Most Uber drivers aren’t getting cut of fare hike
Uber passengers paying astronomical fares amid a labor shortage may think the extra money is going to their drivers.
But drivers are not being compensated based on what customers pay. Instead, they are paid for their time and distance — with added, predetermined surge bonuses controlled by Uber. And drivers in some markets say that is depriving them of tens and even hundreds of dollars per week when customers are now paying multiples of the usual price to ride with the apps.
While drivers in most of the country have operated under that model for the past several years, California drivers only recently shifted back to it, the company acknowledged. The company had previously compensated drivers based on customer fares as it sought to prove they were independent contractors, not employees after the California legislature passed a law aimed at gig work. Voters, however, codified ride-hailing drivers’ status as independent contractors in the state last year, and now drivers are back to the old system just as a driver shortage flares up and fares surge.
“The customer may be seeing this huge price but that doesn’t mean the driver is being compensated accordingly,” said one former Uber engineer, who is familiar with company strategy and who spoke on the condition of
anonymity to candidly describe company matters.
Uber spokesman Matthew Wing said Uber’s median take rate, or the cut it takes from driver earnings, has remained the same — though he declined to provide an average that would account for potential disparities at the highest end of the spectrum.
“On some trips, riders are offered a binding fare that is less than the time and distance rate, and Uber bears the expense of the difference,” he said. “In others, the binding fare is more than what time the distance rate ultimately is.”
Lyft spokesman Eric Smith said its passenger prices and driver pay have been decoupled since 2016, including in California.
Rondu Gantt has driven for Uber and Lyft for about three years in the Bay Area, he said, and the changes have slashed his pay.
“It’s worse,” Gantt said of the new system. “It’s not a transparent pay system. So you don’t actually know how much the passenger’s paying, whereas the old system it was a multiplier based on demand at that given time.
“The rewards were being pushed to you more directly,” added Gantt, who has been active in labor organizing.
It is part of a years-long struggle between drivers and Uber and Lyft, in which drivers argue it has become harder and harder to make a living wage on the apps as compared to in their early days, when the companies were offering incentives to attract enough workers.
California, the largest labor market for U.S. gig workers and home to both companies, has been a test lab for many of the changes. Legislators in 2019 passed a bill known as AB5 attempting to make gig drivers employees. But Uber, Lyft and other gig companies mounted a more than $200 million ballot effort called Proposition 22 that superseded the measure’s requirements on gig workers last year.
Now, the companies are pushing that independent employment model, which includes a set of limited benefits, in other states.
As part of the changes for California drivers announced in April, Uber uncoupled driver earnings from passenger fares. Drivers used to receive a proportionate percentage of what customers paid, meaning they would see an earnings bonus aligned with the customer surge — two times the usual price, for example. Instead of receiving a portion of the true value of what customers pay, drivers now are paid for their time and distance on the trip and a predetermined bonus, say $3, $5 or $10 for any price surges.
Customers, on the other end, might be paying double what they usually would.
“Let’s say you have a long airport ride in a busy [area]: previously the driver would be getting 20% more on that whole long ride,” the former employee said. “Now they’re getting maybe an extra $5 on the front.”
Uber acknowledged the overhauled pay structure in an April blog post on its website. In the post, the company also said it was making tweaks intended to reduce rider cancellations, and to ensure drivers looking for trips are matched with passengers.
But it also rolled back some driver privileges it had introduced last year. Drivers were allowed to set their own price multipliers for much of the year in California.
A driver could choose, for example, to charge two times the usual rate and risk waiting longer for a pickup because customers did not want to pay so much. On the rider end, a passenger could secure a trip more quickly by riding with that driver.
But Uber said cancellations had increased by 117% over the year leading up to the recent changes, and that riders did not opt to pay more in most cases.
It is another way, drivers say, that Uber is clawing money from them, and a broader reflection of the issue of gig worker treatment driving contractors away in the first place.
Ben Valdez, a Los Angeles-based driver-organizer with the group Rideshare Drivers United, said the changes have been altogether unwelcome among most drivers.
“It really comes down to a pay cut,” he said. “These new changes have made it more difficult to have a consistent earnings. ... Now we’re at the mercy of whatever the algorithm throws at us.”
He said he has “fallen prey” to $2 or $3 bonuses on trips when he would ordinarily make much more.
Uber CEO Dara Khosrowshahi argued last month on an earnings call that drivers are receiving unusually high pay. Uber announced a $250 million incentive program to bring drivers back to the apps, and drivers in some cities saw wages spike amid the shortages.
Khosrowshahi said last month that drivers had been collecting median earnings of $37 an hour in New York and Philadelphia, $36 in Chicago and $33 in Austin, exceeding their typical earnings. Smith, the Lyft spokesman, said drivers in its top 25 markets were making about $30 an hour on average during the week of May 10, with earnings topping $35 an hour in some of the busiest locations.
Still, some California drivers argue that their pay could be higher under the old structure.
Drivers also complain about a loss of control. In announcing the changes in April, Uber also said it would hide the fare, destination and distance from drivers who had not accepted five of their last 10 trip requests. It is a particular problem amid the driver shortage, when drivers are prompted to take trips well out of their way that might not make the effort worth their while.
Lyft only lets driver see where passengers are going after they have accepted the ride.