Los Angeles, CA

Uber's Long Wait Times Are A Result Of Them Shooting Themselves In The Feet... Many Times Over.

thethinkingscientist

Now that the lockdowns have ended and people are going out again, why isn't it that the supply of rides is meeting the demand for rides?

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It's an irony, isn't it?

Now that people are able to go out and have fun again...

They face long wait times to get the next available driver.

And not just that, the prices are much higher, too!

What the blazes is happening?

The Control That Uber Desires Over The Driver

Driving with (no, not for) Uber is a highly murky area.

Uber classifies its drivers as independent contractors, and as such are not responsible for providing any form of medical benefits, sick leave or insurance that an employee would have access to.

The question being - is an Uber driver a true independent contractor, especially when most drivers do not have access to important information such as the trip destination and the amount of money that they can earn on that trip?

Many relationships get frayed when money is involved. The relationship between Uber and their drivers was frosty the moment that Uber unilaterally decided to “set and change the fares passengers pay, the rates that drivers are paid, and the commission Uber takes”.

Protests have been conducted to protest against the unilateral fare cuts.

In most markets, Uber does not give the driver much of an indication where the ride request is headed for — and that spells trouble, because the driver, who is an independent contractor, is unable to properly gauge the profitability of the trip.

California’s Assembly Bill 5 (AB5) essentially forced Uber’s hand in providing trip information and setting a cap on how much they could take as commission from the driver — whereas in other American markets, upfront pricing is used as a way to skim more money out of the rider as “service fees” unless the driver knows how to longhaul their way out of a trip.

Because of issues like these, many drivers do not think that they are allowed to operate as true independent contractors. As a driver commented on the current state of affairs in a driver forum on UberPeople.Net, where Uber has 10 days to classify all their California-registered drivers as “employees”, all Uber had to do was to:

1. Give drivers trip information.

2. Make deactivations peer reviewed.

3. Set a nationwide rate minimum.

4. Set a cap on how much the platforms are allowed to take.

“We used to make $1.50 a mile”, that driver mentioned.

Now, perfunctory glances at the fare estimates for Los Angeles, CA, reveal that the mileage rate for the popular 4-seater sedan UberX service comes in at $0.80 per mile, before Uber takes their 20–25% commission off. With a 25% commission, the driver’s take home is $0.60 per mile.

That’s a whopping 250% decrease from a $1.50/mile earn rate.

Compare that with a Los Angeles taxi fare of $2.70/mile, before tips are factored in.

Sure, because taxi fares are much higher than UberX fares, there will be more people flocking over to use UberX services... if they can get a driver.

At such low rates, I’m better off being classified as an employee.

A Business Insider article was quoted as saying that drivers in Washington DC were finding it difficult to make ends meet. In addition,

Uber has fought to keep drivers classified as independent contractors rather than full-fledged employees, whom it would be required to provide benefits. The company said this month in its filing for an initial public offering that drivers being considered employees instead of contractors could seriously damage its business.

If I were a truly independent contractor who had to balance out my costs (operational costs, including fuel and maintenance) with my revenue (whatever I earn from transporting people), I would be willing to take on trips that I know are priced attractively enough.

However, if I were an employee being paid a fixed hourly rate to take any ride request coming my way, and in return, as an employee, my maintenance and fuel costs (and parking tickets for stopping illegally to pick up riders) get taken care off by my employer, would I take that same 100 mile long trip for $0.60/mile? Of course I would. Whether my employer loses money or not is immaterial to me — so long as I make money.

And Uber would soon realise that $0.60/mile (or even its set fare of $0.80/mile, really), is insufficient to cover proper maintenance and upkeep of a vehicle, let alone pay the salaries of their Silicon Valley engineers.

In product development, the common mantra is “You can only choose two. Will it be cost, speed, or quality?”

In the same way, an Uber rider who desires a speedy driver response and a quality 5 star ride simply cannot expect a ride to be that cheap.

When the standard public transit fare in Los Angeles is $1.75 and the minimum fare for an UberX is $6.50, I wouldn’t mind paying the extra if I’m going a short distance. But how much does the driver earn? And does $6.50 reflect the true cost of the ride? A taxi fare would not be that cheap any time either.

And therefore the service standards have plummeted.

In a past incarnation of my life, I was making a living zipping around town as an Uber driver. (More about that in my reflections here.)

The problem is that an Uber driver is, according to Uber, an independent contractor (even though various states such as California are trying to get them re-classified differently).

As such, it means that I can take whatever request that comes my way, and I can decline whatever that I don’t like.

I bear all the operating costs (car upkeep, fuel, maintenance, commercial licensing and insurance), and what Uber does is that it takes a cut of the fare as its commission for allowing me access to use their app, and whatever I do keep as my revenue is used for my expenses and such.

I first started out as an innocent driver. Accept every request, pick people up, drop them off, and head off to the next trip. Rather altruistic, if you could say so. Why?

Because taxi drivers tend to refuse short fares in most major cities. They’re the ones who started screening passengers for profitability.

Of course, when Uber’s fares were good, there was no reason to decline short trips. But then when they unilaterally started slashing fares with zero input from the drivers, would that altruism last long?

No, because every driver is allowed access to the app as an independent contractor.

It became a game of screening and surge hunting, because the main thing on my mind while working this gig was PROFITABILITY. I was always showing an altruistic side of myself for whomever I picked up…

But I was only altruistic because the price was right — because I was in it for the business, not the altruism.

If I did pick up an airport fare at 2.5x of the usual price, I’d gladly assist in the loading and unloading of bags without expecting any tip.

Ever noticed why the service staff at a Michelin starred restaurant do show a better attitude towards their customers than the staff at a McDonald's? It's related to the price that people are paying.

That additional surge price would have been my tip (hence taking corporate riders was part of my bread and butter — they never bothered about the price because the company was paying for it).

Of course, if they did tip extra… I’d hope to get their requests for repeat business. I once had a trip to the airport that resulted in a AU$100 payout for me (1.8x surge on an UberXL trip)— single rider, 2 big luggage bags. I helped her to load and unload her bags, and she tipped an additional AU$20 in cash.

I wished a larger majority of my riders were like that.

Now, as Uber has gone smarter with its pricing, they end up surging the prices higher, with longer wait times as ride requests go unfulfilled… but the driver is surprising earning less as Uber keeps more of the fare for itself after employing a deceptive procedure that decouples the rider’s fare from the driver’s earnings.

As such, we can pick up on one thing here.

The friendly Uber drivers that we may have encountered in the past (with higher base rates) were friendly mainly because they were earning something that they felt was decent for the work that they provided in transporting someone from point to point.

There were also mints and water involved — which I did offer to my surge-paying riders without fail, politely. But when rates are low… can the driver even affotd to purchase mints and water, let alone get their cars serviced or maintained regularly?

It shows that altruism in business does come at a price, unfortunately.

But what complicates the issue further now...

Is the fact that the surge in the rider price isn't passed on to the drivers, and drivers do take note of that too.

So while a rider may be getting quoted an egregiously high fare...

The driver may not necessarily see any of it - and therefore would not be bothered to even go online and accept trips for peanuts.

In big cities such as Las Vegas and Boston, where surge pricing was banned during the state of "public health emergency" brought about by the COVID-19 pandemic, ride fares were low... but wait times were terribly long.

One cannot expect service reliability at low prices all the time, can they?

And as such, Uber did shoot themselves in the feet many times over.

To the point where their CEO, Dara Khosrowshahi is so clueless about the pricing and the payouts to the drivers...

But yet they wonder why service reliability has hit the dumps?

Goodness gracious me.

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