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Uber and the Economics of Tipping


Remember (Mises U Alum and economist) Ken Zahringer’s great short article about tipping?

Fortunately, CNET noticed, and called Ken up to apply his tipping insights to ridesharing programsFrom the article “To tip or not to tip drivers, that is Uber's question”:

While Uber drivers can earn higher than minimum wage, economist Kenneth Zahringer said that misses the whole point of tipping. Zahringer, who works in the University of Missouri's applied social sciences division, said gratuity in the service industry is more about incentives than income.

"There's the simple fact of getting someone from here to there, but then there's a level of service on top of that, being polite, having a clean car, all of that," Zahringer said. "If the driver knows that this particular guy that's sitting in his car right now might give him more money if he's nicer, he's pretty likely to be nicer."

"It makes the service provider, the individual, a little more of an entrepreneur," Zahringer said. "By improving quality, they can directly affect their income. And that's power."


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Ryan McMaken (@ryanmcmaken) is a senior editor at the Mises Institute. Send him your article submissions for the Mises Wire and Power and Market, but read article guidelines first. Ryan has a bachelor's degree in economics and a master's degree in public policy and international relations from the University of Colorado. He was a housing economist for the State of Colorado. He is the author of Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre.