Tipping only does this when it's actually used as a reward. Having it be standard, like in the US, defeats that purpose. In Greece, tipping is not expected, as everyone pays fairly. Tipping is done to reward a good job.
Moreover, in some cases I have seen that all tips are put together and then split after work, so you lose the direct connection between doing a good job and getting more $.
I have always found american's standard tipping uncomfortable, but the few times I've made a point to not tip, and the generally more attentive service there, keep me convinced that the system in fact works.
Sales people work on commission typically, and that system is absolutely not harmed by that on average. It's enhanced dramatically by it. A tip is a commission system that encourages the same way a traditional sales commission pay system does, including rewarding up-selling and efficiency.
The difference between earning 10% and 20% on average for tips can make a very large difference for a waiter. At a good restaurant that can add up to anywhere from $15k to $30k per year in difference. In the US, waiters can often make more than their managers because of the tip system.
The incentive is to earn as high a percentage as possible by doing as good of a job as possible. Everyone should not get paid fairly if they suck at their job and treat people poorly.
Waiters also have an opportunity to earn even more money by up-selling when it makes sense.
Not everyone would agree with your assessment. Case in point: