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You may be paying more for Uber, but drivers aren’t getting their cut of the fare hike

The company uncoupled driver earnings from the price customers pay just as a driver shortage hit, part of a pattern of eroding driver control

(The Washington Post/iStock)
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SAN FRANCISCO — Uber passengers paying astronomical fares amid a labor shortage may think the extra money is going to their stressed and overworked drivers.

But drivers are not being compensated based on what customers pay. Instead, they are paid for their time and distance — with added, predetermined surge bonuses controlled by Uber.

While drivers in most of the country have operated under that model for the past several years, California drivers only shifted back to that model in April. Uber had previously compensated California drivers based on customer fares as it sought to prove they were independent contractors, not employees after the California legislature passed a law aimed at gig work.

But in November voters passed Prop 22, a ballot measure that overrode the law’s requirement to make ride-hailing drivers employees. Now Uber has reverted its California drivers to the old pay system, and drivers in some markets say that is depriving them of tens and even hundreds of dollars per week when customers are now paying multiples of the usual price to ride with the apps.

The change in pay structure in California arrived at the same time as a massive driver shortage drove up passenger prices as the nation slowly emerges from the pandemic.

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“The customer may be seeing this huge price but that doesn’t mean the driver is being compensated accordingly,” said one former Uber engineer, who is familiar with company strategy and who spoke on the condition of anonymity to candidly describe company matters.

Uber spokesman Matthew Wing said Uber’s median take rate, or the cut it takes from driver earnings, has remained the same — though he declined to provide an average that would account for potential disparities at the highest end of the spectrum.

“On some trips, riders are offered a binding fare that is less than the time and distance rate, and Uber bears the expense of the difference,” he said. “In others, the binding fare is more than what time the distance rate ultimately is.”

Lyft spokesman Eric Smith said its passenger prices and driver pay have been decoupled since 2016, including in California.

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Rondu Gantt has driven for Uber and Lyft for about three years in the Bay Area, he said, and the changes have slashed his pay.

“It’s worse,” Gantt said of the new system. “It’s not a transparent pay system. So you don’t actually know how much the passenger’s paying, whereas the old system it was a multiplier based on demand at that given time.”

“The rewards were being pushed to you more directly,” added Gantt, who has been active in labor organizing.

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It is part of a years-long struggle between drivers and Uber and Lyft, in which drivers argue it has become harder and harder to make a living wage on the apps as compared to in their early days, when the companies were incentivizing to attract enough workers.

California, the largest labor market for U.S. gig workers and home to both companies, has been a test lab for many of the changes. Legislators in 2019 passed a bill known as AB5 attempting to make gig drivers employees. But Uber, Lyft and other gig companies mounted a more than $200 million ballot effort called Proposition 22 that superseded the measure’s requirements on gig workers last year.

Now, the companies are pushing that independent employment model, which includes a set of limited benefits, in other states across the country.

As part of the changes for California drivers announced in April, Uber uncoupled driver earnings from passenger fares. Drivers used to receive a proportionate percentage of what customers paid, meaning they would see an earnings bonus aligned with the customer surge — two times the usual price, for example. Instead of receiving a portion of the true value of what customers pay, drivers now instead are paid for their time and distance on the trip and a predetermined bonus, say $3, $5 or $10 for any price surges.

Customers, on the other end, might be paying double what they usually would.

“Let’s say you have a long airport ride in a busy [area]: previously the driver would be getting 20 percent more on that whole long ride,” the former employee said. “Now they’re getting maybe an extra five dollars on the front.”

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Drivers have taken notice of the changes.

Lydia Olson, a Sacramento-based gig worker who has driven for Uber and Lyft for three-and-a-half years, has said the lack of transparency around pay can sometimes leave drivers wondering if they are receiving their fair share.

There are instances, she said, when Uber offers a bonus to lure drivers to an area. Even if the price surge has cooled off by the time drivers arrive, they still receive the bonus, which sometimes leaves them earning more than passengers pay, in her experience.

But the new pay rules have left drivers in the dark, she said.

“We don’t know if the passenger is paying surge or not,” Olson, a prominent opponent of AB5 who supported Proposition 22. “We’ve got to make sure the companies make money, we need to make sure the passengers are getting a fair price and consistent service, and the drivers want to be paid fairly. And that’s the balance. Right now everybody is frustrated.”

Uber acknowledged the overhauled pay structure in an April blog post on its website, which was last updated in May. In the post, the company also said it was making tweaks intended to reduce rider cancellations, and to ensure drivers looking for trips are matched with passengers.

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But it also rolled back some driver privileges it had introduced last year. Drivers were allowed to set their own price multipliers for much of the year in California.

A driver could choose, for example, to charge two times the usual rate and risk waiting longer for a pick up because customers did not want to pay so much. On the rider end, a passenger could secure a trip more quickly by riding with that driver.

But Uber said cancellations had increased by 117 percent over the year leading up to the recent changes, and that riders did not opt to pay more in most cases.

“We know this will come as a disappointment to the drivers who have used this feature, so we want you to know why we’re doing this,” Uber said. “Over the last few months, 80 percent of riders matched with a driver with a fare multiplier above 1x declined the higher fare and did not re-request a ride on Uber. Additionally, drivers who set a high multiplier received fewer trip requests.”

It is another way, drivers say, that Uber is clawing money from them, and a broader reflection of the issue of gig worker treatment driving contractors away in the first place.

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Ben Valdez, a Los Angeles-based driver-organizer with the group Rideshare Drivers United, said the changes have been altogether unwelcome among most drivers.

“It really comes down to a pay cut,” he said. “These new changes have made it more difficult to have a consistent earnings … Now we’re at the mercy of whatever the algorithm throws at us.”

He said he has “fallen prey” to two or three dollar bonuses on trips when he would ordinarily make much more.

Uber CEO Dara Khosrowshahi argued last month on an earnings call that drivers are receiving unusually high pay. Uber announced a $250 million incentive program to bring drivers back on to the apps, and drivers in some cities saw wages spike amid the shortages.

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Khosrowshahi said last month that drivers had been collecting median earnings of $37 an hour in New York and Philadelphia, $36 in Chicago and $33 in Austin, exceeding their typical earnings. Smith, the Lyft spokesman, said drivers in its top 25 markets were making about $30 an hour on average during the week of May 10, with earnings topping $35 an hour in some of the busiest locations.

Still, some California drivers argue that their pay could be higher under the old structure.

Drivers also complain about a loss of control. In announcing the changes in April, Uber also said it would hide the fare, destination and distance from drivers who had not accepted five of their last 10 trip requests. It is a particular problem amid the driver shortage, when drivers are prompted to take trips well out of their way — a 15 or 25 minute ride just to pick up a passenger — that might not make the effort worth their while.

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Lyft only lets driver see where passengers are going after they have accepted the ride — something that helps "to ensure that riders have reliable transportation options,” according to Smith.

The labor group Gig Workers Rising has been critical of what it says is a loss of driver control.

In a tweet, the group shared the map of surge bonuses visible to drivers, which showed the range of potential rewards, with locations at $1.25 and $17, reflecting the whack-a-mole nature of surge rewards.

“The demand from drivers is simple,” the group wrote: “return the fare multiplier & full trip information!!”