DoorDash Steals Just the Tip

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Though it has been known for much longer, a couple of weeks ago the outrage machine mobilized against DoorDash’s policy toward tips.

Twitter is a particularly polarized place, but this topic seemed to create a special type of rift, one that happens only an entertaining few times per year.

The root of the matter is this: DoorDash had a policy (since changed) where they guarantee the minimum that a driver will make for a delivery. However, they also have a base fee that they calculate for the delivery, and if that base fee plus the tip from the customer is greater than the guaranteed minimum, the driver gets that instead.

The scene is now ripe for our scenario where a large fraction of people feel that DoorDash is pocketing tips intended for their drivers, and another large fraction think that there is nothing wrong with this policy, and in fact it is worker friendly. I realize I quoted 4:1 here, but believe me when I say those in economics were just as far one way as the journalists were the other.

I believe the current state is both inevitable, and the disagreement is totally understandable. That’s because the way DoorDash’s policy is perceived relies on path-dependent arguments as well as the point of view from which you observe them. People have never been very good at this, and especially not on Twitter.

Imagine first the point of view I think is most relatable, feeling like DoorDash is undeservedly taking your tip. Here’s the path:

  1. You think about ordering some delivery food, you use your DoorDash app because it is convenient.
  2. When filling out the checkout cart, you have ordered $30 of food and decide to tip $6 (you can always change this later!).
  3. The food comes, it is great and warm and the driver doesn’t miss your address, you are happy they got $6.
  4. You read an article that explains that they were probably paid $4 by the app on top of your $6, but that they were guaranteed at least $10 for the delivery by DoorDash, so your tip was effectively you paying them rather than the company.
  5. The company took your money and none of it – on net – went to the person you tipped.

Of course you are pissed! This is not how tipping is supposed to work and not how you are familiar with it in most of your experiences with restaurants.

Let us consider another path, but from the point of view of the driver (dasher) and the company:

  1. The dasher earns a base fee for driving plus whatever tips the customer pays.
  2. It turns out roughly 15% of customers don’t tip, and there’s some serious disparity amongst those who do.
  3. This causes the dasher to face serious uncertainty about how much they will earn in a shift, uncertainty they’d rather not have.
  4. DoorDash, needing to keep their dashers happy working for them rather than switching to the many other platforms they are just an app away from, proposes the following:
  5. DoorDash will make a minimum guarantee for each trip, enough to make it worthwhile for the dasher even if there is no tip. If the old way they calculated pay, base pay plus tip is higher, the dasher can keep the tip.
  6. The driver always makes at least as much; DoorDash can afford this because they know on average they aren’t doing very much subsidizing, they don’t have the problem of doing only 3 deliveries in a shift and not getting any tips; and the person ordering delivery pays just the same. Everybody wins!

In fact, not only does everybody win, but both drivers and orderers are welcome to switch apps if DoorDash isn’t their preferred app to use.

In any state that we reach that looks like the current one, I believe we will have this dichotomy, and most people will not be able to understand the other side.

Now of course, we know who won this battle, DoorDash has announced a change in policy so that all tips will be received by drivers. But the implications are obvious, the anonymous redditors quoted by the NYT (I can hardly believe I’m writing that) who work for DoorDash nailed it – DoorDash will reduce the guaranteed minimum payment to offset the new costs. Drivers will be worse off, but at least orderers will know their tip gets into the hands of the person they intended.

I think we can expect to stay in this state of unease indefinitely, because there are far more people who order from DoorDash than who deliver for it, so when it turns into a shouting match, the customers will win. However, as many on the other side have pointed out, the company and drivers seem to prefer the other method, and without them, there is no product.

All we can do is enjoy the show.


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