And yet how many of us waiters, waitresses, bartenders, baristas, cashiers, valets, etc have paid the bills because of the gratitude of others. It can work, especially when combined with social pressure to do so.
I disagree with this in part -- I will agree with you that most of these people deserve to be paid more regardless, but I disagree in the sense that they all be paid uniformly. Better service should get a better tip. If that's priced in, I have no choice in the matter, I am paying the same price for subpar or lackluster service. This would make me change services as a whole rather than just chalk it up to I had a bad driver. Allowing me to tip based on the level of service I receive is a form of recourse for the customer in the event of a terrible experience. It's also an incentive to the driver to perform better.