Study helps to explain the decline of tipping norms in the gig economy

Study helps to explain the decline of tipping norms in the gig economy

Cambridge, Mass., Aug. 26, 2019 –– In the new “gig economy,” where technology is used to hire and pay workers for specific tasks, many people are confused about tipping. If you hire someone to do a specific task for a flat fee, is a tip expected? In a recent study, Erik Duhaime, a PhD graduate of the MIT Sloan School of Management, and Zachary Woessner, a PhD student at Michigan State University, identify a breakdown of tipping norms in the gig economy, and attribute it to workers’ increased autonomy in deciding when and whether to work. Their paper, “Explaining the decline of tipping norms in the gig economy,” was published in the Journal of Managerial Psychology.

“While the gig economy may make things more efficient, it also seems to be changing preexisting social norms and expectations, and once those norms deteriorate, it is very difficult to re-establish them,” says Duhaime.

Focusing on the social norm of tipping, they conducted several studies to analyze the impact of paying gig economy workers by the task. They began with the hypothesis that consumers are relatively less motivated to tip workers when they are able to decide whether to complete tasks for a predetermined rate.

The first test of their theory involved a survey experiment using workers on Amazon Mechanical Turk. The researchers told people of a fictitious service that would deliver groceries. Some people were told this would take one hour and that the worker “agreed to do the job for $10.” Others were told it would take one hour and that the company “pays their employees $10 per hour.” That change in wording led to differences in how people would tip. “If the worker agreed to do the service for a flat fee of $10, people were less likely to say they would tip,” notes Duhaime.

The second study analyzed data on New York City taxi drivers, who are allowed to negotiate flat fares when asked to drive outside of their borough. “If the driver chose the price rather than using the meter, people tipped less on average. Riders assumed that the stated flat price must be fair and therefore they didn’t need to tip as much,” he explained.

The final two studies involved food delivery drivers and considered how workers’ motivations are changing in the gig economy. In both studies, food orders were placed on an app and tips of various sizes were provided either at the time of ordering or upon delivery. In the first study, orders were placed with restaurants that primarily employed their own drivers. “In that situation, the timing and amount of the tip impacted the speed of delivery, presumably because the drivers prioritize some deliveries in order to maximize tips,” says Duhaime.

In contrast, the second study involved orders placed through a third-party service that uses gig workers to pick up food from restaurants and deliver it to customers. In that situation, he says, drivers were not responsive to tips, presumably because they are simply trying to accept as many jobs as possible and complete them as quickly as possible.

“In the gig economy, there is increased efficiency in letting people choose whether and when they want to work and setting the rate. However, that dynamic crowds out social norms that used to govern the relationship between consumers and workers. The delivery driver is no longer the kid who works at the pizza shop down the street. Now, that driver is another cog in the machine because each interaction is a one-off task that someone has agreed to perform,” says Duhaime.

“The studies together paint a picture of how tipping norms are evolving in the gig economy. This is important because once tipping norms deteriorate, they are very difficult to re-establish,” he says. “Look at Uber, which initially announced that riders were not expected to tip, but later revised its position to say that tipping is allowed. Despite that announcement, Uber drivers continue to receive low or no tips.”

Duhaime adds, “Whether the deterioration in tipping in the gig economy is for better or worse depends on the context and one’s perspective. Tipping as a practice may have many negative consequences, like enabling a form of racial wage discrimination, and perhaps we would be better off without tipping norms. But more broadly, by eroding previously existing social norms, I wonder whether the marketization and gigification of tasks increasingly enables both managers and customers to view workers less as people and more as another means of production.”

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