(CNN Business)When the coronavirus took hold in the United States, ride-hail drivers watched their income evaporate. With people largely staying at home, there were drastically fewer people to transport. Now facing renewed demand from passengers, Uber has announced a $250 million “stimulus” that will fund incentives to entice drivers back onto the road. But some fear this short-term infusion of cash into the company’s driver program will depress driver wages once more drivers are active and the funds run out.
“I didn’t stop [driving passengers] because I was afraid. I only stopped because of supply and demand. I knew passengers were just not going to pay my bills,” one Phoenix-based Uber driver who asked that their name be withheld for fear of retribution told CNN Business. The driver turned to food delivery, an area of the economy that has boomed during the pandemic, to make ends meet. But by August, money from deliveries from Uber Eats started to fade, too. “Customers were no longer tipping generously,” the driver said. “I had to go back to passengers, which generally pay more if [riders] do longer trips.”
While slow in the fall, ride requests have significantly picked up in recent months and the supply side of the equation is also in favor of Uber drivers at the moment, with fewer of them on the road than pre-pandemic. That’s meant good money for some active drivers, who find themselves with little time without passengers and near constant “surge” pricing in effect — when the company boosts prices when there’s high demand from customers to entice drivers onto the platform. The Phoenix driver’s earnings on the platform doubled last month when compared to pre-pandemic earnings in January and February 2020, according to records shared with CNN Business. While the driver completed a similar number of trips, promotions by Uber led to the significant difference in pay, the driver said.
But the drivers know the good times won’t last — and a big reason is because Uber won’t let them.
For Uber, the goal is getting passengers into cars as quickly as possible, at a price they won’t balk at, at any given time of day. High prices — and, in effect, high driver pay — are bad for business. And Uber is now aggressively trying to get drivers back on the road as the vaccine rollout accelerates and the economy opens up.
Flexible work means little leverage
Industry experts and drivers CNN Business spoke to say there’s likely a combination of factors that have kept some drivers off the road in certain markets, including pandemic unemployment assistance and the ongoing threat of the virus. Moreover, the price of gas — an expense that comes out of drivers’ pockets — has soared and is expected to climb further during the summer, according to a recent government report. Additionally, drivers who gave up car leases earlier in the pandemic have to weigh when it makes sense to take on a new one.
Uber cited a number of other factors to CNN Business, including drivers having to renew their drivers’ licenses or ensure their vehicles are eligible to be used as an Uber vehicle, for example. However, the company said that Covid-19 fears are playing the largest role.
“According to our research the top reason why drivers are hesitant to return is still concerns around Covid safety,” Uber spokesperson Matt Wing told CNN Business. “That’s why we’re continuing to require that all riders wear face masks and we’ve made it easier for drivers to navigate the vaccination process with streamlined appointment booking through our partnership with Walgreens.”
Recognizing all of this, Uber earlier this month announced a $250 million “stimulus” to encourage drivers to work on its platform. The program involves bonus offers, as well as earnings guarantees, for both returning and new drivers and is expected to continue “for the coming months,” according to Wing. To underscore potential earnings, Uber shared some figures on how much drivers are bringing in on a median basis, before tips and expenses, in certain markets. The numbers ranged from $25.94 per hour in Phoenix to $31.03 in Philadelphia.
“On the one hand, the companies want to emphasize the flexibility drivers have — that’s their number one talking point,” James Parrott, an economist at the New School who has studied Uber driver wages in New York City and Seattle, told CNN Business. “Drivers are reflecting that flexibility back to the company — and the company is saying, ‘Wait a minute, we don’t want you to be that flexible, we want you to come back to work. What’s it going to take?’ They don’t have any leverage over the drivers in this situation.”
For some drivers, like Angela Davis, who is also based in Phoenix — among the markets where both Uber and Lyft said driver earnings are particularly high in recent weeks — the stimulus announcement is a cause for concern and more. “If they oversaturate with drivers, that means we’re sitting longer, we’re idling. There’s still wear and tear on our cars but we’re not getting any rides,” she said. “I take it as an insult. What about your drivers that put themselves in jeopardy that you paid nothing extra to during the pandemic?”
(Uber said it has distributed $29 million to nearly 100,000 drivers and delivery workers through its Covid financial assistance program to help those diagnosed with the virus, or who have been individually instructed to quarantine. It also set up a “work hub” last year to help drivers find other work, with Eats or outside the company.)
While Davis said she believed certain promotions were offered or were more lucrative for newer drivers compared to more veteran drivers, Uber’s Wing refuted this, telling CNN Business that incentives sometimes vary based on location and other factors but not tenure. There are some earnings guarantees for new or returning drivers, meaning the company will “top off the promised amount” if the driver doesn’t earn enough to meet the promised guarantee.
A history of incentives
The stimulus announcement is a continuation of the company’s long history of spending on temporary driver incentives. Uber, which has yet to achieve profitability, has for years burned money on incentives to artificially drive down prices for consumers. How much it pays drivers is the biggest cost the company can control.
Hubert Horan, an independent transportation consultant who has been a vocal critic of Uber and Lyft, said the recent Uber blog post underscores “that nothing about Uber’s business model has changed.”
“[Uber has] no ability to earn sustainable profits. They have no ability to provide what they have promised the market (the prompt provision of a ride whenever someone wants one) at prices that the market would be willing to pay and would cover the actual costs of the service,” Horan said in an e-mail to CNN Business, regarding the need to throw money at drivers to entice them to work so it can drive down fares for passengers.
The blog post also came with a warning that may have some drivers wary of restarting too soon: “We want drivers to take advantage of higher earnings now because this is likely a temporary situation.”
“It is interesting they would signal that this is just going to be a short-lived phenomenon,” said the New School’s Parrott. “Someone who is deciding whether or not to resume leasing [a car], that would argue against that.
Between the lines is the ugly truth about the precarious nature of the on-demand business model for workers: Drivers may make more money until the company saturates its platform with more workers to meet customer demand, driving down demand per driver and earnings for all.
To be sure, Uber isn’t alone. Lyft told CNN Business that its drivers have been earning much more on average in recent weeks, compared to pre-Covid earnings. Phoenix, along with Philadelphia, Denver, and San Diego, are some of its “hottest” markets, the company said, with drivers earning an average of more than $40 per hour in recent weeks, including tips and before expenses. There’s a significant difference when compared to the numbers Uber shared (the company reported median earnings before tips and expenses), shedding light on how complicated it can be to decipher the lived reality for workers based on how the companies are calculating and presenting information.
Uber and Lyft’s calculations of how much some drivers are making include both time spent waiting for a gig and “engaged time,” which is when a driver is fulfilling a ride or delivery request.
Uber’s Wing told CNN Business that it “used the conservative approach of showing all time online — even though we expect this to be an underestimate of real earnings potential due to dual apping and other factors because setting lower expectations up front ensures drivers who return are more likely to be satisfied with and stay on the platform longer.”