Tips for Uber Drivers? Not From Me

Bloomberg View , May 03, 2016

One of the best things about Uber is that when you arrive at your destination you can just wish the driver a good day and get out of the car. No fumbling with your wallet, no calculating tips, no waiting for the credit card to go through, no juggling a pen, no asking for a receipt. It’s a seamless transaction. The company charges your credit card and e-mails you a receipt.

For riders in California and Massachusetts, this simplicity may be coming to an end -- but only if passengers let it.

To settle a lawsuit claiming that it unlawfully categorized drivers as independent contractors rather than employees, Uber has agreed to pay up to $100 million and make some changes in its relationship with drivers. One change is that it will let them ask for tips. Unlike its competitor Lyft, however, Uber won’t collect the money on their behalf by letting passengers charge their accounts. Drivers will have to get the tips in cash or through a separate credit card transaction.

So the campaign is on to get you digging out your wallet again. When I took Uber to LAX on Sunday, there was a handwritten sign on the back of the passenger seat. “Tips - Appreciated - Thank You,” it read. Although my driver was fine and I’m generally a good tipper, I resisted the instinct to comply. He got a five-star rating but nothing further — not because I’d begrudge him the extra money, but because the only way to preserve the frictionless Uber experience is for riders to defy the social pressure to tip.

Economists tend to think of tips as incentives for better service, but empirical research suggests that how tipping makes customers feel is at least as important. Michael Lynn, a professor of consumer behavior and marketing at the Cornell University School of Hotel Administration and a former bartender, waiter and busboy, has madetipping his research field. Summarizing a range of studies, he arguesthat “tipping is primarily driven by motivations to: (1) help servers, (2) reward service, (3) gain or maintain future preferential service, (4) gain or maintain social esteem (approval, status, and/or liking), and (5) fulfill felt obligations and duties.”

In other words, people tip because it makes them feel good and they think that it’s the right thing to do. The incentive for good service is less important than the social norm. That’s why customers tip people they’re unlikely ever to see again.

Uber changed the norm for car services. “Uber has made a whole generation of passengers think it’s OK to walk out of the car and not tip their drivers,” acknowledged Shannon Liss-Riordan, the lawyer who brought the suit, in an interview with the San Francisco Chronicle.

To restore the status quo ante, Liss-Riordan recommends that drivers post signs to encourage tips. She said she expects passengers to comply. “I think most people are generous, and the public will realize that Uber drivers need this money,” she told the Chronicle.

Maybe so. But the public may also resent her efforts to ruin a good thing. Rewarding drivers for degrading the service is perverse.

Neither Uber’s executives nor its drivers (or at least their lawyers) seem to care much about the customer experience. Everybody seems more concerned with helping drivers cheat on their taxes by collecting unreported cash than with preserving the frictionless arrival that makes Uber so pleasant.

To preserve that experience, Uber could tie tips to the ratings passengers give their drivers. Let a customer specify in advance that, say, a five-star rating gets a 20 percent tip, a four-star rating gets 15 percent, and anything lower gets nothing. Uber could even reduce its rates further and use tips to price-discriminate among customers.

In the meantime, however, Uber customers don’t have to cooperate. They can continue to get out of the car without reaching for their wallets. They can preserve the existing norm. As Lynn observes, “Tipping norms are not imposed by a central authority, so they must evolve out of the behavior of individual consumers and tippers.” If you want to feel good about helping people, think of your fellow Uber passengers’ welfare and leave your extra bills for the hotel maid.