need tips to motivate good work, are they an effective way of increasing the take home pay of service workers? Turns out National Journal had an article about this just two weeks ago (Why You Should Always Tip Your Waitress, Sep 4). When The Atlantic, reran the story they called it “Confirmed: Tipping Is a Terrible Way to Pay People.”
Here is the gist of the story. Different states treat tipped wages differently. Effectively, they offer differ guarantees on the minimum hourly amount tipped workers (mostly restaurant staff) are guaranteed. On a national basis, about two-thirds of those in tip-based jobs are women. The article then examines how different minimum earnings guarantees for tipped workers translates into earning gaps between men and women.
A new analysis released Thursday by the National Women’s Law Center found that in the eight “equal treatment” states where tipped workers are entitled to be paid the full federal minimum wage by their employers ($7.25), the wage gap between men and women is smaller, and poverty rates among tipped workers (particularly women) are lower than in states where tipped workers make a base wage of just $2.13 an hour. More specifically, the average wage gap is 17 percent smaller for women overall working full time; the average poverty rate for female tipped workers is 33 percent lower.
The analysis, which drew data from the Census Bureau’s recent American Community Surveys, also emphasized that the situation is especially bad for people of color. In states with a tipped minimum wage of $2.13 per hour, African-American women working full time, year round are paid on average just 60 cents for every dollar earned by their white male counterparts (a wage gap of 40 cents). In “equal treatment states,” the wage gap drops to 33 cents. Hispanic women fare worst of all, earning just 51 cents on the white male dollar in the former (wage gap: 49 cents) and 53 cents on the white male dollar in the latter (wage gap: 47 cents).
You can find the original report here.
Admittedly, this evidence is somewhat circumstantial. A state that keeps to the federal minimum for tipped workers may have a whole slew of policies on labor or welfare work requirements that disadvantage workers in general but hit woman hard in particular. This empirical analysis doesn’t really prove that being more dependent on tips lowers earnings.
Turns out a paper that builds a theoretical model to prove that a higher rate of tipping lowers wages and potentially income just became available last week. See “Do Tips Increase Workers’ Income?” by Oz Shy, which is forthcoming in Management Science. The paper considers two firms that are competing to both serve customers and to attract enough service workers to keep up with demand. It looks at what happens when the conventional rate of tipping increases from, say, 15% to 20%. The paper shows that a higher tipping rate leads the firms to offer a lower base salary and that drop in salary may be enough to offset any increase in take-home pay from tips. Intuitively, if someone was willing to work for a straight $10 per hour wage, she should be willing to work for $8 per hour in salary and $2 per hour in tips. The firm will only drop the wage to, say, $9 per hour if there the chance to expand the market, i.e., use its lower labor cost to expand its output.
What does this mean for Marriott’s room attendants? If tipping actually increases wages, Marriott should find it optimal (in the sense of maximizing profits) to cut their wages and effectively take their tips. This usurpation may be offset by an increase in volume (more rooms to clean = more tips!) if the pricing of hotel rooms is largely driven by the cost of labor for serving guests at the hotel. That last “if” is obviously a big one and it is hard to believe that shaving a few bucks of room attendant pay is really going to change the price to stay at a Marriott when you are in Boston for a conference.
There is one caveat to add here. The Shy paper assumes (take your pick) that workers are risk neutral or that there is no variability in the number customers served. In reality, an increased reliance on tips means that workers will have more variability in their earnings. That puts something of a brake on how much the firm can cut workers’ base salary if workers are risk averse.
Where does this leave us? We don’t need tips to motivate good work and tips are at best a limited way to put more money in the pockets of room attendants. So what will Marriott’s new program do? One thing it could do is sanction poor behavior on the part of guests. A friend once confided that she was overly lax with her children’s behavior when they travelled but that she compensated by leaving a big tip for the maid. The maid gets more cash but has to do more work to get it. We may all end up acting like the parents of rambunctious pre-schoolers when we travel if can assuage our consciences by throwing a few bucks in an envelope.