There is a good reason many rideshare drivers have recently made headlines. The strikes that are taking place in major cities are a direct result of poor Uber driver pay. Drivers of both rideshare giants, Uber and Lyft, have seen diminishing returns over recent years. The simple fact is that a ride less than five years ago would net drivers double what it does now. Add in the ever increasing pool of drivers flooding major markets, it is becoming clear that the best days are behind us.
But before we go all “doom and gloom,” what would fair compensation look like? Many drivers have voiced their complaints, and the purpose of this article is not to echo those complaints. Instead, I’d like to explore what fair pay for Uber drivers might look like in the future. Uber and Lyft have both gone public, with varying results. I have spoken to many drivers and heard many ideas, including stock options, expanded benefits packages, and a fare minimum that doesn’t drop.
Current Compensation: A Basic Model
Uber and Lyft have different pay structures and fees that both vary in different markets. Everyone driving for longer than a year knows, however, exactly where they’ve been squeezed. Dramatic drops in rider pricing and an increase in booking and safety fees, coupled with increasing expenses and taxes have left most drivers with empty pockets.
A Base Uber Driver Pay Breakdown
A minimum fare in my market (Denver, CO) sits at around $3.75 for the ride that breaks down as a $0.59 base fare + Mileage ($.06075 per mile) and Time ($.2025 per minute) with a supplement if my mileage and time don’t exceed the minimum threshold. This means that I have to travel in excess of approximately 8 minutes and 2.5 miles per fare to even have a chance of more than the minimum fare. Now, if we factor in what the IRS allows us to claim for expenses $0.545 per mile our cost to give the ride is $1.36. These basic calculations seem like a profit to some, so what is the real issue?
Working as Independent Contractors Broke Our Backs!
The cost to operate with the freedom of an independent worker was once appealing. Drivers could expense their blues away and with higher fares and lower booking fees, a sustainable income was possible. However, the great pinch of increased fees, lower rider pricing, and higher operating costs have made this model less attractive.
This is why many drivers were hoping to cash in on stock options when Uber and Lyft went public. That never materialized. Instead, the rideshare giants gave us Uber Pro, Quest Promotions, Consecutive Trip Promotions, and similar programs. While somewhat promising initially, these programs ultimately fell short. I suppose if you factor in a free education through ASU Online, you might break even. But how realistic are 3,000 rides for the part-time driver? Even surge pricing has changed to benefit the rider and not the driver.
Even with the discounts and “perks” that Uber and Lyft offer their drivers, the costs continue to rise with no pay raise in sight. This model is unsustainable long-term and will lead to a significant exodus of full-time drivers as it keeps moving forward.
So What Does a FAIR Uber Driver Pay Look Like?
We can say goodbye to a rise in fares or payouts similar to what drivers were getting five years ago. Even two years ago seems to be out of reach, partly because the organization within the rideshare driving community is spotty at best. Could the solution be to change the structure of how Uber drivers are employed (changing the status from independent contractors to fully-fledged employees)? Could we unionize and demand for a living wage (in most cities $20 an hour)? Could we, perhaps, require a cap on the number of new drivers allowed to enter the market? Many ideas are shared each day in rideshare groups, blogs, and forums, so which one is right?
How Could a Change in Employment Status Help?
The basic idea here is that Uber driver pay rates would go up dramatically. But the question remains would either rideshare giant take on the exponential increase in cost? The answer is not at all. Not only would this break their business model, which relies on cheap labor provided by a high turnover workforce, but it would undermine their goldmine. Uber and Lyft made it big by undercutting their workforce, which consisted of a mix of driver types. The full-time driver is the driver who is currently feeling the squeeze the most.
The part-time or supplemental driver has felt it but not to the same extent. The overwhelming majority of drivers in both companies fall into the second category. Thus there isn’t an impetus for either company to change. As much as this change might ensure the greatest win for rideshare drivers, I estimate that it is little more than a pipe dream.
Unionize and Strike for a Living Wage
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With the strikes of recent weeks, I have seen many drivers state they won’t return until guaranteed hourly wages are implemented. This particular mode of thinking seems to be ineffectual. Given the reality of poor IPO turnouts for both Uber and Lyft and failed strikes, it doesn’t seem that rideshare drivers have a voice. Otherwise, a massive change would already be underway. Some drivers maintain a $20/hour rate, and others do not. There isn’t a great way to determine how either company would implement a guaranteed wage.
Demanding a Cap on New Drivers
Market saturation has been another huge factor that prevents drivers from reaching a livable wage. High turnover among drivers not only hurts our ability to demand things but invites new drivers into the business model. New driver bonuses may entice new talent. What happens after the bonus fades? More and more drivers fall victim to the negative attitude that is prevalent in rideshare culture. This limits our ability to organize. When we are at each other’s throats, it limits the rideshare companies’ ability to address the real needs of their everyday driver.
If there were to be a cap or limit on the number of new drivers allowed per market, it might be possible to see more growth, on the driver’s side. Uber and Lyft are expected to continue growing in demand upwards of 41% by 2020. It means that the money is out there, but market saturation will keep existing drivers from capitalizing on it.
Raising Awareness with Riders
Riders can sometimes be sympathetic to drivers, and I think that many of the drivers on the road are overlooking this. Tips are a primary way that many of us stay on the road. While maximizing tips is a commonly used strategy to stay afloat, it is not what I want to talk about. Riders do care that their drivers are taken care of, minus the few bad eggs. If drivers were more vocal about their plight, riders might become an ally. Riders are far more likely to slap a tip on a coolheaded driver who explains the situation in a calm manner. I am not suggesting that drivers lead with this conversation topic, but when it comes up we should engage them. Drivers provide a valuable service and our ally will never be the rideshare giants, we need to work with those who we interact with.
Where Do We Go From Here?
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Fair Uber driver pay will be hard to agree upon for most drivers, in large part because of different drivers driving for different reasons. Some drive to live and others drive simply to get out of the house. Uber and Lyft seem poised to keep things status quo, claiming that drivers have the flexibility and availability to make better pay happen. Quest promotions, random surge, and tipping does allow some drivers to make it, but what about the rest?
What About a Minimum Wage Law?
Late last year New York City implemented a minimum wage threshold for their drivers. It seemed at first that this would be a huge win for rideshare drivers, but early returns suggest a different story. June and Lyft have both reported a decrease in bookings, stating that the increase in price has caused riders to find other ways to get around. Lyft has even reported that they expect at least a $50 million dollar decline in bookings for 2019. If bookings are falling this year due to increased pricing a minimum wage law could give a short term boost to drivers. However, this is not a sustainable answer.
Why It is Hard to Nail Down Fair Uber Driver Pay?
The primary problem lies in expectations. Drivers expect to make more than they are actually doing. Riders expect to pay less than they are. And the rideshare companies expect to make a profit. All three cannot occur at once, at least not with the current model. If it was only up to drivers a baseline of $1 per mile and $0.25 would please most if not all. But it would probably break Uber and Lyft. My thought is that the rideshare companies have grown accustomed to the feast. No one seems willing to budge.
Fair Compensation Model
While rates are constantly shifting, a fair fare rate for the service that drivers provide should be $0.90 – $1.00 per mile and around $0.20 – $0.40 per minute. This would be a massive win for drivers. If we got that it might give us the breathing room necessary to stay comfortably afloat over the next couple of years. However, as the industry changes, rates will shift. This will require drivers to band together in a meaningful and effective way, to avoid any future rate depressions.
The benefits that both Uber and Lyft offer are subpar at best. Fair Uber driver pay should include a diverse and well-rounded benefits package for their contractors. Fair driver pay would give access to affordable healthcare options, educational grants/tuition coverage, and a comprehensive vehicle discount package. Healthcare is one of the most costly expenses in the United States and drivers are sedentary most of the day. The fallout from driving cars eight or more hours will be tremendous as the workforce ages. Chiropractic, Massage, and physical therapy are just a few of the things that I have had to utilize. These helped fix problems with my hips and I am only 34 years old. But drivers cannot afford “luxury” medical care when we can hardly afford gas.
Educational support would be a huge boon. Although Uber has partnered with ASU Online, 3,000 rides is a steep hill to climb for most. Many full-time drivers will undoubtedly take advantage of the package and they should. Additional options for trade or technical schools would be a welcome addition to any benefits package.
As for our vehicles, well that is a tough sell. One of the reasons Uber and Lyft work is because they don’t have to front the cost for the fleet. However, if they want the aging fleet roaming the roads these days to stick around, we need better options. Discounts on oil changes, car parts, and dent repair are nice but have been ineffective. Major repairs, tire purchases, and service over 100,000 miles instigates a law of diminishing returns. Not very many drivers can swap cars out with ease. Programs like Fair and the Hertz rental program limit some of the expense, but neither has proven to be long term, sustainable models.
Ultimately fair Uber driver pay looks different to different folks. As a part-time driver, a simple jump in fare rates and a nifty benefits package would make me happy. No, Uber Pro is not the answer, but it is a good step in the right direction. But full-time drivers need more and I fully understand that. Fair compensation can only happen if a universal solution is conjured. A solution that appeases rider, driver, and the intermediary. What that is long-term? I do not know. I would, however, love to hear what you think fair compensation looks like. Feel free to comment below and let me know what you are thinking and feeling. Together, drivers have the power to demand fair Uber driver pay. With a little help from allies like riders, it could be possible sooner rather than later.