Uber And Lyft Take A Lot More From Drivers Than They Say...Part 2


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But in recent years, in efforts to stem the tide of their multi-billion dollar losses, both ride-hail companies have separated what riders pay from what drivers earn, moving away from a strict percentage-based commission.

Using what it calls Upfront Pricing, first instituted in 2016, Uber tells riders exactly how much they will pay before the trip begins based on their own algorithm’s prediction (as is often the case, Lyft instituted the same policy shortly after Uber). It then compensates drivers based on the trip’s actual time and distance.
According to both companies, the change to Upfront Pricing was made in response to rider and driver feedback; riders didn’t want to be surprised with a higher bill, and drivers wanted to be compensated for the work they actually performed.
This common-sense policy has potentially profound legal implications. In practice, Upfront Pricing decouples the rider’s payment from the driver’s earnings; one price is set before the ride based on an estimate, the other after the ride is completed based on reality.
This change is most evident with how Uber and Lyft now handle high-demand periods. Along with the move to Upfront Pricing, both companies also changed the way their high-demand pricing model, often known as Surge or Prime Time works (Lyft has since changed the brand name to Personal Power Zones for drivers).

Instead of drivers receiving a multiplier on their earnings, as Dave did for the Taco Bell run, most now get a flat fee bonus, typically only a few dollars per ride. Uber and Lyft will sometimes kick the drivers a couple extra bucks if the surge is particularly high or the ride especially long, but there seems to be little rhyme or reason for when this happens. Riders, meanwhile, still pay the multiplier, meaning riders are often paying far more than drivers are earning on those rides.

“It shows that they are a firm that is charging consumers and then making decisions with that money, including how to pay a labor force.”
An Uber spokesman explained this dynamic to Jalopnik as follows: “While driver- and rider-side surge are both tied to real-time imbalances in supply and demand, what a rider pays in surge and what a driver earns from surge on a given trip isn’t always the same. This is due, in part, to the fact that new driver surge is based on the driver’s location, not the rider’s. What this means is that a driver may receive surge on a trip even if the rider doesn’t pay anything extra.”
Similarly, a Lyft spokesman said, “Lyft continues to pass the rider Prime Time onto the drivers, via PPZs, at the same rate in aggregate. There are differences on a ride-level but these differences cut in both directions,” in that sometimes drivers earn an usually higher or lower percentage of the fare.
In other words, Uber and Lyft say they are taking all the surge charges riders pay and spreading the proceeds among all the drivers in the area, whether their particular passenger pays a surge fare or not (both companies deny they merely pocket the difference).


Photo: AP
This, according to Wayne State University law professor Sanjuka Paul, who has written extensively on the ride-hailing industry, is a new wrinkle in the independent contractor debate, because it doesn’t align with the arguments the companies make that they merely facilitate interactions between two independent actors in a market.

“The economic reality is they, Uber and Lyft, are collecting the fare from the consumer and then making a capital firm decision which, in this case, doesn’t sound like a very bad decision— actually making quite a sensible decision,” she said. “But it shows that they are a firm that is charging consumers and then making decisions with that money, including how to pay a labor force.”
Or, as Steinbaum put it, “what they’re doing is exactly what employers do with their workers.”
In addition, the companies can, and have, changed the base time-and-distance rates drivers earn whenever they want. And there have been many pay cuts.
In recent years, driver forums have been flooded with angry comments about hastily announced pay cuts in markets around the country. This, despite drivers already making near (or sometimes below) minimum wage. These cuts have led to some drivers who spoke with Jalopnik on the condition of anonymity curtailing their own hours, or exiting the ride-hail business entirely, because it’s no longer worth their time after accounting for expenses like fuel, insurance, and car payments.
Uber and Lyft both deny that driver earnings have declined. “While not every driver has the same experience,” an Uber spokesman wrote to Jalopnik, “that’s not what we see when we look at trends in drivers’ average hourly earnings over the last couple of years, which have increased.”
A Lyft spokesman told Jalopnik the number of drivers on their platform is increasing and that driver earnings increased over the past two years. The company claims drivers make “more than $30 per booked hour nationally,” although that figure only accounts for the time from when a driver accepts a ride request to when the passenger is dropped off and does not include expenses.

Some drivers didn’t even realize the extent of the changes in the company’s take rates, both for high-demand trips specifically and across the board, until they compiled their records to send to Jalopnik. One driver, who has been working for Uber in Texas for three years, sent us almost 500 surge fares.
“Kind of depressing to know that Uber used to take 20 percent when I started and now gets on average 31 percent, with some fares up to 50 percent,” he said.
A former full-time driver from Iowa said that prior to the pay cuts that ultimately slashed his per-mile rate more than half, he estimates about 30 percent of the fares he picked up were, after Uber and Lyft’s cut, not worth his time. After those changes, from 2018 onward, he says the number of undesirable fares is now closer to 70 or 80 percent, which is why he stopped driving full-time.
(It’s tricky to compare ride-hail take rates with the taxi industry in any meaningful way, where drivers are on the hook for fixed expenses such as dispatching services, leasing the taxi and/or paying off the cost of a medallion. Taxi drivers have to pay those fees regardless of how much money they earn. In fact, many taxi drivers switched to ride-hailing because percentage-based commissions—along with the hefty sign-up bonuses Uber and Lyft once offered—sounded like a better deal.)


Photo: Getty

The drivers’ frustrations with pay cuts and Uber and Lyft’s rising take rates are compounded by other inequities of the ride-hail industry.

Uber and Lyft argue that drivers are not employees, but independent contractors, since they are allowed to set their own schedules. Both companies lean heavily on this arrangement in advertisements and promotions to recruit drivers, using phrases like “be your own boss” to describe the arrangement.
But the reality is much more complicated. In fact, drivers don’t have the power to make many of the decisions that typically come with self-employment. Chief among them is the ability to set prices—or even negotiate—for the services they provide.
In driver agreements, both companies state that drivers accept their new rates simply by continuing to drive for the company. In other words, the only recourse drivers have to a pay cut is to quit; a familiar arrangement for any employee, but not for anyone who is their “own boss,” and thus would not have income determined by another company’s ever-changing set of rules.
“It’s really crazy how companies have carte blanche to deprive us of our rights through contract,” Vaheesan wrote in a follow-up email after Jalopnik showed him the contract language. “Courts and Congress have basically accepted this regime as normal.”
Furthermore, drivers have the option to decline or cancel rides, but there is widespread belief among drivers that if they do it too often, they risk being put in “timeouts” where they receive no requests at all for a certain amount of time, a phenomenon that is frequently documented in driver forums and blogs.
Drivers don’t have the power to make many of the decisions that typically come with self-employment. Chief among them is the ability to set prices—or even negotiate—for the services they provide.

Both companies deny they punish drivers in any way for declining rides, but Lyft acknowledged some incentives are only available to drivers with high ride acceptance rates.
In another bid to increase revenue, Uber is rolling out Comfort Mode, which provides riders amenities such as a car with extra legroom, the option to set a desired temperature, or request the driver to be quiet for an extra fee (drivers for Comfort rides get a few cents extra added to their mile-and-time rates).
Uber says this is merely a request to the driver rather than a requirement, but riders are unlikely to be pleased if a driver refuses to comply with a request they paid extra for. Should a driver not follow the instructions, it is likely they would at the very least receive a lower rating.

Taken together, rather than being their own bosses, drivers often feel as if they are being governed by algorithms, as Alex Rosenblat wrote in her deeply reported book Uberland: How Algorithms Are Rewriting the Rules of Work. This algorithmic “boss,” which sets pay rates in opaque ways and governs work rules through carrot-and-stick arrangements, not only removes any accountability but results in drivers having to guess what the algorithm wants. In her book, Rosenblat wrote:
An algorithmic manager enacts its policies, penalizes drivers for behaving in a manner unlike what Uber “suggests,” and incentivizes them to work at particular places in particular times…When I ask drivers if they are their own boss, they usually pause and remark that it’s sort of true, and that they set their own schedule. But an app-employer provides a type of experience that differs from human interactions, and it can be challenging to identify the fault lines of autonomy and control within its automated system.
In an interview for this story, Rosenblat, who spoke to hundreds of drivers researching her book, added that drivers had different reactions to rides where they thought they didn’t get a fair cut.

“Some drivers were pissed, and they would say, if I’m an independent contractor you should give me the information I need to make an informed choice,” Rosenblat said. “But other drivers rationalize taking bad fares with the idea that taking a bad one is kind of like karma… If you only take a passenger a couple of blocks on this ride, you might get compensated for a better ride later.”
Rosenblat added that the karmic realignment theory is a direct result of the lack of transparency from the ride-hail giants. She characterized it as a “magical thinking [drivers] wouldn’t have to resort to if Uber and Lyft gave them the actual facilities to make informed decisions, or to better understand how they might be treated, or rewarded and penalized, for their work performance with valuable or less valuable dispatches.”

A full-time veteran driver from New Orleans told Jalopnik that she somewhat subscribes to the karmic realignment theory on the take rates, although recent cuts have changed her attitude a bit. She has seen her earnings drop roughly 20 percent this year due to a combination of factors, including an expanding of the driver pool as a result of the companies allowing older vehicles than prior years. As a result, she is considering a job change, even though an occasional health issue makes the flexible hours of ride-hailing especially appealing.
Even though she prefers driving to her previous jobs in the service industry, she said she has come to believe Uber and Lyft’s take rates ought to be capped, perhaps at 25 or 30 percent, and said she would get behind a driver organizing campaign to make the profession more sustainable.
But for now, she still avoids looking at individual fare breakdowns. “It just annoys me,” she said, “and there’s nothing I can do about it.”