Ridesharing companies Uber and Lyft have taken more than 11 billion people for a ride in their relatively short life. And yet the two companies have yet to make a cent in profits. Now, as the companies go public, some drivers think they may have spotted one way the companies plan to close that gap: increasing prices while short-changing drivers.
A few weeks ago, Giovanny Tarrago, who has been driving full-time for Uber in Chicago for two years, noticed as he audited his fares that price surges were showing up for riders, but not for drivers.
“They were charging prices for an airport ride that would be typical of a blizzard,” Tarrago told the Guardian. “They were charging high-demand prices for a low-demand morning.”
Demonstrating the differences shown in the Uber app for drivers compared with riders through screenshots, Tarrago said: “When Uber and Lyft do that, they pocket the difference. It’s unfair that hasn’t been communicated to passengers and a lot of drivers around the country still aren’t aware of how the pricing model works.”
Other rideshare drivers around the United States have reported similar changes in pricing models that raise fares for riders, while hiding the price hikes from drivers.
A 2018 study conducted by the JP Morgan found rideshare drivers made 53% less in 2017 compared with 2013, though Uber dismissed the findings due to an increase in part-time drivers. But drivers for Uber and Lyft are noticing recent significant wage cuts.
“It’s not fair they are charging the passenger more, and we’re not getting it. That’s a crock. We’re the backbone of this company,” said John Booth, a full-time Uber driver in Cleveland, Ohio for four years. “For four years it was steady, now all of a sudden there’s a fluctuation.”
These price hikes come as both companies are under intense pressure to bring in more money. Until recently both companies have relied on Silicon Valley investors and other private backers to bankroll their businesses. But Lyft became a public company last month and Uber will shortly follow. Lyft’s share price has collapsed since its initial public offering (IPO), in part because investors are worried about its losses, $911m last year. And Uber has cut the price of its share sale as investor jitters have increased. It lost $1.8bn in 2018.
Uber admitted in its recent IPO filing that driver dissatisfaction is expected to increase as the company plans to decrease driver bonuses to save money, invest in autonomous vehicles and continue classifying drivers as independent contractors.
The companies’ attempts to dig their way out of debt are hurting drivers, Booth said. Recent changes in Uber’s pricing model cut his pay by $1,000 a month, he said. Since he started driving four years ago, Uber hasn’t increased driver rates at all, but made cuts on five separate occasions in Cleveland.
“I always check the rider app anytime before taking rides. During morning rush they’re charging passenger $145 to go to the airport. I only get $33. Lyft started doing this four weeks before IPO,” said one Lyft XL (larger vehicles) driver in San Francisco, California, who requested to remain anonymous because they are currently applying for a new job. The driver said they have to work 100 hours a week just to make the same amount of money they did last year. “It’s amazing they have been able to get away with everything they are doing. Now they are charging passengers surge and keeping it all.”
Sinakhone Keodara, 44, has been driving for Lyft in Los Angeles since September 2018. “I have noticed the pay continuously goes down. It’s getting harder and harder for me to make $100 a day,” Keodara said. He is currently homeless, living out of the car he leases through Lyft. “Unless I go on an airport ride, I don’t make any money. Essentially, I’m paying to give their riders a ride.”
Both companies have increased what they charge for time and decreased what the charge for distance – a move that should benefit drivers stuck in traffic but penalises those who drive greater distances in lighter traffic.
A Lyft spokesperson told the Guardian in an email: “In certain markets, such as SF, we increased the value placed on a driver’s time (an increase in per-minute rates), and decreased the value on distance driven (a decrease in per-mile rates).” Uber declined to comment on the record.
An Uber driver in Houston, Texas, provided the Guardian with screenshots showing a price surge from $20 to $90 for a ride back to his house after a Houston Astros baseball game from Minute Maid Park, with no increase offered to drivers at the same time. “On my way home I looked on the driver app and there was no surge showing for the drivers, but when I looked on the rider app, Uber was charging a crazy price for a ride back to my house,” the driver said. They requested to remain anonymous for fear of their driver account being deactivated in retaliation.
Uber and Lyft profit from a lack of transparency on prices, noted Maurice Stucke, professor at the University of Tennessee College of Law and co-author of Virtual Competition: The Promise and Perils of the Algorithm-Driven Economy. “There is an element of trust that we are relying on Uber to set the market clearing price, and to the extent Uber and Lyft have market power, that can be distorted,” said Stucke. “They can create the rules of the game, they can design the competitive process and they can ensure whichever driver makes more or less, whoever wins in the competition among drivers, they can be assured they’re always going to profit.”
“For me, wages have gone down by half. I have to drive more now than what I used to and drive more passengers to equal what I used to do in a few hours,” said Jose Funes, a full-time Uber Select driver in Los Angeles for three years. “They’ve been lying to the customers just as much as they lie to us. When they give a decrease in payment, they said it was going to be better for us, but it never has.”