Tip of the Iceberg: Tip Reporting at U.S. Restaurants, 2005-2018

Emek Basker, Lucia Foster and Martha Stinson

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: Tipping is a significant form of compensation for many restaurant jobs, but it is poorly measured and therefore not well understood. We combine several large administrative and survey datasets and document patterns in tip reporting that are consistent with systematic under-reporting of tip income. Our analysis indicates that although the vast majority of tipped workers do report earning some tips, the dollar value of tips is under-reported and is sensitive to reporting incentives. In total, we estimate that about eight billion in tips paid at full-service, single-location, restaurants were not captured in tax data annually over the period 2005-2018. Due to changes in payment methods and reporting incentives, tip reporting has increased over time. Our findings have implications for downstream measures dependent on accurate measures of compensation including poverty measurement among tipped restaurant workers.

Keywords: tipping; restaurants; tip reporting (search for similar items in EconPapers)
JEL-codes: H26 J33 L82 (search for similar items in EconPapers)
Date: 2024-11
New Economics Papers: this item is included in nep-lma
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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:24-68

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