Chicago, IL

If You Use Uber and Lyft in Chicago Prepare for High Prices

Natalie Frank, Ph.D.

The pandemic and fear of car jackings have led to fewer drives and a major increase in prices for Chicago riders.

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This time last year, demand for Uber and Lyft dropped dramatically as fear of contracting the COVID-19 virus led most people to remain at home. With the big push for social distancing, not getting into enclosed spaces even with loved ones and a vaccine almost nine month away few people were going anywhere, and those that were found ways to do so other than using Uber or Lyft.

After suffering serious losses for 2020, at the end of April Lyft decided to lay off almost 1000 salaried employees representing 17 percent of the company's official workforce. An additional 288 employees were furloughed without pay. It also cut salaries to the tune of 30 percent for executive leadership, 20 percent for vice presidents and 10 percent for other employees. Members of the board of directors had 30 percent of their cash compensation cut for the second quarter of 2020. These cuts did not include the thousands of drivers who are considered to be independent contractors.

Uber faced similar losses. By the start of May 2020 Uber’s bookings had plummeted 80 percent from where they’d been a year before. The company had already frozen all hiring, and the CEO of the company Dara Khosrowshahi had announced that he would not take a salary for the rest of 2020. With far fewer customers and a hiring freeze the company decided to lay off almost 4000 employees in their customer support and recruiting divisions, which amounted to 14% of their workers. Drivers were also not considered to be part of these cuts. Less than two weeks later Uber laid off another 3000 workers along with Uber Works, it’s gig staffing operation that had opened in Chicago and several other cities and announced the entire board would be foregoing their salary for the rest of 2020. It also shut down 45 offices.

In June 2020 with the protests occurring, Lyft and Uber both announced they were suspending services in cities where curfews were imposed, including Chicago.

By August, Lyft had lost another 50 percent in revenue and over 60 percent of active riders in the second quarter. Uber’s revenue for the second quarter was down 35 percent.

But now as more people are getting vaccinated and some states, including Illinois are relaxing public health restrictions, ride request are skyrocketing. With the loss of many drivers over the past year, both Lyft and Uber are struggling to recruit enough drivers to cover customer demands.

Anyone who has taken Uber or Lyft recently has undoubtedly noticed higher fees and much longer wait times. Across the Chicago area, riders have reported extreme price surges during all hours of the day. Some riders complained about the more than $50 price tag for a 2.5-mile ride. Rates for a trip from Lake View East to near downtown Chicago is now around $30. To get from Rogers Park to Lake View could cost you $70. Prior to the pandemic $30 would cover the 15 mile ride from downtown Chicago to O’Hare airport. Others report that they’ve been quoted prices of $45 to $75 to go a mile and a half.

As prices are increasing in Chicago, many workers who used ride share services to get to work are choosing other modes of transportation. Many are finding that it costs lest to park their cars downtown for the day than it does for a one-way ride to the same location. Other complain about the long wait times.

Organizer for the Independent Drivers Guild of Chicago, Kevin Nelson, blames the higher prices on less drivers on the road. He said that recent carjackings in Chicago and COVID-19 have contributed to a lack of drivers willing to take the risk. In 2020, Chicago reported more than 1,400 carjackings – the highest since 2001.

In Chicago, Uber is attempting to lure drivers back by telling them that as a result of driver shortages, drivers can make a lot more money now than they did before the pandemic. In Chicago at the end of March 2020 the median rate paid to drivers was $12.79. Currently the rate is $29 an hour which includes any waiting between customers. Uber has also announced plans to further encourage drivers to return by offering them incentives worth $250 million. The rate hike and incentives are being passed on to the riders.

Uber pricing and pick-ups are not done by a single person but a “matching” algorithm. The computer-based algorithm evaluates the supply, demand and location of drivers and riders, then uses that to judge pickups, rides and pricing. Drivers don’t know what each of their passengers is paying per ride or what percentage of it they receive as pay.

Uber and Lyft have generally advertised themselves as the most affordable rides available. However, without regulation, these rideshare services can charge what they want to increase profits until the cost makes ride shares inaccessible to many. In Chicago, the rise in ride costs have made people wonder who exactly currently find Uber’s services affordable.

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Chicago, IL
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