Business

Uber’s argument against tipping: Riders have a racial bias

04/22/2016 -Boston, MA- An Uber driver helps out a passenger with luggage outside South station in Boston, MA on April 22, 2016. (Craig F. Walker/Globe Staff) section: metro reporter:
Craig F. Walker/Globe Staff
An Uber driver helped out a passenger with luggage outside South Station in Boston on Friday.

Uber, facing a chorus of criticism from its drivers for refusing to add a tipping function to its app, is mustering a provocative argument:

Tipping is inherently unfair because of customers’ unconscious racial biases.

The transportation network company’s stance is based in part on an academic study that found white restaurant servers earned larger tips, on average, than black servers who provided equally good service.

Advertisement

The popular ride-hailing service is under pressure to add a tipping option to its smartphone app after it agreed to pay up to $100 million last week to settle a class-action lawsuit by drivers who alleged unfair wage and labor practices. As part of the settlement, Uber has agreed to clarify that tips are not included in its fares — an important concession that drivers hope will prompt more passengers to add a gratuity.

Get Talking Points in your inbox:
An afternoon recap of the day’s most important business news, delivered weekdays.
Thank you for signing up! Sign up for more newsletters here

But even though its smaller rival, Lyft, already offers a tip function, Uber has no plans to include one. A spokesman referred to a 2008 study by two Cornell University professors that analyzed data on tipping practices in restaurants and concluded “consumers of both races discriminate against black service providers by tipping them less than white service providers.”

Uber also pointed to a 2014 Bloomberg analysis that uncovered puzzling variations in the tips paid to New York City taxi drivers. Among other statistical oddities, the research found that larger fares that ended in the digits 0 or 5, such as $40 or $55, earned cabbies far smaller tips, on average, than similar fares that happened to end in other digits.

The Uber spokesman, who declined to make a company official available for an interview, said introducing widespread tipping would make drivers’ overall compensation dependent on those same racial biases and apparently random psychological effects. The net result, he said, would be a discriminatory system in which two drivers who perform the same work could receive substantially different wages — not because one provided superior service, but because one was black, or unluckily had fares ending in 5s and 0s.

Some drivers reacted with strong skepticism, saying Uber’s low fares — currently $1.24 per mile and 20 cents per minute, plus fees, for an Uber X in Boston — mean that any tip would be a big help, even if some drivers unfairly get more. The company should at least test a tipping function on its app in one city, they said, and see how strong the bias effect really is.

Advertisement

“Race has nothing to do with it,” said Keisha Seaton, who drives for Uber and Lyft in Boston. “It’s all about the service you provide, and if you provide top-notch, five-star service, you expect to be compensated as such.”

Seaton recounted how a woman recently gave her a $20 cash tip on a $10 fare, telling Seaton she did so simply because “she was glad there are good people in the world.”

“There’s so many people out there who are generous,” said Seaton, who is black. “Would she have tipped a white woman more? I don’t know, but she scored in my book.”

Drivers also argued that many variables could affect their incomes, including the models of cars they drive, the neighborhoods their passengers travel to, customers’ ages and incomes, whether a person happens to be carrying cash, whether a passenger is intoxicated — even whether the personalities of driver and passenger happen to “gel.”

All a driver can control, they said, is the quality of service — and for that, passengers should have the option to easily reward them with a tip.

Advertisement

Connie Hirsch, a 57-year-old Uber and Lyft driver from Somerville who makes about $2,400 a month working part time, said it seemed plausible that minority drivers would get smaller tips. But she noted that young, attractive women are also more likely to get larger tips.

‘There’s a lot of discomfort for companies to say they’re going to use a pay system that we know depends on race and gender.’

“If I was 24, I think I might get a whole lot more — me, young and cute at 24, was pretty good,” she laughed. But if Uber added the tipping option today, she reasoned, “at least I’d be getting half of a whole lot more, instead of nothing.”

Drivers also pointed out that customer bias could affect their ratings in Uber’s zero-to- five-star ranking system, which the company uses to identify, retrain, and sometimes even “deactivate” poor drivers.

Michael Sturman, a coauthor of the 2008 Cornell study, acknowledged drivers’ frustrations. But he said multiple studies have found tips are more strongly correlated with gender, race, and attractiveness than performance.

“Companies often use tips as a way of passing compensation costs on to the consumer,” he said. “The problem is that you don’t have any control over whether violations of [antidiscrimination laws] are occurring. So there’s a lot of discomfort for companies to say they’re going to use a pay system that we know depends on race and gender, which is illegal.”

Sturman commended Uber for taking an evidence-based approach to compensation. But he cautioned that the company may have to rethink its policy if too many drivers leave over it.

“They may know that they’re getting enough drivers, even with some getting dissatisfied and dropping out,” he said. “But if they start to find a shortage of labor, they may need to allow tipping, give bonuses, or just increase the fares.”

Uber’s website says “there’s no need to tip.” Some drivers complained that creates a misperception that they do receive tips from the company, when in reality, they receive only the fare, minus the 20 to 25 percent cut that Uber takes.

A spokeswoman for Lyft, whose fares in Boston are slightly lower than Uber’s, declined to answer questions about potential bias in its app-based tipping system. She said customers have given its drivers more than $85 million in tips over the years.

“Lyft has had tipping since the beginning,” she said. “We wanted passengers to have a way to show their appreciation to drivers who go above and beyond to give a great ride or be extra helpful, since so many of them do.”

While the Uber settlement allows drivers to solicit cash tips without fear of being removed from its the network, drivers worry that customers who are used to a seamless, cashless experience will balk if the ask is too aggressive.

Seaton said she’s noticed both drivers and passengers are switching to Lyft. If Uber added the feature, she said, it would modestly boost her income and help Uber retain more experienced drivers.

“Everyone involved would be happy,” she said.

Dan Adams can be reached at dadams@globe.com.
Follow him on Twitter @DanielAdams86.