National News

Why we tip more than we used to

Marketplace - American Public Media - Wed, 2014-10-08 09:00

Tipping can be a contentious issue in the U.S., especially in light of the debate over raising the minimum wage. Whether tipped employees should even be paid minimum wage is still a question up for debate in most states.

With the hardships of low-wage workers on their mind, consumers might be compelled to increase the percentage of their gratuity in instances like dining in a restaurant. Concerns over low wages might be the reason why, percentage-wise, we tip more compared to past decades.

Or is it some other economic reason tied to the rise or fall of food prices? Does the average diner even pay attention to those factors?

Looking at historical data on the U.S., there does seem to be a general rise in how big of a percentage people tip, says Mike Lynn, a marketing professor and expert in tipping behavior at Cornell University School of Hotel Administration.

“If you look at etiquette books, going back pretty far, etiquette books were recommending 15 percent tips,” Lynn says, “But there was a survey by Leo Crespi in Public Opinion Quarterly in 1947, and what was clear was that people were tipping 10 percent on average in restaurants.”

Other etiquette books reinforced the 10 percent norm for tipping as well.

An excerpt from \"The itching palm; a study of the habit of tipping in America,\" an anti-tipping etiquette book published in 1916.

William R. Scott/The Penn publishing company of Philadelphia via California Digital Library

The rise of tipping to a more 15 percent standard may have more to do with how the tipper wants to be perceived, Lynn says.

“My theory is that some people tip as a positional good. To get ahead of others,” Lynn says, “They want better service than other people get. They want the server to look up to them and respect them more. They tip to get out ahead of others, and once some people do that, it puts pressure on everybody else.”

Lynn cautions that his theory is based more on his own observations rather than hard evidence on tipping, which is difficult to come by, but he does say there is evidence that tipping is more common in countries that are more status-oriented.

Lynn also says we shouldn’t totally discount people who say they do tip to rectify what they see as unfair wage practices for servers, in which they are paid below the state minimum wage. He also points out that in states like California, where tipped employees do make at least the state minimum wage, tipping rates aren’t significantly lower than in states with different policies.

The numbers for October 8, 2014

Marketplace - American Public Media - Wed, 2014-10-08 08:14

Five U.S. airports will begin screening passengers arriving from West Africa for Ebola starting this weekend. Kennedy International will be the first, the New York Times reported, followed by O'Hare, Washington Dulles, Hartsfield-Jackson and Newark Liberty international airports.

The announcement comes right after the death of Thomas Eric Duncan, the first person to be diagnosed with Ebola in the U.S. since the outbreak began, on Wednesday morning.

In other news, the Fed minutes are expected later today, along with the usual combing for clues about interest rate hikes. In the meantime, here are the other numbers we're watching Wednesday:

25 minutes

That's how long one employee says he waited, unpaid, to be screened for stolen merchandise following a 12-hour shift at an Amazon fulfillment center. Jesse Busk sued the staffing agency that placed him in the job, Bloomberg reported, and several other suits against Amazon followed. The allegations will be heard by the Supreme Court Wednesday.


Google, Yahoo, Microsoft, LinkedIn and Facebook all compromised with the Justice Department in January over disclosing details of government requests to the public. Those firms are now able to give some more general information about data requests that were previously confidential. Twitter argues the remaining restrictions infringe on its First Amendment rights, the Washington Post reported, and the tech company is suing the government.

$27 billion

Netflix's estimated market cap, making its recent deals for a "Crouching Tiger, Hidden Dragon" sequel and four Adam Sandler movies seem downright affordable to a streaming service that already spends $3 billion on content annually. Those numbers come from a Variety analysis of Netflix's recent push to the big screen, which posits big theater chains might be forced to get on board with the streaming model... or go the way of Blockbuster.

Why water conservation doesn't mean lower water rates

Marketplace - American Public Media - Wed, 2014-10-08 05:27

Tap water is still one of the cheapest things you can buy these days.

Of course, out West many households have to conserve water because of a drought. In other parts of the country, folks are using less water not only because they want to conserve, but also because appliances are way more efficient than they used to be. Still, many of those folks are finding that no matter how much water they save, their water rates still go up. They’re using less water, but paying more per gallon.

Why? Put simply, when water consumption drops, so do the main revenue streams for water and sewer agencies. But whether you use one drop of water or a thousand gallons, utilities still bear the cost of cleaning it and sending it to you. Those costs are mounting.

To get a quick sense of the success of passive household conservation, just walk into a store that sells toilets.

“We’re looking at a couple of models here,” says Sean Jones as we walk down through the Home Depot in Gaithersburg, Maryland. “American Standard, Glacier and we have Kohler.”

Twenty toilets in a gleaming row, and when all of them flush, they flush low-flow. Decades ago, toilets used five to seven gallons of water per flush. Now, every toilet here uses far less, to meet EPA criteria.

Jones says now it's “1.28 gallons of water flushes per flush."

It’s not just toilets, though the EPA says toilets are the main source of residential water use. Decades of federal standards have created a new normal: water efficient dishwashers, shower heads and washing machines that save thousands of gallons a year.

Water and wastewater utilities also urged conservation, including the Washington Suburban Sanitary Commission, or WSSC, in Maryland.

“We’ve had a 30-plus year message of conserve, conserve, conserve,” says West Laurel resident and WSSC customer Melissa Daston.

So, that’s just what she did.

“I’ve replaced all of my toilets to low-flow toilets,” says Daston, the past-president of her local civic assocation. “I save up all my dishes until I have a full load. I have stopped watering my lawn years years and years ago.”

The list goes on. If Daston’s water use has fallen, however, her water rates have not. She doesn’t find her bill unreasonable – and she’s not complaining – but, she’s noticed.

“They’ve gone up,” she says. “Point blank, they’ve gone up year, after year, after year, after year.”

In fact, WSSC’s acting CFO Chris Cullinan says rates have gone up about 95 percent (on a compounded basis) over the last ten years. That’s far higher than the rate of inflation.

The reason? WSSC is producing less water than it did twenty years ago, even though it’s added more than 70,000 customer accounts. Again, because of fixed costs, the less water people use, the more these public utilities have to charge for it.

“We make money when we sell water,” Cullinan says. “That’s our primary revenue source. And so while from an environmental standpoint conservation is certainly one of our objectives, from a business standpoint it certainly presents some challenges.”

The biggest challenge is aging infrastructure. WSSC has about 5,600 miles of water pipes and almost as many sewer pipes. 

“It’s from New York to LA and back, within a service area encompassing two counties,” Cullinan says.

He says decades of improper infrastructure investment mean it’s now time to catch up and do reactive maintenance. The utility is under court order to fix sewer overflows, which Cullinan says will cost about $1.4 billion.

The head of the American Water Works Association says rate increases like the ones in Maryland are happening across the nation, as decreased water use collides with the financial burden posed by buried infrastructure.

“Those pipes were put into ground anywhere from 70 to 100 years ago,” says AWWA’s CEO David LaFrance. “There’s massive needs for replacements. We estimate that over the next 25 years it’s a trillion dollar problem.”

The solution won’t all come in the form of rate hikes.

Like other utilities, WSSC wants to stabilize rate increases by charging higher fees. It has proposed a revamped account maintenance fee, which would include an infrastructure investment charge. It’s also proposed a changed customer affordability program, which requires state approval.

The utility sees recalibrated fees as a more stable, equitable way for all users to fund the infrastructure that brings them water and takes away waste.

Small users like Melissa Daston worry increased fees hurt the biggest conservers the most.

PODCAST: Laying transatlantic sea cables

Marketplace - American Public Media - Wed, 2014-10-08 03:00

We often have to go through security to get into work, but in some occupations this takes a while. Question: Are workers entitled to get paid for time spent doing the required screening? The issue is before the Supreme Court this morning. And the Federal Reserve reported yesterday that while credit card borrowing fell in August, consumers borrowed more through car loans and student loans, driving borrowing up overall. The burden of student loans on young people, age 20 through 29, is much heavier than it was for that age group a decade ago. Plus, the private company Space X with entrepreneur Elon Musk at the helm is spending this fall pushing for clearance to compete for satellite launching contracts. Now it's Boeing and Lockheed who get a lot of support from Russia for the rockets. But when it comes to communications, satellites are not the only way to go. Bjarni Thovardarson is CEO of a company called Hibernia Networks. As we speak, he's got a huge infrastructure project underway to link New York and London via Nova Scotia that's both cutting-edge and and old-school at the same time. 

The heavy burden of student loans

Marketplace - American Public Media - Wed, 2014-10-08 02:00

According to a new report from TransUnion, the burden of student loans on young people, ages 20 through 29, is much heavier than it was for that age group a decade ago. Charlie Wise, a vice president at TransUnion, looks at what is called the “consumer loan wallet” – how debt shakes out.

“Certainly, that student loan piece is a much, much larger share of that overall wallet,” he says. “In fact, it has nearly tripled between 2005 and 2014.”

On average, a twentysomething today has about $25,000 in student loan debt. That is up about $10,000 from 2005. Older borrowers are also carrying more student loan debt, in part because they co-signed loans with kids and grandkids.

Mortgages are down, as a percentage of young American’s debt. “If you were to look at that as a graphic, a bar chart, you would essentially see that the decline in mortgages is almost exactly matched by the increase in the student loan piece,” Wise explains.

There are several reasons for that. According to Brent Ambrose, the Smeal Professor of Risk Management at Penn State University, “lenders have been tightening underwriting standards; so, it is more difficult to get a mortgage now.”

Today’s twentysomethings may have learned a thing or two from the downturn. Less of their debt is credit card debt.

A farmers market at your front door

Marketplace - American Public Media - Wed, 2014-10-08 02:00

Rob Spiro is the co-founder of Good Eggs, a Brooklyn startup that brings the local farmers market to your front door.

In order to deal with the demands of an inherently unpredictable food environment, the company is putting together a software engineering team that not only builds a website where you can shop for food, but sophisticated logistic systems throughout its locations.

Good Eggs is currently providing services to Los Angeles, Brooklyn, New Orleans, and the San Francisco Bay Area. And as Spiro points out, "If you look at the market in any given city, the inventory is 100% different." Which is why the company has designed small "Foodhubs," each one with their own unique supply chain.

Being able to centralize activity will help local farmers compete with industry giants. Spiro says the ultimate goal is to have 1,000 Foodhub's located around the world, serving 10,000 food producers, and millions of customers.

Click the media player above to hear Rob Spiro in conversation with Marketplace Tech host Ben Johnson.

Stock buybacks could be good for investors

Marketplace - American Public Media - Wed, 2014-10-08 02:00

The financial press has been sounding alarms over a trend toward more buybacks of stock by big, publicly traded companies. Stories in the Economist, the Wall Street Journal, and now Bloomberg have warned that corporations may be buying back too much stock with an eye to pushing up the price, at the expense of investment in their businesses. 

Michael Mauboussin, head of global financial strategies for Credit Suisse, takes a different view. He doesn’t think more buybacks means less investment.

"When you buy back stock, it’s not like the money disappears," he says. "It’s going back to investors, who themselves are re-investing it."   

So even if the company isn’t investing in its own business, shareholders can invest in somebody else’s.

That sounds like a great idea to Aswath Damodaran, who teaches corporate finance at NYU’s Stern School of Business. When he looks at the biggest companies buying back the most stock—companies like Microsoft, Hewlett Packard, IBM—he sees a pattern.

"I mean you look at that list," he says, "and every single one of them, you look at the last decade, have a history of destroying value— of investing in things where they have nothing to show for it 5 years out, 10 years out.  I look at that list, and I say: Thank God for buybacks."

In other words, if a company doesn’t have great ideas to invest in these days, then giving money back to shareholders could be the right thing to do. And the market may thank it with a higher stock price.

Cardinals And Giants Advance To NLCS, Will Play Each Other Saturday

NPR News - Tue, 2014-10-07 20:51

The St. Louis Cardinals beat the LA Dodgers 3-2 Tuesday. The San Francisco Giants defeated the Washington Nations 3-1. The Cardinals and Giants will meet in the National League Championship Series.

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