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

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  • 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
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    References listed on IDEAS

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    2. 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.
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    Keywords

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    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

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