Uber’s Aha! moment: tipping, like racial bias, is bad.

In its proposed settlement of two employment misclassification class-action lawsuits in California and Massachusetts, Uber concedes that drivers can solicit tips.

But Uber’s ideological stance is firmly against tipping, and the company refuses to add a tip function to the app: tipping is inefficient, and it’s effectively a rate hike. (This reasoning has a side effect: employers are prohibited by law from taking a cut of workers tips. Tips would represent the only portion of driver earnings that Uber cannot take a commission from).

The Aha! moment for Uber’s public policy — we hate tipping because we reject bias.
Uber *does* have a built-in tipping option — just not for most Uber drivers.

Uber’s reasoning is marvelously tongue-in-cheek. In summary, its argument is that tipping will create unreliable, uneven wages because its customers are biased, but this is a company that perennially slashes driver wages through rate cuts and unilateral changes to its commission (starts at 20%…then 25%…28%...etc.).

For drivers, some fraction of tips is still better than no tips. One way around this is to automate gratuities so they are more evenly applied, such as Uber already permits for uberTaxi.

Uber taxi, which permits tipping.

Moreover, the same biases likely exist in the ways passengers rate drivers (like in other reputation systems), and driver ratings determine their employability on the platform.

Only Uber could brand not-tipping lower-wage workers who lack benefits as a win for non-discrimination values, and a win for transportation network efficiency.

A lot of people hate tipping culture, for a variety of good reasons — it is inefficient, it can be awkward, and it creates inequities in pay distribution, particularly for people of color. I’m not enthralled with tipping either, and I empathize with Uber’s reasons. Uber’s stance would be completely reasonable if the rates drivers are paid were high enough to create sustainable incomes for them and their families, or stable enough to justify the significant financial, social, and personal investments people make to become drivers.

More from Uber’s approach to tipping.

Uber’s current pay incentives, like surge pricing, already do a pretty good job of distributing the supply of drivers to where demand is highest for passengers who are willing to pay a premium. A recent study showed that Uber’s service is currently better in whiter neighborhoods. And Uber’s pax (passengers) have smartphones, credit cards, and expendable income.

Seamless

The absence of a moment where a passenger fumbles with cash is a high-point in the seamlessness of the Uber experience.

…is it also a hassle for drivers? It can be awkward because the norms around it are unclear.

The option to tip in-app doesn’t mandate tipping, but it visibly shifts the onus to the passenger to participate in the rites of service culture in America. Lyft has the option to tip, and I may be misremembering, but I recall Logan Greene, Lyft’s co-founder, announcing in Dec. 2015 that only 20% of passengers actually tip. Lyft just issued a notice from the founders expressing that 70% of Lyft passengers have tipped, totaling $85,000,000. An in-app tip function also makes things less awkward for the driver and the passenger.

Uber also directly mislead passengers into thinking the “tip is included” in its earlier advertising, and an Uber spokesperson continued (2:30–3:50) to tout that mantra well into March 2016 even after that point was contested in several lawsuits. In other words, Uber pandered to the cultural norm of tipping before taking a harsher (“clarified”) stance.

My bet is some drivers will reward passengers who tip with 5 stars.

Tips are not a useful indicator of quality. But they’re useful for other stuff, like paying bills.

But what I keep thinking about is the ways that uneven pay is distributed in systems with opaque criteria for earning opportunities. Tipping is literally just the tip of the iceberg, but it’s of particular importance to drivers.