Some Uber drivers still don't know what they actually earn driving for Uber

CLII

Apr 23, 2019

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Slippery wages.

Georgetown University’s Kalmanovitz Initiative for Labor and the Working Poor released a two-year report (pdf) on the working conditions of 40 Uber drivers in the Washington DC area. The top-level points:

Uber drivers don’t know how much they earn (or lose)
Regulators and researchers lack information on driver work conditions
33% of Uber drivers took on debt relating to the job
30% of drivers reported physical assaults or safety concerns
And yet, 50% of drivers would recommend it to a friend, and 45% planned to continue for at least six months

The researchers define the “complex and difficult-to-track set of earnings and expenses” involved in working for Uber as a “slippery wage.” They cite a conversation with a 53-year-old Uber driver, Suzanna, who said her weekly pay is hard to measure “because it changes every time they change the rules.” During its time in DC, Uber has cut the base rates drivers earn, added a rider safety fee (later renamed a booking fee), and increased its own commission. Driver wages also became harder to predict when Uber introduced upfront pricing in 2016, which decoupled driver earnings from the fare the rider paid, with Uber pocketing the difference between the two.

Uber’s take rate on rides improved to 21% in 2017 from 16% in 2016 “as a result of declining Driver incentives,” the company said in its S-1. It ticked up again, to 22% in 2018, on “increases to booking fees in select markets.”

In other words, Uber’s fare games have helped it improve margins, often at the expense of drivers. From the Georgetown report:

Of the 40 drivers in this study, 83% knew what percentage of their fares Uber took but 38% did not know how Uber determined the amount drivers took home on a single fare (whether, for instance, the booking fee is removed before or after Uber takes its commission), whether they were required to buy commercial insurance, or how tax filing worked at the end of the year. This varying degree of knowledge about compensation details could have been expected if the majority of drivers in our study were new to the Uber platform. But they were not. Seventy percent of the drivers in this study had worked on the Uber platform for at least seven months.

Such realities of driving for Uber aren’t exactly news. Technology ethnographer Alex Rosenblat documented these problems in her book, Uberland, writing, “Drivers operate at an information disadvantage, and so it is harder for them to make full and informed decisions as independent contractors about the work they do.” The US Federal Trade Commission investigated Uber’s messaging to drivers, and fined it $20 million for greatly exaggerating what drivers could earn, as well as the terms of its vehicle financing programs. Even Uber, in spite of its aspirational marketing around earning “on your terms,” admitted in its IPO filing that it views the gig as “comparable to that available in retail, wholesale, or restaurant services or other similar work.”

The problem is that Uber has never been clear about these realities to drivers; Uber sold drivers on the job using unrealistic earnings expectations and it has struggled to wean them from those expectations ever since. Uber told the Washington Post the company “has changed a lot since this research was started,” but the fundamentals of the business—that Uber sets rider fares and driver earnings and has only so many ways to improve its own take—remain largely the same. The real question is how long Uber can continue walking this tightrope before autonomous cars hit the mass market and render human drivers unnecessary, which by most estimates is still quite a ways off. (An Uber employee recently likened the company’s self-driving cars to a “science experiment.”)

“[A]s we aim to reduce Driver incentives to improve our financial performance, we expect Driver dissatisfaction will generally increase,” Uber writes in its S-1. The company can only try to cut costs without having drivers quit or defect to competitors. It’s hard to see a good way out.

Labor slack.

Elsewhere in ride-hail driver wages, here is an interesting post from the Federal Reserve Bank of Dallas on how wage growth has been subdued in part because “the headline unemployment rate has understated the amount of available labor, or labor slack, owing to gig employment”:

In labor markets, there has been a rising self- or gig-employment trend, as tracked by the share of households earning enough to pay self-employment tax, as Chart 1 shows. This tax-return-based measure avoids underreporting of gig employment in surveys in which some households report their status as employed even though they’re actually contractors or running a small business.
New technologies that encourage contingent or just-in-time labor (gig employment) lower the bargaining power of workers. This, in turn, lowers the natural rate of unemployment and real equilibrium wages.
Essentially, firms are able to hire contract or self-employed workers, who are not on their payrolls and not counted among the unemployed when not on the job. As a result, the headline measure of unemployment may understate labor slack.

Just something to think about.

Airport fees.

Uber and Lyft are battling proposed changes to ride-hailing at Boston’s Logan International Airport that they say will worsen the airport trip experience.

The Massachusetts Port Authority plans to increase pick-up fees on private rides at the airport to $5 from $2.50, and to add a $5 drop-off fee. Massport would charge a smaller $2.50 fee on shared rides in an effort to encourage carpooling. The proposal would also require Uber and Lyft to pick up and drop off passengers in Logan’s central parking garage, several minutes’ walk from the airport terminals, rather than right at their terminal, with an exception for riders with disabilities.

The stated goal of the Massport plan is to reduce congestion at Logan and in East Boston, which increased a stunning 47 percent from 2013 to 2018 alongside the rise of ride-hail. The transit agency also plans to put the increased fees toward subsidies on Logan Express buses, an alternative airport transport option, cutting fares from Back Bay to $3 from $7.50. The changes wouldn’t affect taxi companies.

Ahead of an April 25 vote on the proposed changes, Uber has been circulating one of its classic online petitions. This one comes from “someone who relies on Uber to get to and from Logan Airport” and says the changes would “add unnecessary hassle to the airport traveler experience.” Lyft in its own online petition says the new fees “could lead to fewer passengers taking Lyft rides to the airport,” which really demonstrates a very solid grasp of the concept. Massport wants to reduce congestion at the airport, and that probably involves reducing ride-hail trips too.

The battle at Logan is telling in light of Lyft’s recent IPO, and Uber’s upcoming one. Uber disclosed in its prospectus that 15% of gross bookings on rides in 2018 came from trips that either started or ended at an airport, and said it expected that share would increase. “[I]f drop-offs or pick-ups of riders become inconvenient because of airport rules or regulations, or more expensive because of airport-imposed fees, the number of Drivers or consumers could decrease,” the company warned. Uber had $104 million in “government and airport fees payable” on its balance sheet as of Dec. 31, 2018.

Lyft didn’t break out airport-related revenue in its IPO filing, but did cite existing permits, fees, and penalties at airports, and the potential for new ones to be created, among its risk factors.

Uber and Lyft took over airports largely because the other transport options were quite bad. Before ride-hail was a going concern, more than 80% of trips to and from US airports were made in private cars, taxis, and rentals, according to a November 2018 report from consultancy LEK. Then Uber appeared, and it was so much better than dialing 7777 to get a car. The shift to ride-hail trips continued the trend of people taking cars to airports, but decimated airport revenues by undercutting car rentals, garage parking, and taxi charges.

Ride-hail companies won the first round with airports by simply continuing to operate. Uber and Lyft knew they provided a valuable service to travelers, and that gave them leverage in their negotiations. But now airports like Logan also know how valuable they are to Uber, and probably to Lyft. That gives Logan and Massport more bargaining power; whatever the companies may threaten, it seems they likely can’t afford to suspend airport service flat out.

Robotaxis.

Tesla plans to launch a ride-hail service with self-driving cars in 2020, Elon Musk said during the company’s Autonomy Day yesterday:

“I feel very confident predicting that there will be autonomous robotaxis from Tesla next year — not in all jurisdictions because we won’t have regulatory approval everywhere” Musk said without detailing what regulations he was referring to. He added that he is confident the company will have regulatory approval somewhere next year.
Tesla will enable owners to add their properly equipped vehicles to its own ride-sharing app, which will have a similar business model to Uber or Airbnb. Tesla will take 25 percent to 30 percent of the revenue from those rides, Musk said. In places where there aren’t enough people to share their cars, Tesla would provide a dedicated fleet of robotaxis.

A take of 25% to 30% would be pretty good, especially if you recall that Uber’s take on rides, as discussed above, only recently inched up to 22%. Musk also estimated some of the costs associated with operating a robotaxi, a big question mark as companies think about transitioning from human to autonomous operators. At the moment, Tesla estimates it would cost about 18 cents per mile to operate a robotaxi, compared to 62 cents per mile for personal vehicle owners in the US and $2 to $3 a mile for ride hail. You can see why that’s attractive to the ride-hail industry.

This time last year.

The tech bros are older than you thought

Other stuff.

Sony launches Uber competitor in Japan. Uber and Lyft IPOs could lead to higher fares. Happy Fresh raises $20 million for online grocery shopping in Southeast Asia. Prosper fined $3 million for materially overstating returns to investors. Car2Go suspends service over mass fraud in Chicago. Amazon and Walmart join SNAP pilot for online groceries. Older millennials are bargain grocery shoppers. Waymo opening factory in Detroit. Eat Club buys meal-delivery service Taro. New York Stock Exchange plans IPO test ahead of Uber debut. Startups reach for $120 billion travel activities market. The Airbnb Invasion of Barcelona. Underage kids call Uber for rides home from school. Congressman drives for Uber. Lyft limits employee access to customer data. Lyft promotes the “Dutch reach.” Lyft suffering on the public markets. Uber and Lyft add safety measures after college student death. Toronto Uber driver accused of two sex assaults. Teen charged for smuggling migrants in a Lyft. Gig satire. Uber questions. Marijuana Delivery App Crashes on Pot Industry's Black Friday. The kids are over driving.

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Send tips, comments, and slippery wages to @alisongriswold on Twitter, or oversharingstuff@gmail.com.

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