Uber drivers held a 25-hour strike March 25 to demand the company reverse a 25 percent per mile pay cut it imposed on drivers in Los Angeles and parts of Orange counties. Two hundred of the striking Uber drivers were joined by drivers for Lyft to protest in front of Uber headquarters here. Protests were also held in San Francisco and San Diego against similar cuts.There's reason for skepticism. Uber drivers go on strike all the time--whenever they turn off their app--say to sleep, eat, or pick up their kids from school. That a few drivers turned off the app for 25 hours to uselessly rage against the machine is irrelevant to the company. I doubt it even noticed.
Then one has to take the "25% pay cut" headline number with a grain of salt. Were the cut that big drivers would be quitting in droves--not simply going on strike. So there obviously has to be more to the story than what The Militant is telling us.
This website lists all changes in Uber pricing in Orange County since way back when. The relevant entries appear to be these:
UberX cost per mile decreased from $1.06 to $0.80 - 3/11/19So the dramatic cut in per mile compensation is at least partially offset by a comparable increase in per minute pay. This is good for drivers who spend a lot of time in traffic, but less beneficial for those out on the open road. The decrease in the minimum fare only affects very short trips. I think The Militant's "pay cut" phrase is an exaggeration.
UberX cost per minute increased from $0.24 to $0.28 - 3/11/19
UberX minimum fare decreased from $7.30 to $6.10 - 3/11/19
Another website (here) has information about Uber's pay policies--and as Mr. Senter suggests, they certainly are complicated. The company's cut varies by length of service and geography, ranging from 20% to 28%--though in the latter case the company pays the driver's insurance. That percentage only applies to time & distance charges, resulting in a service fee. In addition customers pay additional fees:
- A booking fee--that goes entirely to the company.
- A surge fee--applied in cases when there is a shortage of cars, and that goes entirely to the driver.
- A tip--which also goes entirely to the driver.
The booking fee is per trip and looks to cost about $2.30. On a short trip that will be a substantial fraction of the fare, which inflates Uber's percentage of the total haul. A long post from an Uber driver (well written, despite typos, from somebody who self-identifies as Underachiever (1970-present)) details an example:
- The customer paid $9.90.
- Booking fee--$2.30
- The time & distance charge is the difference--$9.90 - $2.30 = $7.60
- Service fee (25% of time & distance)--$1.90
- Total paid to Uber--$2.30 + $1.90 = $4.20
- Total paid to driver (75% of time & distance)--$5.70
For short trips the booking fee is substantial. For a $50 airport run, on the other hand, it's nearly trivial.
Mr. Senter quotes an Uber driver:
“In 2015, I was making between $1.15 and $1.20 per mile,” driver Esterphanie St. Juste, an organizer of the action, told Los Angeles Magazine. “Today, I’m making 50 percent of that. They call us partners, but we’re not. They dictate everything.”As just documented, Uber drivers have not taken a 50% pay cut. But let's focus on the last sentence: "They dictate everything." They don't, and here's why.
Uber is a platform--it connects drivers with passengers. An analogy is the stock market, which connects stock sellers with stock buyers. The price of stocks fluctuates as necessary to clear the market.
Uber needs all passengers to get rides and all drivers to get passengers. There is a price that will do that--it's called the market price. If Uber charges below market, it is just leaving money on the table--money that could otherwise be shared with drivers. Conversely, if Uber charges more than market, there will be fewer passengers, and therefore also less revenue.
The market price is the price that maximizes total revenue. Obviously that's good for the company--25% of more is better than 25% of less. It is also good for the drivers collectively, who get 75% of more. It may not be good for individual drivers, since more drivers mean that the money gets split up more ways.
So the drivers, as described in Mr. Senter's article, are pushing to limit the total number of drivers, similar to what cab companies did with the medallion system. This is good for those (relatively few) drivers who have a job, but bad for those who are left at the side of the road. Even worse, it's bad for passengers, who will now have to wait longer and pay more to get a ride. And it's bad for Uber who, by charging above market rates, receives less revenue.
The drivers become rent collectors--selling access to a licensed, Uber slot--and can charge a premium for the privilege. Perhaps that's good for those drivers, but rent collecting never generates social utility.
Contrary to Mr. Senter's quote, Uber does not dictate its prices. The market does.
Still, the drivers have a case. Given that Uber has maximized total revenue, how should that revenue be split between driver and company? The drivers argue for more, while Uber wants to give them less. But the company can't dictate this, either. It is also determined by the market.
The market price is established by that equilibrium where the number of drivers equals the number of passengers. If the drivers are paid more, there will be too many drivers. Conversely, if they're paid less, there won't be enough drivers. The company has no real discretion over what that pay is. Indeed, it varies by time of day--during rush hours more drivers are needed and therefore a surge price is added.
Uber also has to cover its own expenses. It has to handle requests from customers, process payments, and arrange for pickups. Payment processing alone probably accounts for the majority of the booking fee--that's a real expense. The service fee likely pays for the elaborate computer navigation systems, which has to be absolutely fail-safe. That's expensive.
It's worth noting that neither Uber nor Lyft are profitable. So the incipient union (Rideshare) demand that the service fee be capped at 10% is a non-starter. Both companies would go bankrupt.
Likewise, demands that Uber pay for gas, car repairs, taxes, health insurance,... is a non-starter. Uber is a software and payment processing firm. They're not a transportation company. Folks in the transportation business need to cover their own expenses. It's a hard-scrabble, low wage industry to be sure, but asking Uber to manage a business for which it has no expertise will not make it better.
I think Uber is better for drivers than my initial job as a cab driver in the mid 1970s. I worked for Checker Cab in Chicago and received 42% of the meter, plus tips. Tips were about half my income. Apart from social security I got no benefits, but Checker covered all the car expenses (including gas).
It was a lousy job, and within a year I switched cab companies to one that operated more like Uber.
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