I don’t know what’s going on around the rest of the country, but here in New York City, it looks like Uber’s rate cuts, earlier this year, have been a complete flop.
I first noticed this three to four months ago when I realized 70%-80% of Manhattan was on fire with beautiful orange and red surge colors filling the map, several times a day, every day of the week. When the whole map lights up in red for several hours each day Uber tells us that means there are too many passengers for the available number of drivers. But what it tells me is that there has been a long-term mass exodus of drivers as a result of this year’s rate cuts. Prior to this last cut, things appeared to be in equilibrium, as the surges were infrequent and short-lived. But gradually over the few months following the last cuts, I noticed surges became more frequent, they lasted longer and they covered a larger area.
This fit into my theory that the last rate cut would lead to a lot of drivers dropping out. Average hourly earnings dropped well below $20 for the first time in New York, in my experience. And in New York, that’s not enough to make it worthwhile. And the lower driver pay goes the easier it is for drivers to find better opportunities elsewhere.
About three months ago I began saying that riders have gotten the bad end of the rate cut deal. Surges were happening so often that they were paying a lot more than they had been paying at the old higher rates. Which is fine by me! But it was a sign that if rates drop too low, passengers will end up paying more and the drivers who are left will end up making more. In the free market that Travis is so fond of, people are going to move on if an opportunity isn’t worth their time.
In New York we have at least five competing rideshare companies. Uber, Lyft, Juno, Gett and Via. I’m signed up with all of them except Via. And every week now I get emails from almost all of them offering a guaranteed surge deal during certain hours. Uber is paying 1.2x guaranteed, almost all the time. Juno just this week sent out an email saying they would pay at least a 1.2x surge all the time and up to 2.0x at certain times. Lyft has gotten in on this too but in the last two weeks they’ve been silent. No special offers from them.
A 1.2x surge effectively negates the January rate cut. Uber is now paying drivers at least what they used to make and often more. But they’re charging riders the new lower rates, so they’re losing money on almost every trip now in New York.
Uber has always said that “partners” were customers too. And they were right. We drivers have never felt like we were customers, but they have to work as hard to get drivers as they do passengers. They didn’t act like we were customers though until this onslaught of competition for drivers in New York got so stiff that now all the companies are offering anywhere from 1.2x to 2.0x surge guarantees. The fact that Uber is paying at least 1.2x almost all the time now, is an admission that their price cuts didn’t work for drivers. They lost a ton of drivers and they’re struggling now to get them back.
Uber was the first to offer surge guarantees and they were quickly followed by Lyft, which stayed in the game for a few weeks. Then Juno got in on the action and suddenly Uber’s guarantees have gone higher and cover more hours each week! Juno has taken New York by storm. Drivers love them. And thousands of Uber drivers are now driving for them. It looks like Uber has taken notice and is fighting back with these sudden surge offers.
A lot of people have argued that drivers should go on strike. But others have said a one-time strike will never work. Nothing, we’ve said, will work until Uber sees a mass long-term exodus of drivers. And by long-term, I mean for more than a few weeks. But up until now, a lot of drivers had nowhere else to go. They’re driving for Uber because for whatever reason, they can’t get a better job elsewhere, so despite rate cuts that put them at or below minimum wage, they’d stick around no matter what. But rate cuts plus competition is a deadly combination for Uber. When other companies are offering the same or better pay, Uber will finally see a long-term exodus of drivers. Rate cuts alone weren’t enough for drivers to leave uber. But rate cuts plus viable alternatives is more than enough. That’s the only thing that would ever force Uber to increase pay and that’s exactly what they’ve done in New York – where they have more serious competition than anywhere else.
I think they’re finally seeing that exodus and they’re fighting back hard – with higher pay. The January rate cut has been negated. In the end all of these companies are going to have to eventually raise rates to passengers because these current rates are simply unsustainable for drivers.
My advice to drivers is, if a competitor comes to your town, sign up with them and drive for them. Every trip you drive for them is a trip taken from Uber. Uber will notice and soon your pay will go up!
I’d love to hear what’s going on in your part of the country. Please feel free to leave a comment and let us know!