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Tips, Bribes and Freebies

As you consider whether to leave a tip or pay a voluntary service charge in a restaurant, do ponder over whether it is a social welfare or a freebie. Who decides what is an “undesirable freebie” and when does it transform into social welfare? In a democracy, is this not best left to the voter?

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Have you been tipping waiters at restaurants? The government has now reiterated that a service charge cannot be added, and many have stopped doing so. A few continue to include it, with a note saying it is voluntary. Restaurant owners argue that a mandatory service charge supplements the income of waiters and staff. In fact, in some countries – and, doubtless, in many restaurants in India ‒ waiters are underpaid because they will earn through tips. In the US, waiters generally expect (demand?) a tip of as much as 20 per cent; anything less may be returned with a sarcastic comment like “You have overpaid the bill”!

What really is a tip? Is it a bribe with an eye on receiving special service in future ‒ or is it a reward, a baksheesh, expressing your happiness at the service? Some would say it is akin, in both cases, to dropping money in the temple hundi. A mandatory charge in the bill is like a tax, which negates both bribe and baksheesh unless you pay an additional amount.

From the viewpoint of the staff, is the tip a compensation for low wages, or it a “freebie”? The latter is very much in the news, with the Supreme Court making adverse comments on freebies promised by parties and candidates to sway voters. Apparently, it views these as some form of bribe, with serious implications for electoral democracy and the economy. The Prime Minister, too, has spoken of the “read culture” and irresponsible promises that have serious economic implications.

Expectedly, there is disagreement on the definition of a freebie. There is unanimity that free health services – be it the primary health centre or vaccinations – and school education are not freebies. Nor are free rations for the deprived (especially amidst the pandemic), a water-tap in every home and houses for the poor (through the PM Awas Yojana). One argument is that these are essential items; but, then, the definition of “essential” changes with time.

An IT leader (the late Dewang Mehta, then President NASSCOM) added in the 1990s to the essentials in the then-prevalent slogan and popularised it as “roti, kapda, makan aur bandwidth”. In this digital era, who can doubt the essentiality of electronic connectivity (“bandwidth”)? After all, during the lockdown, much of the country was dependent on digital technology for key necessities – from groceries to education; from health consultancy to social interaction; from meetings to news or entertainment, and for much else. Surely, free bandwidth or even a free mobile phone or laptop cannot be in the freebies category?

Some will try to draw a line between public goods like health facilities, schools or roads and private goods like a mobile phone. Yet, funding for a house ‒ or for building a household toilet ‒ are generally accepted as worthwhile, and not considered – one assumes – as freebies. So also pensions for elders. Clearly, not all items for private use, consumption or ownership are considered freebies.

Talking of the digital age and providing access devices has no meaning without the vital infrastructure of electricity. Now, according to media, Supreme Court views a few free units of electricity as social welfare; however, some consider this an undesirable freebie. Wiser people may know, but to many a layman like this writer, it is perplexing as to why large subsidies and tax rebates to the industry are fine, but even limited free (electric) power to households is not; why free laptops are par for the course, but free TV sets are not (it seems the Supreme Court too has considered this an undesirable freebie, as differentiated from social welfare).

Yet, for many – especially the poor – TV is a source of news and entertainment, an escape from the rigours of the world, and often a companion (more so for the lonely and elderly). A laptop or a mobile sometimes takes its place and offers more versatility. In a changing world, what is “essential” evolves with time? In earlier times, few thought of pensions or free healthcare as necessary social welfare measures. Today, for the self-employed, using WhatsApp to seek, promote and transact business makes the smartphone an essential tool for livelihood and would qualify under any reasonable definition of social welfare. 

There are, of course, vital policy issues involved, in the context of some freebies. For example, in agriculture, free power often leads to wrong cropping patterns and excessive pumping of groundwater; subsidised urea results in its overuse and causes soil degradation. Passenger fare subsidy by the Railways means higher freight costs and consequent diversion to polluting and energy-intensive road transportation. Similarly, other well-meaning subsidies ‒ whether social welfare or freebies ‒ may have unforeseen or second-order implications of concern.

Such expenditure has obvious political overtones; it may also have serious fiscal and economic implications at the macro-economic level – a genuine concern which has stoked the recent controversy on freebies. Yet, it is important to note that the health of the forest depends on that of each tree, and that the micro-level welfare of each individual should drive policy as much as concern for the overall GDP. The two are not orthogonal, but where there are trade-offs, welfare of the poor must dominate: a healthy, harmonious, educated nation in which everyone can realise their full potential, is a better outcome than a high-GDP country of great inequity and fractious divides; a happy people vs. a merely rich nation. Which would you choose?

As you consider whether to leave a tip or pay a voluntary service charge in a restaurant, do ponder over whether it is a social welfare or a freebie. Who decides what is an “undesirable freebie” and when does it transform into social welfare?  In a democracy, is this not best left to the voter?

Contrary to what many experts may say, not all freebies are bad.

Kiran Karnik loves to think in tongue-in-cheek ways, with no maliciousness or offence intended. At other times, he is a public policy analyst and author. His latest book is Decisive Decade: India 2030 Gazelle or Hippo (Rupa, 2021).

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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freebies Magazine 10 Sep 2022

Kiran Karnik

The author is an independent policy and strategy analyst, and alumnus of IIM Ahmedabad

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