Moneybox

You Need to Tip Your Uber Driver More Often

Uber app icon on a tablet screen.
Come on.
Denis Charlet/AFP/Getty Images

You should probably tip your Uber driver more often.

I mean, maybe you don’t need to. Perhaps you’re the sort of person who tacks a few dollars onto each ride unless the driver causes a minor fender bender. But that would leave you among the minority of the ride-hailing public. According to a study released this week, 60 percent of Uber’s riders don’t tip at all. Just 1 percent tip each time. And when riders do tip, the average is about $3.

It is possible that these numbers are slightly outdated. The draft paper is based on four weeks of data covering 40 million rides from the late summer of 2017, when Uber first rolled out the tipping function on its app. Prior to then, the company was the Mr. Pink of the gig economy—defiantly anti-tipping. Uber management argued that it was “better for riders and drivers to know for sure what they would pay or earn on each trip” rather than have to guess about a tip, and cited studies showing that customers can be a bit racist and sexist when it comes to how much they tip. (Which is a fine sentiment, except when you’re a tech firm notorious for dodgy labor practices.) It took a lawsuit for the company to even let drivers solicit tips, and for a while riders had to pay any extra in cash. It seems plausible that, as Uber users have become more accustomed to being automatically prompted for a tip, they’ve gotten more generous about it. But also, they might not have.

The study’s authors include three ex–Uber employees who helped design the app’s tip feature, including former chief economist John List, who is now at Lyft. They’ve put a sort of upbeat spin on their results for the press. “I think Uber drivers are tipped less than taxi drivers because tipping happens after the ride is over and not face to face,” University of California San Diego economist Uri Gneezy told the Verge. “In a sense, I think that this is the right way. Riders don’t tip automatically, but only if they are happy with the service. Hence, tips provide incentives to drivers.” To that point, the study finds that drivers with higher ratings tend to receive higher tips, suggesting that good performance gets rewarded. The researchers have also produced a sister paper, which also suggested that the advent of tipping may have led to a decline in demand for rides and, as a result, hourly pay for drivers, though the results weren’t statistically significant. The outcome weakly suggests that nudging riders to tip more might not be in drivers’ best economic interests.

Here’s the thing: As is, your Uber driver probably does not earn very much. The company has suggested that its contractors gross around $20 per hour, but that’s before you account for little things like the cost of repairing all the wear and tear on their vehicles, insurance, and gas. Once you do include those expenses, the left-leaning Economic Policy Institute estimates that drivers earn a bit under $12 per hour; the hourly rate drops closer to $9 if you take self-employment taxes into account. In some places, they do better—New York City passed a law last year requiring ride-hailing apps to pay a minimum wage of $17.22 an hour, after expenses. In California, they could end up getting benefits like health insurance thanks to the new state law aiming to make them employees, AB5, although right now it’s unclear if Uber and Lyft will even comply. But overall, it’s a hard, not particularly remunerative line of work, where a few extra dollars at the margins from a nice tip can make a big percentage difference in hourly take-home pay.

There are, of course, principled reasons you might object to tipping. Maybe you think it takes the pressure off Uber to raise pay. Personally, I think tipping is generally a kind of barbaric and classist economic tradition that puts workers at the mercy of arbitrary and potentially abusive customers, and we’d be better off preventing it from spreading to industries where it isn’t already common—especially given the way some tech firms like Instacart have abused tipping already. But for now Uber and Lyft are money-losing ventures, which means they aren’t likely to raise pay much on their own unless absolutely forced—and, now that they’re public companies, may subsidize rides less under pressure from investors expecting profits. If you want your driver to make a decent wage in the meantime, you should probably be willing to pay a bit more voluntarily.