Technology

Digital economy needs to develop a tipping etiquette

Surge rates just aren’t enough to earn a living delivering food

Bikers working for Deliveroo enter a restaurant to pick up meals for delivery. Photograph: Eric Feferberg/AFP/Getty Images)

Izabella Kaminska
Mon Dec 19 2016 - 06:05

I have been puzzled by the way that different cultures approach service workers’ pay ever since I was involved in an awkward stand-off over a tip with a taxi driver during my first trip to Tokyo.

“No tip necessary, no tip necessary,” the driver kept saying in broken English.

But I continued on bullheaded: “No please, please, do take this.”

In the background my husband was shaking his head, as a small scene developed at the hotel doorway.

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He had, of course, warned me this could happen.

“I told you so!” he snarked, as I finally conceded.

I was clueless to the fact that in Japan tipping is considered an insult. The price is the price.

I had stupidly tried to force some yen into the taxi driver’s hand.

Why is tipping deemed essential in, for example, the US but judged to be merit-based and discretionary in Europe?

Such cultural differences I once put down to local quirks or regulations.

But a recent experience in the gig economy, which is trying to do away with tips altogether, has made me realise that those differences may be closely tied to how career-minded we expect our service workers to be.

This year I spent time working for Deliveroo, a UK food courier service, for research into a story I was writing for the Financial Times.

Workers must be on call

I wanted to figure out how responsive workers needed to be to earn lucrative “surge rates”, where workers are paid more when demand increases.

Because surge rate periods cannot be predicted, workers must be on call all the time.

I also wanted to see if it would be possible in the gig economy to earn more than the minimum national wage of £7.20 per hour, as companies such as Deliveroo and Uber often claim.

I discovered that surge rate periods were too few to supplement the basic rates.

Meanwhile, the one element of a low-paid service job that had traditionally compensated for low rates – a tip for a job well done – had largely been done away with.

In their effort to end the necessity for cash and create the perfect, frictionless experience, app developers for Deliveroo and others like it had dehumanised the transaction to such a degree that tips had become inconveniences.

Uber even encourages riders not to tip drivers.

To maximise earning potential, gig economy workers often become jacks of all trades, signed up to as many different task apps as possible to capture surge rate opportunities as best they can.

Yet when they do so, they undermine their own economies of scale.

From the need to invest in multiple tools and equipment to the burden of having to turn your hand from one trade to the next, multitasking introduces new costs.

What the gig economy really does is undercut seasoned service workers who have learnt through experience that it makes sense to smooth prices across low and high peak periods for the sake of professionalism.

Kindness of strangers

It has replaced them with amateurs with no capacity to plan ahead – and little time to hustle for compensatory tips.

In the US, waiting staff depend on the discretionary kindness of strangers to make a living wage.

Some might say that leads to better and more responsive service workers.

In continental Europe the service cost is always included in the bill.

Yes, critics could argue that is why France has so many shoddy and obnoxious waiters. Incentives matter – and French waiters do not have any.

But it is also true that in France, service work is considered a legitimate and respectable career choice for everyone – not just students, migrants or casual workers.

In the gig economy, where workers struggle to make the minimum wage but cannot rely on a cash exchange to generate a tip-giving opportunity, the discretionary system just does not cut it.

The traditional US restaurant industry bypasses regulation because of a local quirk: no one dares not to tip a minimum 20 per cent of the bill.

This amounts to a culture of respecting the true cost of professional service.

The digital economy will have to develop the same culture if it is to avoid intervention by regulators.

If not, the career waiter or waitress will be consigned to history.

That would unleash a bitter race to the bottom, undermining all our living standards.

– Copyright The Financial Times Limited 2016

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