I had not known this history of tipping:
There is no agreement on just how the practice of tipping started. Hemenway (1993) suggests that tipping dates as far back as the Roman era and is probably even older. Segrave (1998) claims that tipping may have begun in the late Middle Ages when a master or lord of the manor could give a little extra money to a servant or laborer, whether from appreciation of a good deed or from compassion. Brenner (2001) attributes the tipping origins to 16th century England, where brass urns with the inscription “To Insure Promptitude” were placed first in coffeehouses and later in local pubs. People tipped in advance in order to get good service by putting money in these urns. Indeed, Schein, Jablonski, and Wohlfahrt (1984) and Brenner (2001) suggest that “tip” comes from the first three letters of “To Insure Promptitude,” but others suggest different stories. Hemenway (1993), for example, argues that “tip” may come from stipend, a version of the Latin “stips.”
I had also not known that the practice of tipping flowed from Europe to the United States, which is ironic, because the practice has faded in Europe while strengthening in the US--at least in certain industries. Azar writes:
It seems that Europe exported the practice of tipping to the United States, when high-income Americans who traveled in Europe in the 19th century started tipping upon their return to the United States, to show that they had been abroad and were familiar with the European customs (Schein, Jablonski, and Wohlfahrt 1984). By 1895, the average tip in European restaurants was 5 percent of the bill, while in the United States a common tip was 10 percent. Segrave (1998) estimates that during the early 1910s, five million US workers—more than 10 percent of the labor force—had tip-taking occupations. The large extent of tipping gave some tipped employees relatively high income, and employers both in Europe and the United States sometimes tried to take these economic rents from the workers either by taking the tips, or by charging employees for the right to work and earn tips (Scott 1916; Segrave 1998; Azar 2004a).
By the early 20th century, even though the tipping custom had only just arrived in the United States, there were already attempts to abolish it. Some saw tipping as creating a servants’ class, part of a society where the tippers looked down upon the service providers. Gunton (1896) called tipping offensively un-American, because it was contrary to the spirit of American life of working for wages rather than fawning for favors. Some states passed laws against tipping, starting with Washington in 1909, but these laws were repealed after several years.Over the years, the percentage tipped in the United States has gradually risen. The 10 percent tipping norm in restaurants in the late 19th century stayed for several decades (Hathaway 1928; Post 1937), but eventually increased to 15 percent (Post 1984). In her etiquette manual, Post (1997) writes, “It wasn’t long ago that 15 percent of the bill, excluding tax, was considered a generous tip in elegant restaurants. Now the figure is moving toward 20 percent for excellent service. In ordinary family-style restaurants 15 percent is still the norm.” Today, some travel guides refer to 15−25 percent as a tipping standard in restaurants (for example, https://www.lonelyplanet. com/news/2016/12/07/how-much-to-tip/). A similar pattern of increasing tip percentages is observed in taxi tipping, starting with 10 percent early in the 20th century (Hathaway 1928), rising in mid-century to 15 percent (Post 1984), and then by the end of the 20th century reaching 20 percent in large cities (Post 1997). Today, tipping norms differ around the globe. Tourist guidebooks often provide advice about the tipping norms in the country (for example, Star 1988). In Europe, where tipping originated and was common already hundreds of years ago, today tipping is generally less common and in much smaller magnitudes than in the United States. In many European restaurants, tipping takes the form of rounding up the restaurant bill a little, not adding 15−20 percent to the bill. Along with restaurant servers and taxicab drivers, some of the professions where tipping is at least relatively common include food delivery people, bartenders, and hair salon workers. ...
Why does tipping persist, at least in certain settings? For example, why don't more restaurants move to a fixed service charge, or just raise their prices? Azar offers a number of ways in which the different players in a restaurant have reasons to prefer tipping and to facilitate it--for example, by leaving a line on the bill for the tip and even suggesting a precalculated amount.
From the customer's point of view, as Azar notes: "Many customers prefer the control of choosing a tip and have a positive feeling that they are showing generosity."
From the server's point of view, tips are a form of variable compensation. A server probably works a lot harder on Friday and Saturday than on Tuesday and Wednesday, but the hourly pay from the restaurant may not distinguish much or at all between days. It also seems clear that servers often get higher pay as a result of tips--and their implicit deal with diners--than they would get with pure hourly pay. Azar writes: "Servers earn more as a result [of tipping] and find that busy shifts where they have to work harder are rewarded with higher income. Service quality seems modestly higher."
For restaurant owners, in a setting where tipping is an established norm, attempts to move away from tipping run a risk of alienating those customers who like the feel of tipping and also of driving away their best servers, who will earn more at a restaurant with tips--especially if they can work Friday and Saturday nights. However, restaurant owners will also look at tips with a degree of longing. They will either try to find ways to share tips among all workers, including the kitchen workers, or to shift some of the tip money to their own pockets, or both.
There's much more in the article itself. As Azar writes: "Perhaps the self-reinforcing social norm of tipping will be toppled eventually in the United States, but with more than a century of history,
it seems unlikely to go quickly."
[Full disclosure: I've worked as Managing Editor of the Journal of Economic Perspectives since 1986, so I am perhaps predisposed to find the articles of great interest. However, this blog is an unpaid labor of love, not part of my job.]