10 ms·

How Software in Half of NYC Cabs Generates $5.2M a Year in Extra Tips

268 points by iquantny 12y ago

nostromo 12y ago
Including taxes when calculating the tip seems like a class action lawsuit waiting to happen.
- monksy 12y ago
  But it's the norm and expectation. Theres a reason why the post tax total is the biggest number on the check. (Other than thats how much you owe)
  - conductr 12y ago
    Agree. It is the norm. All restaurants, the most common places to tip, do this too. If they calculate/print suggested tip amounts they use post tax and also if you trigger a gratuity included they use post tax. To be far, I think most people use post tax when calculating tip in their head too.
    - ihaveajob 12y ago
      One thing I hear a lot is to just double the sales tax. Around CA, when it was around 7.5%, it added up to a nice 15%. Since they recently increased sales taxes to about 8.5-9% depending on the city, it doesn't work that way. Or yes, if you account for tip inflation.
    - monksy 12y ago
      One thing I saw recently is that a place did 18, 20, 22%. I'm pretty sure I tipped lower just for that.
    - smackfu 12y ago
      > If they calculate/print suggested tip amounts they use post tax I see it done both ways.
biot 12y ago
I find tipping culture really confusing. How is it that when your plumber saves the day and gets your leak fixed (saving you expensive flood restoration costs) you pay the price on the invoice, yet for a car ride from A to B it's worth paying 20% to 30% over the invoice price? Compare that to buying a new vehicle where, regardless of how knowledgeable and spectacular the salesperson is, you are considered to be getting a bad deal if you don't bargain to below invoice price.
- untog 12y ago
  In the US particularly, tipping is basically just making up for the fact that the person is underpaid. Plumbers are typically very well rewarded for the work they do - restaurant waiters, less so.
  - click170 12y ago
    I agree. And it's this tacit admission that those workers are underpaid that makes this particularly embarrassing. We can generally agree these people are underpaid (we all generally tip and agree on the reasoning behind it) yet we can't agree to raise the minimum wage to get them a livable income.
    - dkrich 12y ago
      Waiting tables and other tip-based compensatory jobs are specifically granted an exception to the minimum wage, so I don't think raising the minimum wage would change anything. Depending on where you work and how experienced you are, waiting tables or bartending can be very lucrative relative to the amount of education or experience required to do the job. I'll certainly not suggest that a Denny's waiter or a Wal-Mart cashier are not underpaid, but grouping all waiters together and labeling them underpaid is an oversimplification.
  - madeofpalk 12y ago
    ...but don't they get underpaid because they make it up in tips? Vox said it well with "consumers should not be responsible for paying the incomes of a restaurant owner's employees. "
dude_abides 12y ago
Some great tips here for budding data scientists: * Form a hypothesis before you start looking at data, else you're susceptible to post-rationalization. * When in doubt, have the raw data available to reconcile with aggregate data. * When publishing results, include your data sources, so that others can verify your findings.
- hudibras 12y ago
  (Since your comment appears to be the only one here about the article itself, I'll piggyback off it.) This is a really great data analysis. The bottom-line conclusion of "cab drivers who are driving CMT programmed cars are making more money in tips" will definitely cause the Verifone drivers to say "Wait, what?" The Businessweek article also shows the limitations of the so-called data journalism. The two reporters grabbed the data from the database, made some pretty graphs, got some quotes and called it a day. It took some readers revisiting the data to tease out the real insights. But that's a bit unfair to the Businessweek guys. They're on a deadline and won't get paid extra for geeking out on the data too much, so their goal is to get the initial news out there to the world. Ben Wellington's interest wouldn't have been piqued if the article hadn't been written in the first place. I guess what I'm saying is that it's a win all around.
Someone1234 12y ago
Is a 20% tip the norm for cabs? I don't live in NY and don't take cabs often, but I would just assume tipping would be similar to eating out in the US (10% for bad service, 15% norm, and 20%+ for good service). Anyone care to weigh in? Also I always heard how "cheap" taking a taxi was in NYC. That's why people did it all the time. But looking at his example fares ($40+), that doesn't seem cheap to me, in fact quite unaffordable. Still cheaper than London's insane taxi fares however.
- nostromo 12y ago
  The table of example fares only includes trips with tolls, which are going to have higher totals, even without the toll. The fare for people jumping around Manhattan would be quite a bit cheaper on average.
- raldi 12y ago
  > Is a 20% tip the norm for cabs? Not historically. It used to be 10% or 15%. But then they put a screen in the back of the cab whose software says, "How much would you like to tip? [20%] [25%] [30%]" and then in a less enticing spot, "[Other]". The power of evil, manipulative UI design is being used to make riders think that 25% is the typical taxi tip, and in a short amount of time, they'll have managed to use this fake-it-till-ya-make-it strategy to turn that lie into the truth.
- hbosch 12y ago
  Within Manhattan, you can usually get where you're going for under $20 sans tip. When I lived there, I wouldn't necessarily call that "cheap" compared to the underground alternative... but definitely just cheap enough that, after a long day, I would raise my hand if I saw the light on instead of walking the next block to the subway.
  - pkaye 12y ago
    But how often do people use cabs in Manhattan? If you used it say twice a weekday then that is like $10K a year on cabs alone!
- 12y ago
leelin 12y ago
I usually just manually type "1.00" or "1.50" as tip for a short city fare (under $15), And "5.00" for a long trip (airport). I guess I'm cheap. I would also be interested in a histogram of raw tip amounts to see if people cluster at 1.00, 1.50, or 2.00 as well. We could even bucket by fair sizes. It would also be very cool if we had metadata on the credit card, for example, do corporate cards tip a lot better than consumer cards. Presumably company-paid travel leads to better tips.
- patmcc 12y ago
  >>Presumably company-paid travel leads to better tips. Companies I've worked for have mandated the tip size (15% both places) that they'll allow for reimbursed travel, although I'm not sure how universal that is.
infinotize 12y ago
I thought this was a pretty blatant cheap trick the first time I saw it (similar to restaurants putting tip calculations on bills from 18-25% (which are usually post-tax no less!!)) and on the occasion I am in a cab always punch in "Other," or best option pay cash. Automatic deduction for cabbies who often tip themselves and hand you less change without asking - give me my change in full and I'll tip you, thanks. To add a data point on tipping amounts I would say I usually tip 10-15% for a good cab ride or less for a bad one, or even zero if the driver "screened" my fare (common from yellow cabs in Queens - keeping the doors locked and asking where you are going before letting you in, which is illegal) or takes unnecessary routes, blatantly excessive slowing to hit red lights, etc. I might venture into 20%+ for a good service ride to/from an airport. Restaurants I stay around 15% for fair or better service, 20% for good, much less than 15% requires the server to be noticably rude or inattentive. Sometimes I do feel like an outlier or cheapskate as the "norm" service for anything feels like it has become 20%, which I find a little ridiculous. I won't not tip because I don't "believe" in the culture of tipping, because all I would be doing is hurt mostly decent workers; at the same time I won't default to a high tip for average service just because other people are doing it. I try to find a middle ground.
- crmd 12y ago
  >I won't default to a high tip for average service just because other people are doing it. 30% and up is a high tip. 20% is not. Life is short. Be the guy/gal who puts smiles on strangers faces. You can do this by taking care of service staff.
  - EC1 12y ago
    I can't wrap my head around tipping. Why do I have to pay extra? Why doesn't their employer pay them. Can someone explain tipping to me? Because apparently I'm the worst person on the planet for not tipping.
    - crmd 12y ago
      The theory is to incentivize awesome service by having each customer decide how much compensation to give based on the server's performance. Those who delight customers make more money, while whose who are bad at customer service make little money and are incentivized to leave the industry and do something not customer-facing.
codezero 12y ago
Since Uber is currently banned in Vegas I took a cab and the defaults were 20/30/40 which is insane. They also take a $3.00 credit card processing fee, also insane.
jack-r-abbit 12y ago
There is a lot of talk about how people who get tips generally get a very low wage to start and if they don't get good tips they make a lot less. The federal minimum wage is $7.25 per hour (effective July 24, 2009).[1] Furthermore, the federal government requires a wage of at least $2.13 per hour be paid to employees that receive at least $30 per month in tips. If wages and tips do not equal the federal minimum wage of $7.25 per hour during any pay period, the employer is required to increase cash wages to compensate.[2] So while it may be true that servers might get a base pay of something stupid like $2.13, they are guaranteed that they will make at least the federal minimum wage (which still sucks but that is a different topic). And... many states go above and beyond what the federal government requires[3]. I'm getting a little tired of the whole "but they live off tips" rhetoric. Tip what you want and don't let society pressure you into tipping more than you desire. For me, since sales tax is hovering in the 9% level where I am, I usually just double that and adjust accordingly (based on service quality, etc). That also makes it easy to not tip based on the bill+tax amount that they give you on the "sub total" line. [1] http://www.dol.gov/whd/minimumwage.htm http://www.dol.gov/whd/minimumwage.htm [2] http://www.dol.gov/elaws/faq/esa/flsa/002.htm http://www.dol.gov/elaws/faq/esa/flsa/002.htm [3] http://www.dol.gov/whd/state/tipped.htm http://www.dol.gov/whd/state/tipped.htm
- madeofpalk 12y ago
  > guaranteed that they will make at least the federal minimum wage Guaranteed legally, and guaranteed in reality are two different things. If I pay someone to drive me somewhere, it's legally guaranteed that they're licensed driver by the government by the appropriate regulator. But in reality, UberX. I would like to know how often employee's end up following this up with their employer, and how often the employer makes up their wage.
  - parennoob 12y ago
    This. I come from a culture where tipping implies "reward for good service". But in the US, I always feel that if I tip less than the expected 20%, practically I may be cutting into someone's wages. If they demand the difference, they may end up getting fired by their boss. Does anyone know if these workers are that helpless in practice? Or can they make a single call and get the restaurant owner in trouble if he/she doesn't make up their wages to the minimum? (As an H1B employee, I know well that the theoretical extent of what you can do and the practical extent are sometimes far apart.) Interestingly, I've seen that this perceived "power/responsibility to ruin someone's job" makes it so that as an outsider, I tip more than the average. I've seen American friends tip 10% when I was tipping 20% for 'average, not great' service.
deleted 12y ago
[deleted]
andykellr 12y ago
I was shocked when I saw these defaults on recent trips to NYC. I lived there before these machines and 15-20% has always been the standard--less if the driver was rude, reckless, or deliberately slow--but almost never more than 20%. Including the surcharge is fine because it's part of the fare, but including tax and tolls is unreasonable. I typically choose 20% or Other. Now I will be sure to check the software as well.
nickstefan12 12y ago
I just ran into this last night: I took a cab home from the airport. One: he had no gps and took a wrong freeway change getting home. Two he barely spoke English. Three I basically had to navigate him back on track and painfully turn by turn. End of the trip I go pay, and he's sad that I want to pay with a credit card. Then the tip meter only has 20% or other. I hit other with a much lower tip. He cancels the transaction from the front, and says that the ride is actually 150 not 100, and that's why I need to tip. So I say fine and end up tipping him the 20% at 100. But seriously isn't a tip like a bonus!? Why are we all required to give 20% tips even when the service sucks? Next time I'll just uber.
- tvon 12y ago
  I've never had an experience this bad, but I've had plenty of bad experiences with sketchy rates in Baltimore cabs that I just take Uber or Lyft.
  - acjohnson55 12y ago
    Baltimore cabs are The Worst. Meters are routinely rigged. When I lived there, I'd usually haggle on a fare before getting in the cab. Sometimes, I didn't feel like it and I'd take my chances. There was wild variance in the rates the meters racked up. Not only that, but cars are frequently in very poor shape and many drivers don't know where they're going in a city that's pretty easy to navigate. On top of that, at the time, credit card machines were unheard of, even after NYC had them in every single cab.
- SeanOC 12y ago
  If this ever happens again in the future, take a note of the cab's number and call 311 or go to http://nyc.gov/311/ http://nyc.gov/311/. They take reports of this kind of activity very seriously and will usually prosecute the driver if you're willing to testify.
  - hueving 12y ago
    >if you're willing to testify Most people aren't over $20, which is why the system is a complete failure.
yodsanklai 12y ago
When I moved to NYC, there was no credit card payement in the cabs. Some friends told me that they tip about 10% (and at least $1). I was surprised when they introduced credit card payement to see that default tip was much higher than that. I assumed it was just to trick people into tipping more, and I kept with my old tipping habit. But this article makes me wonder, should I tip more?
deleted 12y ago
[deleted]

268 points by iquantny 12y ago

nostromo 12y ago

Including taxes when calculating the tip seems like a class action lawsuit waiting to happen.

monksy 12y ago
But it's the norm and expectation. Theres a reason why the post tax total is the biggest number on the check. (Other than thats how much you owe)
- conductr 12y ago
  Agree. It is the norm. All restaurants, the most common places to tip, do this too. If they calculate/print suggested tip amounts they use post tax and also if you trigger a gratuity included they use post tax. To be far, I think most people use post tax when calculating tip in their head too.
  - ihaveajob 12y ago
    One thing I hear a lot is to just double the sales tax. Around CA, when it was around 7.5%, it added up to a nice 15%. Since they recently increased sales taxes to about 8.5-9% depending on the city, it doesn't work that way. Or yes, if you account for tip inflation.
  - monksy 12y ago
    One thing I saw recently is that a place did 18, 20, 22%. I'm pretty sure I tipped lower just for that.
  - smackfu 12y ago
    > If they calculate/print suggested tip amounts they use post tax I see it done both ways.

biot 12y ago

I find tipping culture really confusing. How is it that when your plumber saves the day and gets your leak fixed (saving you expensive flood restoration costs) you pay the price on the invoice, yet for a car ride from A to B it's worth paying 20% to 30% over the invoice price? Compare that to buying a new vehicle where, regardless of how knowledgeable and spectacular the salesperson is, you are considered to be getting a bad deal if you don't bargain to below invoice price.

untog 12y ago
In the US particularly, tipping is basically just making up for the fact that the person is underpaid. Plumbers are typically very well rewarded for the work they do - restaurant waiters, less so.
- click170 12y ago
  I agree. And it's this tacit admission that those workers are underpaid that makes this particularly embarrassing. We can generally agree these people are underpaid (we all generally tip and agree on the reasoning behind it) yet we can't agree to raise the minimum wage to get them a livable income.
  - dkrich 12y ago
    Waiting tables and other tip-based compensatory jobs are specifically granted an exception to the minimum wage, so I don't think raising the minimum wage would change anything. Depending on where you work and how experienced you are, waiting tables or bartending can be very lucrative relative to the amount of education or experience required to do the job. I'll certainly not suggest that a Denny's waiter or a Wal-Mart cashier are not underpaid, but grouping all waiters together and labeling them underpaid is an oversimplification.
- madeofpalk 12y ago
  ...but don't they get underpaid because they make it up in tips? Vox said it well with "consumers should not be responsible for paying the incomes of a restaurant owner's employees. "

dude_abides 12y ago

Some great tips here for budding data scientists: * Form a hypothesis before you start looking at data, else you're susceptible to post-rationalization. * When in doubt, have the raw data available to reconcile with aggregate data. * When publishing results, include your data sources, so that others can verify your findings.

hudibras 12y ago
(Since your comment appears to be the only one here about the article itself, I'll piggyback off it.) This is a really great data analysis. The bottom-line conclusion of "cab drivers who are driving CMT programmed cars are making more money in tips" will definitely cause the Verifone drivers to say "Wait, what?" The Businessweek article also shows the limitations of the so-called data journalism. The two reporters grabbed the data from the database, made some pretty graphs, got some quotes and called it a day. It took some readers revisiting the data to tease out the real insights. But that's a bit unfair to the Businessweek guys. They're on a deadline and won't get paid extra for geeking out on the data too much, so their goal is to get the initial news out there to the world. Ben Wellington's interest wouldn't have been piqued if the article hadn't been written in the first place. I guess what I'm saying is that it's a win all around.

Someone1234 12y ago

Is a 20% tip the norm for cabs? I don't live in NY and don't take cabs often, but I would just assume tipping would be similar to eating out in the US (10% for bad service, 15% norm, and 20%+ for good service). Anyone care to weigh in? Also I always heard how "cheap" taking a taxi was in NYC. That's why people did it all the time. But looking at his example fares ($40+), that doesn't seem cheap to me, in fact quite unaffordable. Still cheaper than London's insane taxi fares however.

nostromo 12y ago
The table of example fares only includes trips with tolls, which are going to have higher totals, even without the toll. The fare for people jumping around Manhattan would be quite a bit cheaper on average.
raldi 12y ago
> Is a 20% tip the norm for cabs? Not historically. It used to be 10% or 15%. But then they put a screen in the back of the cab whose software says, "How much would you like to tip? [20%] [25%] [30%]" and then in a less enticing spot, "[Other]". The power of evil, manipulative UI design is being used to make riders think that 25% is the typical taxi tip, and in a short amount of time, they'll have managed to use this fake-it-till-ya-make-it strategy to turn that lie into the truth.
hbosch 12y ago
Within Manhattan, you can usually get where you're going for under $20 sans tip. When I lived there, I wouldn't necessarily call that "cheap" compared to the underground alternative... but definitely just cheap enough that, after a long day, I would raise my hand if I saw the light on instead of walking the next block to the subway.
- pkaye 12y ago
  But how often do people use cabs in Manhattan? If you used it say twice a weekday then that is like $10K a year on cabs alone!
12y ago

leelin 12y ago

I usually just manually type "1.00" or "1.50" as tip for a short city fare (under $15), And "5.00" for a long trip (airport). I guess I'm cheap. I would also be interested in a histogram of raw tip amounts to see if people cluster at 1.00, 1.50, or 2.00 as well. We could even bucket by fair sizes. It would also be very cool if we had metadata on the credit card, for example, do corporate cards tip a lot better than consumer cards. Presumably company-paid travel leads to better tips.

patmcc 12y ago
>>Presumably company-paid travel leads to better tips. Companies I've worked for have mandated the tip size (15% both places) that they'll allow for reimbursed travel, although I'm not sure how universal that is.

infinotize 12y ago

I thought this was a pretty blatant cheap trick the first time I saw it (similar to restaurants putting tip calculations on bills from 18-25% (which are usually post-tax no less!!)) and on the occasion I am in a cab always punch in "Other," or best option pay cash. Automatic deduction for cabbies who often tip themselves and hand you less change without asking - give me my change in full and I'll tip you, thanks. To add a data point on tipping amounts I would say I usually tip 10-15% for a good cab ride or less for a bad one, or even zero if the driver "screened" my fare (common from yellow cabs in Queens - keeping the doors locked and asking where you are going before letting you in, which is illegal) or takes unnecessary routes, blatantly excessive slowing to hit red lights, etc. I might venture into 20%+ for a good service ride to/from an airport. Restaurants I stay around 15% for fair or better service, 20% for good, much less than 15% requires the server to be noticably rude or inattentive. Sometimes I do feel like an outlier or cheapskate as the "norm" service for anything feels like it has become 20%, which I find a little ridiculous. I won't not tip because I don't "believe" in the culture of tipping, because all I would be doing is hurt mostly decent workers; at the same time I won't default to a high tip for average service just because other people are doing it. I try to find a middle ground.

crmd 12y ago
>I won't default to a high tip for average service just because other people are doing it. 30% and up is a high tip. 20% is not. Life is short. Be the guy/gal who puts smiles on strangers faces. You can do this by taking care of service staff.
- EC1 12y ago
  I can't wrap my head around tipping. Why do I have to pay extra? Why doesn't their employer pay them. Can someone explain tipping to me? Because apparently I'm the worst person on the planet for not tipping.
  - crmd 12y ago
    The theory is to incentivize awesome service by having each customer decide how much compensation to give based on the server's performance. Those who delight customers make more money, while whose who are bad at customer service make little money and are incentivized to leave the industry and do something not customer-facing.

codezero 12y ago

Since Uber is currently banned in Vegas I took a cab and the defaults were 20/30/40 which is insane. They also take a $3.00 credit card processing fee, also insane.

jack-r-abbit 12y ago

There is a lot of talk about how people who get tips generally get a very low wage to start and if they don't get good tips they make a lot less. The federal minimum wage is $7.25 per hour (effective July 24, 2009).[1] Furthermore, the federal government requires a wage of at least $2.13 per hour be paid to employees that receive at least $30 per month in tips. If wages and tips do not equal the federal minimum wage of $7.25 per hour during any pay period, the employer is required to increase cash wages to compensate.[2] So while it may be true that servers might get a base pay of something stupid like $2.13, they are guaranteed that they will make at least the federal minimum wage (which still sucks but that is a different topic). And... many states go above and beyond what the federal government requires[3]. I'm getting a little tired of the whole "but they live off tips" rhetoric. Tip what you want and don't let society pressure you into tipping more than you desire. For me, since sales tax is hovering in the 9% level where I am, I usually just double that and adjust accordingly (based on service quality, etc). That also makes it easy to not tip based on the bill+tax amount that they give you on the "sub total" line. [1] http://www.dol.gov/whd/minimumwage.htm http://www.dol.gov/whd/minimumwage.htm [2] http://www.dol.gov/elaws/faq/esa/flsa/002.htm http://www.dol.gov/elaws/faq/esa/flsa/002.htm [3] http://www.dol.gov/whd/state/tipped.htm http://www.dol.gov/whd/state/tipped.htm

madeofpalk 12y ago
> guaranteed that they will make at least the federal minimum wage Guaranteed legally, and guaranteed in reality are two different things. If I pay someone to drive me somewhere, it's legally guaranteed that they're licensed driver by the government by the appropriate regulator. But in reality, UberX. I would like to know how often employee's end up following this up with their employer, and how often the employer makes up their wage.
- parennoob 12y ago
  This. I come from a culture where tipping implies "reward for good service". But in the US, I always feel that if I tip less than the expected 20%, practically I may be cutting into someone's wages. If they demand the difference, they may end up getting fired by their boss. Does anyone know if these workers are that helpless in practice? Or can they make a single call and get the restaurant owner in trouble if he/she doesn't make up their wages to the minimum? (As an H1B employee, I know well that the theoretical extent of what you can do and the practical extent are sometimes far apart.) Interestingly, I've seen that this perceived "power/responsibility to ruin someone's job" makes it so that as an outsider, I tip more than the average. I've seen American friends tip 10% when I was tipping 20% for 'average, not great' service.

deleted 12y ago

[deleted]

andykellr 12y ago

I was shocked when I saw these defaults on recent trips to NYC. I lived there before these machines and 15-20% has always been the standard--less if the driver was rude, reckless, or deliberately slow--but almost never more than 20%. Including the surcharge is fine because it's part of the fare, but including tax and tolls is unreasonable. I typically choose 20% or Other. Now I will be sure to check the software as well.

nickstefan12 12y ago

I just ran into this last night: I took a cab home from the airport. One: he had no gps and took a wrong freeway change getting home. Two he barely spoke English. Three I basically had to navigate him back on track and painfully turn by turn. End of the trip I go pay, and he's sad that I want to pay with a credit card. Then the tip meter only has 20% or other. I hit other with a much lower tip. He cancels the transaction from the front, and says that the ride is actually 150 not 100, and that's why I need to tip. So I say fine and end up tipping him the 20% at 100. But seriously isn't a tip like a bonus!? Why are we all required to give 20% tips even when the service sucks? Next time I'll just uber.

tvon 12y ago
I've never had an experience this bad, but I've had plenty of bad experiences with sketchy rates in Baltimore cabs that I just take Uber or Lyft.
- acjohnson55 12y ago
  Baltimore cabs are The Worst. Meters are routinely rigged. When I lived there, I'd usually haggle on a fare before getting in the cab. Sometimes, I didn't feel like it and I'd take my chances. There was wild variance in the rates the meters racked up. Not only that, but cars are frequently in very poor shape and many drivers don't know where they're going in a city that's pretty easy to navigate. On top of that, at the time, credit card machines were unheard of, even after NYC had them in every single cab.
SeanOC 12y ago
If this ever happens again in the future, take a note of the cab's number and call 311 or go to http://nyc.gov/311/ http://nyc.gov/311/. They take reports of this kind of activity very seriously and will usually prosecute the driver if you're willing to testify.
- hueving 12y ago
  >if you're willing to testify Most people aren't over $20, which is why the system is a complete failure.

yodsanklai 12y ago

When I moved to NYC, there was no credit card payement in the cabs. Some friends told me that they tip about 10% (and at least $1). I was surprised when they introduced credit card payement to see that default tip was much higher than that. I assumed it was just to trick people into tipping more, and I kept with my old tipping habit. But this article makes me wonder, should I tip more?

deleted 12y ago

[deleted]