Uber Drivers Can Now Accept Tips – Here’s Why That’s Bad

First, I want to start by saying that this blog is not saying that Uber drivers are overpaid and shouldn’t get tips. Actually the opposite. Uber itself admitted that it underpaid New York City drivers for almost three years back in May. While this may have been accidental, it still shows that they are trying to pay their drivers as little as possible in order to get by. And don’t get me wrong, that makes sense as they are a private company in capitalist America that has yet to be net income positive. They are well within their rights to try to keep costs low in order to get into the black.

The issue that comes into play now that drivers can accept tips is that it opens the door for Uber to pay their drivers even less and also makes the overall seamless Uber experience, well, not as seamless. I’ll let Adam explain where tipping in the US started, why it exists today, and why it is bad (note that his video is mostly focused on restaurants but the concepts still apply to taxi and ride sharing services):

A few key points to highlight from the video:

• Why is it the customer’s responsibility to make sure the server makes a reasonable, living wage? Shouldn’t that be the employers job and included in the overall cost of whatever the customer is purchasing? Example: When you buy pants, you don’t tip to make sure the person who helped you get a size from the back, right?
• Tipping is huge in the US, but not as much in other countries. In some cultures, it can even be considered insulting.

Adam makes the point that it makes the entire experience a bit uncomfortable as well because the customer has to determine what is a fair tip percentage and then do the math (although they’ll likely have suggested tip amounts within the app). The nice thing about Uber before tipping was accepted is that this was not part of the experience at all. You paid for the service and knew exactly how much it was going to cost you when you ordered the ride. It is taking a seamless experience and making it more difficult, and potentially worse for the driver if it’s a slow night or if they don’t receive tips. Most drivers are looking for consistent income and tipping makes that potentially ambiguous.

As someone who has worked nearly every job in the service industry (restaurants, valet, landscaping, you name it) I know firsthand how important tipping is and how you can have “those nights” where you make a bunch of extra money on the side, but also those nights when you don’t when you needed to in order to pay all your bills on time. Uber drivers could always have accepted tips under the table, and still can but, if anything, drivers may now make even less money. Customers who would’ve tipped under the table before will now tip in-app where it’ll be taxed as income, leading to a lesser amount in take home money for the driver.

As Adam says, now we are obligated to tip and that doesn’t feel right considering the experience of the service prior to this change. I’m sure most drivers are excited about the prospect of making a few extra dollars, but the concern arises when those extra dollars are now taxed in addition to the drivers making less per trip because Uber can now pay them below minimum wage with it being a tipped position. For example, in my job as a valet I only make $7 an hour when minimum wage in my area is $10 because I’m expected to make the rest up in tips). If I’m wrong and the drivers end up consistently make more money than they did before, then that’s great news and I’ll be happy to be wrong. However, as shown in the video, that’s not the norm for service positions in the US.

It is important to point out that when Uber announced this change, Lyft’s spokeswoman stated “Tipping isn’t new to us at Lyft. We’ve offered in-app tipping since our earliest days because it was the right thing to do, and our drivers have earned an extra $250 million as a result.” Now that sounds amazing. An extra $250 million. However, as mentioned above, it’s likely the Lyft drivers make slightly less per trip because they receive tips and thus get paid below minimum wage. If Lyft drivers were always making substantially more than Uber drivers, no one would be driving for Uber anymore and Lyft would be completely dominant. However, that is not the case so there are likely other factors at work which keep incomes comparable.

Overall, this could be a good change for Uber drivers and it might bring them the extra money they need to get by. However, just going off of historical evidence, that is not traditionally the case so really all that is changing here is making the experience worse for the customer which seems backwards given that tech companies like Uber try to beat out their competitors by having a better, more streamlined system in place. As Adam said, in an ideal world (as some countries already do) tipping would not exist, so it is a bit frustrating to see a top tech company go backwards on this. Hopefully it’s for the better, but don’t count on it.