The Wal-Mart Tip Jar

by Russ Roberts on November 30, 2005

in Social Responsibility, Wal-Mart

I’ve been writing recently (here and here) about how we don’t want Wal-Mart and Exxon and other corporations to share the burden during a catastrophe by holding prices below the market price or by paying employees more than the market wage.  As appealing as it is for businesses to act with kindness by altering prices and wages, it is actually destructive to ask buisinesses to be loving.  It is better for businesses to do what they do best (use information, creativity and capital to create wealth) and leave families and charities to do what they do best.  Asking businesses to be loving makes no more sense than charging my brother rent when he comes to visit for Thanksgiving.

But what can we do to help the underpaid Wal-Mart worker?  So many people are telling us how underpaid and overworked they are.  How strange that those who would help the Wal-Mart worker do so by NOT shopping there!  How strange it is that those who would help the Wal-Mart worker want fewer Wal-Marts built, reducing the demand for such workers temporarily or for even longer!  Is there a better way?

My idea is to create an organization that would go around the country putting special tip-jars by the cash registers at the check-out stations of every Wal-Mart.  In front of these jars would be a sign, saying something like this:

Hello!  We are the employees of Wal-Mart.  We earn less than the national average and only about half of us have health insurance.  Can you do your part to help us make ends meet?  Especially if you make more than we do, please consider a generous donation.  Thank you!  And thank you for shopping at Wal-Mart!

Would you give?  Many would, just as they give now to charities at the cash register that collect money for the poor and hungry.  Why not give something to the poor wretch standing right there before you, kindly ringing up your order?

Do you see the beauty of the tip jar?  Instead of asking the stockholders of Wal-Mart to give something back of those profits they could be sharing more lovingly, ask the customers!  After all, it is we the customers who foolishly think we’re getting a bargain and not realizing all the hardship such selfishness creates.  The tip jar allows the customers to give something back.  Surely, with such low prices, we can afford to give something back.

It’ll probably never happen.  But just thinking about the tip jar gets at the heart of the flaw behind all those who villify Wal-Mart for exploiting its workers.

The people who work at Wal-Mart show up for work of their own free will.

I know it’s hard to believe.   But Wal-Mart employees work there voluntarily.  About a million every day.  A million every day!  Incredible.  And when Wal-Mart opens a new store, people throng the doors for the opportunity to work there.

Why?  Why would people line up to be exploited?  Two answers come to mind.  The first is these pitiful fools don’t know any better.  They actually think it’s a good idea to work at a large, profitable corporation that exploits them paying them low wages with meager benefits.  The second possibility is that for most or all of the people who work at Wal-Mart, working there is actually a good deal.  Working there is as good or better than their next best alternative.  There may actually be a few who actually believe that it’s a good idea to work at a  profitable corporation because it raises the odds that your job will still be there tomorrow.

How would these workers feel about the tip jar?  Would they be grateful for the helping hand?  Or is it possible that they might find it a tad insulting, a tad condescending, a tad patronizing?  How many of those million Wal-Mart employees are actually proud to work there?

A reporter once told me how sorry she felt for Wal-Mart workers because they were treated like slaves.  Yes, I agreed, the hardest part of the job is lugging the ball and chain out to the car at the end of the day.

But it turns out that they actually choose to work there.  There is no ball and chain.  How can this be?

When Sam Walton was alive, whenever I shopped at Wal-Mart, I’d ask the cashier if she liked her job.  Invariably, she would say yes and I would marvel at Walton’s ability to create enthusiasm through such a large organization.

Now where I live, the Wal-Mart is far away.  (Thank you Montgomery County politicians for making it so hard for me to exploit those poor workers at Super Wal-Mart!)  So I don’t get there often.  The next time you’re in a Wal-Mart, ask the cashier if she likes her job.  And whether she says yes or no, give her a ten or twenty-dollar bill as your way of giving something back, your way of saying you’re sorry for shopping where the prices are low as a result of her sweat and sweatshop wages, your way of brightening her day until the tip jar shows up.  How do you think she would respond?

For economics students:  If the tip jar actually did happen and people gave generously, would Wal-Mart employees be better off?

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Randy November 30, 2005 at 4:36 pm

Setting aside the damage to pride, I think the cashier would be better off; because the tip jar would be a true charity donation and not viewed by the donor as a cost to be recovered as is the case in a tax and redistribution scheme.

Tateum Bowers November 30, 2005 at 4:41 pm

Thanks for the post.

It never ceases to amaze me that those who critize companies like Wal-Mart forget that the people who work there do so voluntarily. If it wasn't in their best interst to do so, they wouldn't. After all, a low paying job with no insurance is better than no job with no insurance.

As for the question about whether or not Wal-Mart employees would be better or worse off as a result of the tip jar I would say initially they would be better off. More money is always better. That is until Wal-Mart management clues in to what's going on. Once management realizes that shoppers will pay checkers wage for them, Wal-Mart will pay a lower hourly wage. Wal-Mart cashiers will end up working for pay like a waitress does, for tips.

Fiona November 30, 2005 at 4:55 pm

Been to Walmart lately? Between RFIDs and the do it yourself cash register (which admittedly does need some tweaks), cashiers at Walmart (and Home Depot too!) are on their way out.

JohnDewey November 30, 2005 at 5:04 pm

The average fulltime worker at WalMart makes about $20,100 annually. If that worker resides with another WalMart worker, their household income would exceed $40,000. I've read elsewhere that the median household income for WalMart customers is about $37,000. Perhaps the WalMart employees should be tipping the customers.

I've also read that WalMart makes health insurance available – at a low cost – to all its fulltime and parttime employees. Many choose not to participate for a variety of reasons:

- existing coverage from a spouse's or parent's employer;

- public health coverage that's cheaper;

- belief that health insurance is not needed.

A small percentage of Walmart employees burden the public with the cost of their health insurance. The problem is not Walmart. The problem is that public health insurance exists at all.

Michael November 30, 2005 at 5:12 pm

If the tip jar became universal Wal-Mart employees would (probably) be no better off in the long run. to see this think of the following thought expirement. Imagine that on average the tip jar generates $24/ 8 hour shift. This means that employees are getting $3 more than they presently get (say $11 instead of $8). More people apply to WalMart (then today). WalMart sees it has a glut of applications and cuts back on wages. To restore equilbrium (applications=jobs) wages will fall by $3.

The story would get more complciated if there were a high variance in tips and/or employees were risk averse. In this case WalMart could not cut wages by the full $3. However, employees would still not be better of in an expected utility sense.

If WalMart's ability to adjust wages downward were constrained (say by minimum wage) WalMart employees would be better off. People with WalMart skills however would not. Those with jobs would be better off. Those who wanted jobs but could not get them would be worse off. On balance there would be no change.

xteve November 30, 2005 at 6:32 pm

"Oh look! Walmart employees have to accept charity from customers just to get by!"

This will only feul the critics ire. It's a good IDEA, but I don't think it would ultimately solve any perceived problems. (I don't think there are any actual problems. I don't think Walmart employees are exploited by Walmart employers)

Great post. You guys deserve those multiple HNN nominations.

Adam November 30, 2005 at 10:24 pm

"When Sam Walton was alive, whenever I shopped at Wal-Mart, I'd ask the cashier if she liked her job. Invariably, she would say yes and I would marvel at Walton's ability to create enthusiasm through such a large organization."

In fairness, I'd expect the cashier to say yes regardless of how she felt. I doubt she'd feel free to bad-mouth the company in front of customer and other employees.

Adam Smith December 1, 2005 at 2:46 am

Capital replacing labor….does Fiona think this is bad?

medusa December 1, 2005 at 9:24 am

Better off? Devil's in the details…Off the cuff I'd say it's always a horrible idea to walk home from a job with more money than the market will pay. It creates a false sense of adequacy–the adequacy of one's skills to support oneself at a desired level. In fact, it is paralytic for the very class of employees that absolutely should be increasing their skills and marketability. When the present job ends, they will face the probability of accepting lower wages, likely viewing that as unjust, or possibly not finding a job at all because they have failed to understand that their job security was based upon their skills and not their present wage.

Parents see this often, I think, because children are often paid an unreasonably high amount for simple tasks by family and neighbors. When it comes time for the teenager to get "real work" outside the family, it is a difficult adjustment, even to the point of abandoning the search for work (unless they have loving parents who insist!)

Not only this, but charity with the exception of extreme cases, usually damages folks' ambition and sticktoitiveness. We deprive people of the natural incentives provided by deprivation—and have yet to find as efficient a replacement.

Eva December 1, 2005 at 9:48 am

It wouldn't work because most of the people who shop at Wal Mart are ones that can't afford to tip. The upper middle class and rich
do not shop at Wal Mart for self-righteous princples.

But let's say people do tip. Wouldn't it end up much like being a waitress were you're wage is docked assuming you will pick up the remainder of the wage via tips. I am sure the Federal government would want a piece of that action and tax the wal mart employee's tips.

Pierre December 1, 2005 at 11:11 am

Hi every body,

I live in france and I 'm just surprised reading your comments because if you do tip to the cashier in france, she will kick you, and argue she needn't pity.
The point is about low wages and so about fighting against the boss.
I'm happy to seee it's not exaclty the same case in USA…

JohnDewey December 1, 2005 at 11:11 am

"The upper middle class and rich
do not shop at Wal Mart for self-righteous princples."

I think that's changing. Snobbishness by many upper middle class folks is being overcome by good, old-fashioned economuic sense – exactly the behavior that allowed many of us to become upper middle class.

Not sure what your definition of rich might be, but I know four "Millionaires Next Door" who have shopped at Wal-Mart for 20 years. These Texans have plenty of money available to tip, but they're not going to do it. I doubt they view a $20,000 per year retail worker as underpaid, because all four worked for less than that – in real dollars – at one point in their lives.

mark December 1, 2005 at 12:04 pm

i hate to bring any reality into this discussion, but…

suppose you brought a tip-jar to your local walmart, and left it at one of the checkout stands. One of the following would happen:

* The cashier would remove it for fear of getting in trouble
* The manager would remove it as soon as s/he saw it, and possibly reprimand the cashier.

Haven't you ever dealt with an employee of some business where there is some notice to the effect of "our employees may not accept tips"?

Now, gee, why would a business prohibit its employees from accepting tips from grateful customers? I better not think about that too hard…

mark December 1, 2005 at 12:14 pm

Oh yeah, I almost forget:

Saying that you have free will when your choices are "work for BigCorp" or "starve to death" is sort of stupid.

I'm not saying that all walmart workers are faced with exactly that choice. I'm saying that you have to consider the possibility that there are forms of force that can be exerted on an individual that do not consist of threats of bodily harm.

The whole thing about "no one is forcing them at gunpoint to work at walmart" is so stupid it borders on infantile.

Trish Fitzpatrick December 1, 2005 at 1:14 pm

Very interesting idea posted in re tipping at Wal-Mart. Some thoughts to consider:

As others posted quite well, Wal-Mart employees aren't working there because their too noble to compromise themselves with all the capitalist exploiter executive jobs available to them.

Tips would have a distorting effect in the same way as waitresses. How many bloggers can say that they tip honestly including NO tip for poor service? Tips are received in large part because of the way the giver wishes to be seen. Poor, pathetic waitress person has to be given SOMETHING…

In addition to the contamination of givers wishing to be seen as benevolent and kind, there is the distortion of ordinary social expectations; if all waitresses are receiving tips regardless of work quality, then a giver who fails to match the norm inspires resentment towards a person who might actually be giving real feedback on poor work habits.

And finally from the perspective of health insurance, the majority of citizens fail to understand how badly the availability of health care funded by others has damaged the health of those who both need good health (to pursue profitable labors) and are most likely to damage their own health (due to the comfort of a 'savior' waiting in the wings a la public financed health professionals).

I am a nurse (retired) and my husband has an active orthopedic practice of twenty-five years experience. There is, as I’m sure all bloggers here know, no health CARE crisis. It’s a health INSURANCE crisis. Costs are sky-rocketing (BTW, does anything ever other-rocket?) for reasons very well known to all. But of special note should be the agreement that something that is seen as free is over-used until the resource is fatally compromised.

For many years, my husband could count on those who existed on welfare to plague his every resting moment. People who worked for a living were too busy to engage in the kind of behavior that caused musculo-skeletal compromise. Knowing that availability to the ER is a virtual guarantee to be summoned to repair some drug or alcohol addled idiot suffering the consequences of such self destructive behavior, he has acquired a grim sense of fatality. There is no control over those who can claim your life and activity however unfairly they do so.

Spend the night picking asphalt particles from a zillion piece femur puzzle a few hundred times and it loses some of the charm. Dealing with individuals so emotionally, intellectually, and morally stunted as these people invariably are, means facing that the guy isn’t going to have the slightest notion of gratitude, isn’t going to cooperate in his own rehabilitation, isn’t going to pay a dime, and will harbor notions of revenge for his ugly life towards every medical person that comes in contact with him courtesy of our benevolent trial attorney population.

So what does this have to do with the poor Wal-Mart cashier? Only that their attitudes are now aligned with the welfare bums of the past. For years now we have witnessed the working poor parade through the office decked in every latest fashion fad, with ever pricier doo-dads from the electronics, automotive, and jewelry industry galore.

An orthopedist who will treat public financed patients for so much less than the going rate that he’s literally, after a point, PAYING to treat them, will hear that an ATV costing thousands caused someone’s teenager to break several bones but they can’t afford to pay for treatment? No embarrassment. No thought that perhaps an ATV isn’t the sine qua non of living no matter how much it costs. That having made this choice is largely why they can’t make the OTHER choice, purchasing insurance. Or, the crowning glory of idiot-think, no thought of SELLING the ATV in order to pay for either or both, insurance and treatment. The operating notion is: my ATV (laptop, digital camera, big screen TV, Disney vacation) that I bought with my paycheck represents a necessary resource without which I cannot survive… at least as I define survival.

So screw docs. Who cares? They seem to be doing ‘alright’. Why should anyone do anything about it?
Well, if you think that schlepping and checking for Wal-Mart is the pinnacle of degrading, tiresome labor; that being forced to do such work is unseemly and worthy of some kind of charitable intervention, that in a better world a person shouldn’t have to do such work; what about the medical industry?

Think that twenty-five years of education and training at below minimum wage rates in an industry that commands your attention without the slightest regard for personal time and space, while subjecting you to constant risk for damages and public humiliation by people who have no RIGHT to your services beyond a governments bullying will give you MORE and BETTER doctors or WORSE and FEWER doctors?

You don’t have to read Hayek to answer that one…

Mike Z December 1, 2005 at 2:00 pm

The next time there's a protest at a local Wal-Mart, I think I'll just join in, wirth a sign reading "DOWN WITH LOW PRICES! DOWN WITH WIDE SELECTION!"

If I get dirty looks, I'll just explain that, hey, I'm protesting Wal-Mart, just as you are.

Randy December 1, 2005 at 3:46 pm


Saying that no one is forced to work at Walmart is stupid? Personally, I think its a critical point.

If I follow your thought process, anyone who has a job, any job, has a right to a "decent" standard of living. Correct?

Okay, I think we can agree that a "decent" standard of living would be about $50,000 per year. That's certainly not a slave wage. So let's just pass a law that anyone making less than $50K gets a raise to that level. No problem. Simple legislation. Then, when the price of a loaf of bread rises to $30, we can pass a law that says the baker can charge no more than $2. Then when the baker quits, we can pass a law that says he can't quit. Then, when he quits anyway, we can flog him in the public square. Do you see? In the name of ending slavery, we have reintroduced slavery.

fiona December 1, 2005 at 5:13 pm

FIona to Adam – no it's definitely a good thing – going to be tough to unionize those little bitty chips…

mark December 1, 2005 at 6:23 pm

Mike Z,

You made quite a leap there. I'm not saying that we should legislate higher wages for WalMart workers. (I'm a fan of the free market in many situations, though not nearly as many situations as the authors of this blog).

What I'm saying is that issues of social coercion and injustice arise in both capitalist and socialist societies. Just as the solution to problems in a socialist society is not always to institute better and more pervasive central planning, the solution to problems in a capitalist society is not always to make the market more free. The world is more complex than that.

JohnDewey December 1, 2005 at 6:44 pm

Mark, what are you saying about WalMart? I understand this statement:

"I'm not saying that we should legislate higher wages for WalMart workers"

But earlier you wrote this:

"you have to consider the possibility that there are forms of force that can be exerted on an individual that do not consist of threats of bodily harm."

Are you saying that WalMart somehow forces its employees to continue working there? Do we need to get the National Guard out to every WalMart location and rescue the oppressed?

You also wrote:

"the solution to problems in a capitalist society is not always to make the market more free. The world is more complex than that."

What WalMart problems are you referring to?

I bought three CD players last weekend
at WalMart. I was happy with the prices. The cashier was the same one I saw a week earlier, and she was still smiling. The company that supplies those CD players was happy, because they'll eventually get a new order. WalMart shareholders will enjoy the profit that flows from my purchase. Where's the problem?

mark December 1, 2005 at 7:02 pm


The form of force I posited was the choice between a particular form of work and starvation.

And then I explicitly said that I was not claiming that WalMart was in fact exercising such force. It was a hypothetical.

I guess you didn't bother to read my post carefully.

JohnDewey December 1, 2005 at 7:18 pm

No, Mark, I read it carefully, and then reread it. It's very clear you were referring to WalMart. Of course, you still haven't provided a clue about what you are talking about. How could WalMart, or any hypothetical employer, force an employee to choose "between a particular form of work and starvation"?

mark December 1, 2005 at 7:41 pm

An employer could force an employee to choose between work and starvation (or other consequences of poverty) if they obtained a monopoly on the local job market, and it was not within the means of the employees concerned to move to another job market.

Monopoly, noun: A failure of the free market.

b-psycho December 2, 2005 at 12:55 am

Something else to think about w/ the Wal-Mart tip jar thing:

At some businesses where tips are given, the tips are pooled together and divided evenly to the employees. This basically has the effect of cancelling out the entire point of tipping: rewarding extra effort. Anyone else here think if this were actually done that the employees would end up calling for an equalization of tips?

My experience has been that the prices are great but the service is usually terrible. If they did the tipping thing, I'm willing to bet a handful would get a ton of tips & the rest would be staring at empty jars.

JohnDewey December 2, 2005 at 12:35 pm

Mark said:

"An employer could force an employee to choose between work and starvation (or other consequences of poverty) if they obtained a monopoly on the local job market"

I'm going to assume you're still talking about WalMart, the subject of Professor Roberts' post. Other than Bentonville, do you know of anyplace where WalMart supplies even 5% of the jobs?

WalMart's customers are diverse, but they really do cater to lower income households. I cannot imagine them opening a WalMart store in an area that lacked many low-income workers. Even retirement communities are supported by large numbers of service employees. How could WalMart ever attain a monopoly of unskilled jobs?

xteve December 2, 2005 at 3:06 pm

It's actually almost impossible to starve to death in America these days, thanks in no small part to the abundant & cheap food that these Big Box stores & their ever-improving distribution methods provide. So even the argument that anyone is "forced" to either work there or starve is bogus.

RanDomino December 3, 2005 at 10:17 pm

mark – "you still haven't provided a clue about what you are talking about. How could WalMart, or any hypothetical employer, force an employee to choose "between a particular form of work and starvation"?"

That's not exactly the question. Fiona (who is also Mark? these comments seem… odd…) should not have implied that the business/es are 'conspiring' to give workers only two bad choices (work for BigCorp for less than you deserve, or live in absolute squalor). For unskilled laborers, the millions of Americans living at the edge of poverty (and below), when a job comes up, they take it. They don't have the luxury of shopping around.

They know that they have little in the way of marketable skills, usually having no higher education and too-often not having finished High School. Consequently, they know their jobs are constantly at risk- Unskilled labor is plentiful; by definition, anyone can do it.

Thus Wal-Mart can get away with paying workers so little ($13,000/year on average) without them complaining; as the store closing in Canada earlier this year showed, Wal-Mart will not tolerate unions which would demand a living wage.

So, why don't we just mandate that they pay more? Because, obviously, the money has to come from somewhere, so it is often argued that this would lead to inflation. And that may be true, although I have never seen any definitive proof of this phenomenon.

Now here's some food for thought: Wal-Mart took in about $10 Billion last year in profit. If that money had been given to the corporation's 1.3 Million workers (instead of going to shareholders who contributed little or no work), they could each have been given an $8,000 bonus! Even half of that would be enough for many people and families to be much better off- perhaps enough to have some dignity!

The money exists, you see. It's just that, if your goal is the betterment of humanity, the wrong people have it.

Now, I'm no Communist (I mean, I wish Communism was viable, but I'm realistic). I understand that it takes a cash incentive to motivate someone. But it is ludicrous to think that the Walton family, among others, deserve to be paid the billions they have while their own employees struggle to make ends meet.

Wal-Mart, like any other profit-seeking corporation, doesn't care about its workers, except in ways that may directly affect profit.

Long-term, the solution is tax reform that more accurately reflects the effect of taxation on a person's Standard of Living (after all, $10 is nothing to a rich man, but it could feed a starving person).

Short-term, please patronize retail companies that provide a living wage and benefits to its employees, such as Costco.

If you wonder how any company treats its employees (or, for that matter, the environment, minorities, and just about anything else), search at

Tom December 5, 2005 at 2:22 am

I entirely agree with Russell Roberts. The arguments of those who say that Wal-mart workers are "exploited" do so as they don't know what the word means.

Let's take a clearer example. A young child is homeless and starving. A man gives her board and bed – letting her leave at any time – in return for some favours; a bit of anal perhaps – broadcast live on his webcam to paying viewers.

Is he "exploiting" her poverty? Good Lord, no!! She CHOOSES to be there, after all!

How strange that those who would help the child-prostitute do so by NOT paying to watch! How strange it is that those who would help the child-prostitute want fewer such web-sites, reducing the demand for such prostitutes!

I'm quite sure Mr Roberts will agree with me that this is not exploitation: it is his logic, after all.

Randy December 5, 2005 at 5:00 pm


Society does draw lines. We say that child pornography is unacceptable, that child labor is unacceptable, etc. But to this list you would have us add that working for less than $12/hr with medical benefits is unacceptable. Well, that's a grand vision. But how do we give everyone $12/hr without raising the cost of bread to $6/loaf? Until you solve that puzzle, please refrain from assuming the moral high ground. Anyone can have a grand vision, and then accuse others of any number of moral failings for not working towards that vision. But the true moral high ground is held by those who actually accomplish something to help others, e.g., the folks at Walmart.

Tom December 5, 2005 at 5:59 pm


I am simply criticizing, in my post above, two suggestions by Roberts:

(1) that a person who accepts an opportunity to alleviate themselves from poverty can, QED, not in doing so be the victim of exploitation, and

(2) that an increased turnover at Wal-mart would NECESSARILY result in increased wages for its lowest-paid workers,

as both are palpably absurd. I've no problem with sound economic arguments against higher wages, but Roberts is peddling twaddle instead.

The choice of image was not to suggest a moral equivalence between child pornography and US Wal-mart wages, as that would be obviously absurd.

PS – As a sidebar I don't think I understand all of your last post. You seem to be suggesting that in America you have some people who only earn double the price of bread an hour? Your 2:1 figure is hypothetical, right?

Sean December 7, 2005 at 1:08 pm

Ok…what utter trash.

If Costco can pay it's workers TWICE the wage, give better benefits and still keep prices at a reasonsable level, then so can Walmart. The difference? Greed. Costco is willing to see 800mil profit as enough, while Wally World sees 10billion as not enough.

I'm 100% behind a business making money. I'm not 100% behind a business making money by exploiting it's workers, the evironment, and it's vendors to the degree Wally World does.

And cheaper prices does not always equate to better for the economy. Cheaper prices come at a cost. That cost is passed on to the manufacturers who in turn have to cut corners, sometime so drastically that it effects the quality of the product or lose shelf space at Wally World.

Walmart is in a unique position. It has not only can control the pricing that you pay from the retail perspective, but also dictate how the manufacturers produce and market their products.

I don't think ANY one corporation should weld that much power.

Ron March 6, 2006 at 2:02 pm

Russell Roberts is absolutely correct: If people willingly contract themselves with Wal-Mart, then how have these people entered into any form of slavery? Workers will only be compensated for the effort that they put forth. If an employee is worth $5 an hour to a business, then that employee will be paid that amount. And if that employee is worth more (and the business refuses to pay more), then he or she will say "thank you, but no thanks" to the employer and move on. It's in the best interest of any employer to pay the person the amount that that person brings to the business. If a person is paid less than what they're worth (like many claim in the Wal-Mart debate), then that person will either adjust their productivity to a level that they feel is appropriate or they will deny the job and move on.

If the tip jars do get put out, then there will be no difference in income to any party involved in the situation.

Let me explain: there are two perspectives to look at this situation from: (1) the supply and demand relationship between workers' labor and the firm (2) the supply and demand relationship between the firm's products and customers’ wants.

First Situation: If the tip jars are out, and say that average tips are at $24 for an eight hour shift, then hourly wages will rise by $3/hour. That in turn will cause the supply of labor in that market to increase, thus putting downward pressure on the price that is paid to labor by the firm. In equilibrium the wages will be the exact same as before.

Second Situation: The demand for goods by the customers can be determined by their income. Therefore, if a customer is giving $3 into the tip jar/visit, then that person will spend $3 less on goods. And the demand for goods will then be reduced, and prices will fall.

In the long run, the cashiers will see less wages from their employer (but the difference will be offset by their earnings from the tip jar); Wal-Mart will see less sales because of the reduction in customer's income that is going to the tip jars, but the reduced sales will be offset by the difference that’s spent on personnel costs for cashiers. The customers will receive the same amount of goods that they were purchasing before because of lower prices. So, nothing changes, the money just gets pushed around in different ways.

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