Less is always more. Except when Tipping

It can be tricky to figure out how much to tip, especially in the “Gig economy”. The Gig economy is the ecosystem including workers who take on ‘gigs’ to provide services to employers as independent contractors, but not employees - think Doordash delivery people and Lyft drivers. Partly due to the inherent flexibility, over a quarter of the working population in the US now participates in this economy. Yet, tipping these workers can be particularly dicey since we don’t interact extensively with them, especially in comparison to a waiter at a restaurant for instance.

Sure, but why should I care about tipping? After all, tipping culture is a topic with differing views and no consensus.

Well, the rate of exploitation of workers in the Gig economy is increasingly concerning as more is being asked of Gig workers and less is given to them in return. What’s more is that the bigger Gig employers are notorious for either overworking or underpaying workers. To better understand this growing discrepancy, we look to what happens at Amazon fulfillment centers, and why an Uber ride in San Francisco can now cost you a kidney and a half.

Amazon

One of the higher pay rates for workers is at Amazon. At $15 per hour, this tech behemoth pays double the federal minimum wage and frequently touts the value it places in competitive compensation. But under what conditions? Chances are that you have either heard of the breakneck pace expected in fulfillment centers (inventory management warehouses) or heard about the more recent unionization efforts in Bessemer, Alabama. These unionization talk is pushback from Amazon workers demanding better working conditions and benefits from a company run by the world’s richest person. One anonymous driver told Business Insider that making a bathroom stop can cause “Amazon [to] text [them] and call [them] asking why [they had] stopped for so long and why [they weren’t] making deliveries”.

Wisconsin Rep. Mark Pocan tweeted that “Paying workers $15/hr doesn't make you a 'progressive workplace' when you union-bust & make workers urinate in water bottles”.

If you doubt the existence or frequency of urine in bottles, an undercover journalist at a fulfillment center can attest from personal experience.

These conditions are deplorable, and unfortunately they seem to be a trend with large organizations with power. The first quarter of 2021 has seen increased testimonies from Goldman Sachs analysts about overly hefty work weeks which are the norm rather than a deviance. By many standards, this is a better evil since these investment bankers get paid as well as…well, investment bankers.

Can we continue to trust Gig employers to take care of gig workers? Do you believe in the innocence of Amazon’s leaders? That they were truly unaware of the effects of heavy monitoring and planning of employee schedules? Even if we assume they were previously unaware, now that they are certainly aware, are they bothered enough to improve?

Uber

Uber, along with other Gig employers including Doordash, Instacart, and Lyft, spent over $200 million lobbying for Prop 22. This is a ballot that exempts large Gig employers from a California labor law, and these companies did not hold back in sponsoring ads to this effect. This mishmash of tech companies were successful and the ballot passed.

After this ‘victory’, Uber CEO, Dara Khosrowshahi, emailed Uber drivers saying “We’re looking forward to bringing you these new benefits – like healthcare contributions and occupational accident insurance – as soon as possible.” But as you might have suspected, something is indeed off. Why would Uber, and these other companies, spend so much trying to pass this law, if they could just spend that money offering the benefits they claim to want to offer! Here are a couple of comments from Gig workers who shared their thoughts with The Guardian in February, about 4 months after Prop 22 was passed:

“A lot of drivers were duped because they expected they were magically going to be able to qualify for benefits that the companies made it sound like they were going to pay for up front and that drivers were going to be getting reimbursement for the mileage”

- Ben Valdez, a 5-year Uber driver in Los Angeles

“Prop 22 hasn’t made anything better because the companies still don’t take into consideration the waiting time and driving time to stores, so their guaranteed 120 percent of minimum wage is fraudulent”

- Saori Okawa, who worked for Uber, Instacart, and Doordash in San Francisco.

The observable trend here is that these companies are heavily self-interested. They are determined to provide great quality to customers at prices that are low enough without compromising their profitability. This effectively leads to squeezing benefits for Gig Workers. There is nothing wrong with these companies being self-interested. In fact, the daunting truth is that deep down we all are. However, the exploitation of underpaid and overworked Gig workers is not an acceptable or moral means to profits.

Tipping

Let’s circle back to our question of ‘why should I care about tipping?’. By this point, I trust you have developed a concern for treatment of Gig workers and what can be done to alleviate their situations (and if you don’t feel this way yet, I’m only going to waste more of your time going forward).

There are at least two possible answers here. The first is that we sidestep questioning our tipping behaviour and we instead throw our hands in the air and rain curses at these technocrats that want to inflate their paychecks (under the guise of maximizing shareholder value) at the expense of vulnerable Gig workers.

I have no problem with this except the deal breaker that it does not actually help Gig workers. When Uber and other employers can spend millions to pass bills, like Prop 22, that exempt them from doing the right thing, we have to rethink how we can actually help.

I couldn’t know your mind, but my thoughts are that I cannot simply rely on Gig Employers to solve this problem. The way the incentives are structured, means it will be a lugubrious drag to proper compensation and benefits. This leads us to the second possible answer: changing our behavior to change the incentive system.

Hold on a second just there. Before we fall into a circular discussion on exactly how much to tip, which we all know will involve me trying to lobby you to tip more, let’s just understand the current state of tipping in the Gig economy.

As consumers, we want to minimize how much we pay for Uber rides, Doordash deliveries, and generally everything we spend money on (as you should!). At best, we try to order from restaurants with cheaper menu items, switch from Uber to Lyft for a better fare, or do group orders with friends to reduce per person costs. These optimizations are great, and encouraged. Yet they are insufficient in improving Gig worker compensation without having a conversation about tips.

Take a second to think about the last time you had a contactless delivery of your food. How much did you tip? How about your last Lyft ride? Hold on to this number.

Grubhub pays a $3.50 base (depending on location), plus mileage, any bonuses they’re offering, and tip, according to Curtis, who delivers for Grubhub in Denver. According to ridester, “Before tips, DoorDash drivers make an average of just $11 per hour — below minimum wage in some markets”. Sure, but this is still only a part of the picture.

Let’s dig a little deeper. What I found surprising to learn is that tips are a much higher component of earnings than, innocent but naive, assumptions may lead us to believe. For John William, a driver in Pennsylvania, about 50 percent of his weekly earnings comes from tips.

This means that half of a Gig worker’s compensation per order is completely at the mercy of your desire to reduce your total order cost by reducing tips. Since learning this, my attitude at checkout has changed. Yes I now rethink whether I should tip more. This is especially given that a U.S. Foods study found that the primary complaints Gig workers have is low tips. But I now also rethink whether I should order at all.

If tipping the right amount means that the order is too expensive, then the onus is on me to either make a group order, get my butt off the couch and walk over, use public transportation instead, or even simply not make the order. If your friends invited you to dinner at a pricey restaurant, your desire to reduce costs does not make you put in a ‘low’ tip. Similarly, don’t maim a Gig worker’s pay so you can save a few dollars.

Gig workers deserve better compensation. Yes, it is the fault of Gig Employers, but we’re better than them. It might not be our fault, but it is our responsibility.

Look out for the follow-up article that explores how we can determine exactly how much to tip. For now, a U.S. Foods Study found that customers and food deliverers agree on a tip of $4.