Should Uber Workers be Tipped?

General , Uber Dec 02, 2015 No Comments

“There’s no need to tip”

This statement from Uber’s help page has caused confusion for passengers and frustration for drivers, and is a serious point of contention for those that care about the future of work in the on-demand economy.

Uber doesn’t want their passengers to think about money; they just want them to request a ride get in and out of the car, and move on with their life.  Payment is cashless and invisible to the customer; they have already entered their credit card information into the Uber app and don’t have to take any additional action during their ride.  This keeps their minds on the convenience of the service and off the fact that they are paying for it.

To satisfy drivers and those that are concerned about the well-being of on-demand workers, Uber has produced data to show that their drivers earn more than taxi drivers.  If this is accurate, it would seem to be a win-win for both drivers and passengers; passengers don’t have to worry about tipping, and drivers are making more money than they would as taxi drivers (who are usually tipped), so they won’t mind the absence of a convenient tipping option.

Unfortunately, the story isn’t quite that simple.  It’s always wise to be skeptical about data produced by a company that has a lot to lose if its stats don’t look good.  Uber has to sell the public on the fact that their drivers are well-compensated and satisfied with their jobs.

This study also shows how much drivers earn per hour before expenses.  Rideshare drivers have to cover their own costs for gas, insurance, maintenance, and repairs, while taxi drivers may cover some of those costs but not others.  This means that the comparison could be somewhat misguided and not give a truly accurate picture of the relative earnings of these two jobs.

The Negatives of Tipping

Of course, Uber could solve this problem very easily by allowing tips through their app.  While other aspects of their employment arrangements are more complicated to fix, this one is pretty much a no-brainer.  The existence of Lyft’s tipping feature provides strong evidence that tipping can be allowed, and it remains one of the biggest differentiators between the two companies.

Aside from Uber’s desire to keep their transactions cashless and effortless, there may be other reasons why Uber has refused to budge on the tipping issue so far.  Tipping has been a controversial issue in America since it first became a custom in the late 1800’s.  Some people believed that tipping a worker implies that they are of a lower class than the customer and considered it demeaning.  Anti-tipping legislation was proposed and passed in some states, but it was rarely enforced and people continued to tip.

Tipping is also a subject performance measure and can therefore lead to unfair outcomes.  This same argument has been used to complain about driver ratings.  Giving too much power to customers with arbitrary and unknown performance standards puts drivers in a precarious position.  This also creates more wage instability, as tips will naturally vary from day to day.  Drivers are then less able to accurately predict how much money they will make in a given night.

The argument against tips because of their subjectivity is less powerful than the argument against ratings, because the latter has the power to completely remove the driver from the network.  A bad rating can totally eliminate a source of income for the driver while a bad tip can be evened out by a good one.

Most of the arguments against tipping Uber drivers and other on-demand workers have also been used to denounce tipping of servers and other employees.  In spite of this, tipping has continued to remain widespread in many professions, such as servers, hair stylists, and taxi drivers.

It’s also important to note that while servers and other tipped employees have lower minimum wages under “tipped employees” laws, they are still required to make at least minimum wage after tips, or their employer must make up the difference.  These laws don’t apply to independent contractors (which most on-demand jobs are), which leaves them in an undefined category that doesn’t have clear customs yet.  People are aware that certain types of employees rely on tips, but on-demand workers haven’t been clearly put into this group yet.

Alternatives to Tipping

If Uber doesn’t want to change their policy on tips, there are ways to get around it.  Drivers can accept cash tips, and new ways of accepting tips outside of the Uber app are being developed.  These options aren’t as convenient as in-app-tipping, but if they become popular it could motivate Uber to change its attitude towards tipping.

Uber could also include a gratuity in the service fee, as some has restaurants have done, but this seems unlikely based on Uber’s strategy of lowering rates rather than raising them.  Once again, passengers may also be confused or annoyed if a gratuity is included without their knowledge.

A Call for Tipping Clarity

Passengers take their cues from technology; the fact that in-app tipping could be allowed by Uber and isn’t signals to them that tipping isn’t necessary.  While Uber’s stance on this issue is understandable, it’s also not doing them any favors with drivers.  The ease with which a tipping feature could be implemented makes it seem like a great way to extend an olive branch to the drivers that are the heart and soul of Uber.

Regardless of whether Uber changes its stance or not, other on-demand companies and their employees need to provide customers with accurate signals of what proper tipping etiquette is.  These employment arrangements are still very new, and people need some guidance as to what’s expected of them. 

On-demand companies should be transparent about what wages their workers can actually expect to earn and what a standard tip should be.  With no social norms yet developed for these positions, both workers and customers will look to the companies to provide clear information on how much to tip.

Also published on Medium.

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