Harry Campbell is now known as the Rideshare Guy, an industry expert who blogs, podcasts, and even wrote a book about ridesharing. His content isn’t of the Uber confessions variety; instead, he offers high-level economic analysis and market insight, as well as advice for drivers. But in a simpler time, he was a part-time Uber and Lyft driver. “I used to drive every big holiday and event,” says Campbell. “Now it isn’t worth it for me to spend time away from my family.” These days, he does hardly any driving for hire. “I think it’s tough to make a living as a full-time driver since you lose a lot of the flexibility and earnings that make the job so desirable.”
Driving an Uber or Lyft simply isn’t as profitable as it once was. A recent study from the JPMorgan Chase Institute found that monthly earnings for Uber and Lyft drivers dropped 53 percent between 2014 and 2018. To be more precise: Drivers pocketed an average of $1,469 per month in 2014 but only $783 by 2018. How did Uber and Lyft go from being the ultimate side hustle to a round-the-clock trap that rarely ends in driver profitability?
The easy answer: More users require more drivers, spreading fares thin. And the demand for ridesharing is only growing; by 2020, an estimated 685 million people will use these services. Amid internal struggles, Uber saw a 41 percent increase in its gross bookings during the past year. In September, Lyft hit the 1 billion rides mark. This growth has in part been aided by the aggressive hiring of drivers, a tactic these companies have deployed since their respective launches.
In the early days of ridesharing, says Jim Conigliaro Jr. of the NYC-based Independent Drivers Guild, drivers were generally happy with the amount of money they made and the hours they worked. Then, their numbers rapidly swelled. “We [saw] the addition of two thousand, three thousand drivers per month,” says Conigliaro, a hiring spree he says lasted for nearly three years. “It just kept growing, and growing, and growing. You have more and more drivers entering the industry, so there’s less and less work to go around.” That increase, coupled with a ballooning consumer base, meant ridesharing companies started slashing wages. Ridesharing companies claim to take no more than 28 percent from each ride, but tacked-on fees mean this number is almost always higher. That cut, plus lower prices for customers, have led to an obvious loser in the equation: drivers. When they first began hiring, ridesharing platforms presented themselves as an attractive alternative for taxi and limo drivers, as well as a viable option for anyone seeking a quick part-time gig. But over time these companies did an about-face and became consumer-first at any cost. “It’s been a combination of the expansion of the market, the flooding of the market, [and] inaccurate projections and promises to drivers that are joining this market,” says Conigliaro.
In truth, the current reality is the outcome that these companies have likely always planned for. The source of conflict is a classic worker vs. corporation impasse. “Drivers really want as few other drivers on the road as possible,” says Campbell. The ridesharing companies, on the other hand, want the exact opposite. “They will hire anybody and everyone as long as you can pass a background check and have a pulse, which is great when you’re getting hired,” says Campbell. “But as you might imagine, down the road, it becomes a problem.”
This surplus of drivers means that users will never wait too long before catching a ride; it also means that drivers are forced to drive longer hours in order to make money. And it appears that for some, making profit has become a near impossibility. According to a 2018 study from the Economic Policy Institute, Uber drivers average $11.77 an hour (before taxes) and earn less than 90 percent of all full-time workers. The study also tried to define what “earnings” really means for ridesharing drivers. EPI points out that drivers must pay the aforementioned fees to the rideshare companies, as well as self-employment taxes.
It is becoming clear that the current ridesharing model is unsustainable for drivers, and that the effects are being felt at the local level. The nonprofit Partnership for Working Families published a report early this year on how ridesharing companies (and Uber in particular) bully their way into cities, ignoring (or clashing with) local government as they go. The paper’s authors explain that the goal of ridesharing companies’ interference is in part intended to bend employment laws to their will. “By rewriting the law, they exempt themselves from a myriad of employment protections,” the report reads—most obviously including, but not limited to, a state minimum wage. Researchers go on to say that Uber specifically worked to influence local governments “enabling [Uber] to draft its own bills, heavily influence the vetting, and even effectively staff elected officials on the issue.”
Now, drivers will likely need to depend on those same local governments to fight for more equitable wages—most importantly, an hourly salary. For the past two years, the IDG has been running its Fair Pay campaign in New York, advocating that drivers should be able to make a livable wage driving for Uber and Lyft. Following a two-year IDG campaign, the city has proposed a regulation that would give drivers what would in effect be a 22.5 percent raise (paying them $15 an hour, though the IDG suggested $20)—which would increase moving forward to reflect the rising cost of living as well as to protect against overhiring. Conigliaro says his organization is actively pleading drivers’ cases to city officials. In 2017, the IDG successfully lobbied Uber to make tipping a nationwide feature on the Uber app. (Lyft has always included nationwide tipping.) Conigliaro hopes that IDG’s latest push for a livable wage for ridesharing drivers will also spread beyond New York City. Campbell is also optimistic other cities will take cues from progress made in New York. “I think that one of the reasons Uber fought so hard against regulation in New York is because it’s one of the biggest transportation markets in the world and a lot of cities potentially look to it to see the good and the bad about what’s happening there,” he says. Such change will most likely come at the hands of local and federal legislatures.
Conigliaro believes the minimum wage regulations can satisfy the needs of both drivers and users. “Consumers could still have the product that they like and they love,” he says, “but the people who are doing the work, who are the face of the company, could also make a living wage.” Campbell mentions the NYC proposal as a promising start. He says utilization-based algorithms coupled with a minimum hourly wage could address not only pay problems but also congestion. It would mean that drivers would be getting paid a higher hourly rate while actively driving around and picking up passengers, as opposed to sitting and waiting to shark for fares. “That will kind of prevent that situation where Uber’s just flooding the market with drivers and drivers are just sitting there or having to work longer hours for the same amount of pay,” he says. “I think that component of the regulations that New York [proposed] is actually pretty smart.”
Bradley Tusk is a venture capitalist who offers his expertise to startups facing regulatory hurdles. (He was also former NYC mayor Michael Bloomberg’s campaign manager and Senator Chuck Schumer’s communications director.) Tusk was one of Uber’s earliest investors, and he’s had a front seat to the company’s—and the industry’s—struggles with local governments. “I’m probably the only Uber investor who would say this, ” he says of the IDG, “but I’m a fan of theirs.” Like Campbell, Tusk also thinks the utilization algorithm component is key—those who are actively driving full-time could qualify for the minimum wage. But beyond providing better conditions and earnings for workers, Tusk thinks the minimum wage is just good business. Better wages retain employees, and retaining employees means a business has happier workers who also know how to do a job well—and that ultimately keeps customers happy.
Tusk acknowledges that given his position as an Uber investor, his are unlikely opinions on the matter: “I’d probably get in trouble for saying this, but I’m not sure that [minimum wage] is a terrible idea from a business perspective.” He also believes that while Uber needed to take an aggressive stance at launch in order to break into the transportation market, the company can now use a more cooperative approach when working with local governments. Whether the ridesharing industry feels compelled to do so in regards to minimum wage, says Tusk, will depend on what gets a better short-term reception. Both Uber and Lyft are planning to file for IPOs in 2019. “It’s whatever narrative plays best to the market,” says Tusk. “Not sure which way it will go, but that will drive the decision in the short term more than anything else.” And what matters to these companies in the short term will likely have lasting effects on the futures of rideshare drivers.