Should tipping be outlawed? That's one suggestion made in a new study, which finds there's extreme racial discrimination in taxicab tipping, reports The New York Times. This isn't the first study to reach such conclusions. Is this a microcosm for wage gaps in corporate America and other salaried environments? What's going on?

Many studies document discrimination against consumers based on race (read Shopping While Black: One Serious Shopper's Customer Service Nightmare), but few analyze discrimination based on the race of the "seller," in this case the driver.

Black cab drivers were tipped about a third less than white cab drivers, the study found. Black passengers also participated in this discrimination against Black taxi drivers. And the overall "tipping shortfall" causes total revenue per fare for Black drivers to be 7 percent less than white drivers, which perpetuates economic inequality.

The study, published in the Yale Law Journal, included data on more than 1,000 taxicab rides in New Haven, Conn., where taxi drivers are dispatched to pick up passengers or wait their turn at cab stands rather than being hailed from the street, which means they don't have much discretion in turning down fares.

Click here to download the full study from the Social Science Research Network.

Here are some of the key findings:

• White drivers were tipped 61 percent more than Black drivers and 64 percent more than "other" non-white drivers in the sample.
• Black and Latino passengers also demonstrated biased tipping in favor of white drivers. Black passengers tipped white drivers 48 percent more than Black drivers, while white passengers tipped white drivers 49 percent more than Black drivers.  Latino passengers had the most disparate tipping, giving white drivers a 146 percent higher tip than Black drivers, which supports previous studies' findings that Latinos tend to identify more with whites than Blacks.
• Black drivers also were 80 percent more likely to be stiffed than white drivers. Latino passengers were 88 percent more likely to stiff Black drivers than white drivers, and white passengers were nearly twice as likely to stiff Black drivers.
• Making a last-minute decision about whether to round up or down in tipping also is influenced by racial undertones, with passengers of all races tending to round up for white drivers and down for Black drivers.  

To provide some control for quality of service, which clearly influences tipping, the authors conducted some "secret auditing" of cab drivers. Their testers rated quality of service higher for Black drivers (4.5 out of 5 total points) than white drivers (3.3 out of 5 total points). While these audits were not a complete control for quality of service, previous studies on tipping back up the researchers' findings.  

More than 30 service professions are regularly tipped, according to the study, which reports that restaurant tips alone in the United States are estimated at $26 billion annually.

There's evidence that biased tipping extends to the restaurant realm, according to "Consumer Racial Discrimination in Tipping: A Replication and Extension," which is based on 140 surveys of white and Black workers at a large U.S. restaurant chain. This study found that white customers tipped Black servers nearly four percentage points less than white servers and that Black customers tipped Black servers half a percentage point less than white servers, writes Ian Ayres, lead author of the latest study on taxicab tipping, in his New York Times blog.

A Racist History

Why is there racial discrimination in tipping? Think about the historic social context. The practice of tipping emerged in the early 20th century to provide a "consideration" from then primarily white customers to those serving them in menial jobs, who tended to be Black workers. "For some, the practice of tipping was intimately connected to the perceived inferiority of African Americans," writes Ayres in the study.

Remember The Pullman Company? It was notorious for hiring all Black workers from the South to work its railroads and trains and was "repeatedly singled out for fostering the tipping norm for its all Black work force as a way of economizing its wage bill," writes Ayres. "Pullman made public the fact that its African-American porters were poorly paid so the public would pay them instead."

But that's not how it works, as Ayres' and other studies indicate. In the case of Pullman, Black porters eventually requested a prohibition on tipping, knowing it would diminish their earnings, because they didn't want to be accepting "tokens of inferiority."       

"Of course, this degradation conception of tipping may have long passed," the authors write. "But both minority and non-minority consumers today may still be affected by this now withered perception--as one generation passes its tipping practices onto the next."

What's Next?

Is there a solution? The authors suggest government-mandated tipping would reduce passenger discrimination against Black taxi drivers in the form of lower tips.  They also suggest outlawing tipping altogether

But outlawing or heavily regulating tipping--economic incentive for superior quality of service--is antithetical to a capitalist society. Tipping policies saves employers from having to establish equitable pay scales for salaried and non-salaried employees.  However, if tipping has a disparate impact on Black taxi drivers or servers, as these and other studies indicate, employers could actually be liable under Title VII of the Civil Rights Act of 1964 for maintaining a workplace policy that discriminates based on race, the study says.

Whether that discriminatory policy is intentional on the part of the employers is irrelevant. The reality is that it has a disparate impact based on race. Not all employment policies that produce racial inequities are illegal under Title VII, but employers would have the burden of proving that tipping is "consistent with business necessity," writes Ayres.

Does a biased tipping infrastructure translate into a biased salary structure in the workplace? Currently, the salary gap in corporate America continues along racial/ethnic lines, according to the Bureau of Labor Statistics. In 2007, Black full-time and salaried workers earned 20.5 percent less per week than their white counterparts, 45.9 percent less than Asian workers and slightly more (11.6 percent) than Latinos. The disparity is more evident between Black and white men--a 24 percent gap--than between Black and white women (14.9 percent).

Read Pay-Discrimination Lawsuits Severely Limited by Supreme Court.

More Work Force >>