IDEAS home Printed from https://ideas.repec.org/p/cen/wpaper/24-68.html
   My bibliography  Save this paper

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

Author

Listed:
  • Emek Basker
  • Lucia Foster
  • Martha Stinson

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.

Suggested Citation

  • Emek Basker & Lucia Foster & Martha Stinson, 2024. "Tip of the Iceberg: Tip Reporting at U.S. Restaurants, 2005-2018," Working Papers 24-68, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:24-68
    as

    Download full text from publisher

    File URL: https://www2.census.gov/library/working-papers/2024/adrm/ces/CES-WP-24-68.pdf
    File Function: First version, 2024
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. James Alm & John Deskins & Michael McKee, 2009. "Do Individuals Comply on Income Not Reported by Their Employer?," Public Finance Review, , vol. 37(2), pages 120-141, March.
    2. Mellow, Wesley & Sider, Hal, 1983. "Accuracy of Response in Labor Market Surveys: Evidence and Implications," Journal of Labor Economics, University of Chicago Press, vol. 1(4), pages 331-344, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Laisney, François & Pohlmeier, Winfried & Staat, Matthias, 1991. "Estimation of labour supply functions using panel data: a survey," ZEW Discussion Papers 91-05, ZEW - Leibniz Centre for European Economic Research.
    2. John Abowd & Martha Stinson, 2011. "Estimating Measurement Error in SIPP Annual Job Earnings: A Comparison of Census Bureau Survey and SSA Administrative Data," Working Papers 11-20, Center for Economic Studies, U.S. Census Bureau.
    3. Friedrich Heinemann & Martin Kocher, 2013. "Tax compliance under tax regime changes," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(2), pages 225-246, April.
    4. Christopher R. Bollinger, 2001. "Response Error and the Union Wage Differential," Southern Economic Journal, John Wiley & Sons, vol. 68(1), pages 60-76, July.
    5. William Bentley MacLeod & Daniel Parent, 1998. "Job Characteristics and the Form of Compensation," CIRANO Working Papers 98s-08, CIRANO.
    6. Joseph Michael Newhard, 2018. "The effect of equalizing differences on tax-price: explaining patterns of political support across industries," Constitutional Political Economy, Springer, vol. 29(3), pages 281-302, September.
    7. Fisher, Jonathan D. & Houseworth, Christina A., 2013. "Occupation inflation in the Current Population Survey," Journal of Economic and Social Measurement, IOS Press, issue 3, pages 243-261.
    8. Henry S. Farber & Bruce Western, 2000. "Round Up The Usual Suspects: The Decline of Unions in The Private Sector, 1973-1998," Working Papers 816, Princeton University, Department of Economics, Industrial Relations Section..
    9. Christopher R. Bollinger & Barry T. Hirsch, 2010. "GDP & Beyond – die europäische Perspektive," RatSWD Working Papers 165, German Data Forum (RatSWD).
    10. Nicolas Frémeaux, 2023. "The More, the Better? Individual and Joint Interviewing in Surveys," Annals of Economics and Statistics, GENES, issue 149, pages 63-96.
    11. Katharine G. Abraham & James R. Spletzer & Jay C. Stewart, 1998. "Divergent Trends in Alternative Wage Series," NBER Chapters, in: Labor Statistics Measurement Issues, pages 293-325, National Bureau of Economic Research, Inc.
    12. Alan B. Krueger, 1988. "Are Public Sector Workers Paid More Than Their Alternative Wage? Evidence from Longitudinal Data and Job Queues," NBER Chapters, in: When Public Sector Workers Unionize, pages 217-242, National Bureau of Economic Research, Inc.
    13. Martin Abraham & Kerstin Lorek & Friedemann Richter & Matthias Wrede, 2017. "Collusive tax evasion and social norms," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(2), pages 179-197, April.
    14. Santosh Anagol & Alvin Etang & Dean Karlan, 2017. "Continued Existence of Cows Disproves Central Tenets of Capitalism?," Economic Development and Cultural Change, University of Chicago Press, vol. 65(4), pages 583-618.
    15. Adhikari, Bibek & Alm, James & Harris, Timothy F., 2021. "Small business tax compliance under third-party reporting," Journal of Public Economics, Elsevier, vol. 203(C).
    16. Battistin, Erich & De Nadai, Michele & Sianesi, Barbara, 2014. "Misreported schooling, multiple measures and returns to educational qualifications," Journal of Econometrics, Elsevier, vol. 181(2), pages 136-150.
    17. Michele Lalla & Patrizio Frederic & Daniela Mantovani, 2022. "The inextricable association of measurement errors and tax evasion as examined through a microanalysis of survey data matched with fiscal data: a case study," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 31(5), pages 1375-1401, December.
    18. Andreas Kuhn & Oliver Ruf, 2009. "The Value of a Statistical Injury: New Evidence from the Swiss Labor Market," NRN working papers 2009-15, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
    19. Mark B. Stewart & Joanna K. Swaffield, 2008. "The Other Margin: Do Minimum Wages Cause Working Hours Adjustments for Low‐Wage Workers?," Economica, London School of Economics and Political Science, vol. 75(297), pages 148-167, February.
    20. Katarzyna Saczuk & Olga Zajkowska, 2024. "Measuring labour force participation during pandemics and methodological changes," NBP Working Papers 372, Narodowy Bank Polski.

    More about this item

    Keywords

    tipping; restaurants; tip reporting;
    All these keywords.

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cen:wpaper:24-68. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dawn Anderson (email available below). General contact details of provider: https://edirc.repec.org/data/cesgvus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.