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Amid a driver shortage throughout the state, the ridehailing giant Uber is reportedly charging passengers astronomical fares — and yet this extra money is not going to its workers. Instead, drivers are reportedly paid for their time and distance, with added, predetermined surge bonuses controlled by Uber.
According to the New York Times, ride-hailing prices are up by 50% or more over pre-pandemic rates. “The customer may be seeing this huge price but that doesn’t mean the driver is being compensated accordingly,” one former Uber engineer, who is familiar with company strategy and who spoke on the condition of anonymity to candidly describe company matters, told the Washington Post.
In California, Uber had previously compensated its drivers based on customer fares as it sought to prove they were independent contractors and not employees after the state legislature passed Prop. 22. This ballot measure, passed in the Nov. 2020 election, overrode the law’s requirement to make ride-hailing drivers employees.
Now, Uber has reverted its California drivers to the old pay system — paying upfront per trip fare. Drivers in some markets say that is depriving them of tens and even hundreds of dollars per week when customers are now paying multiples of the usual price to ride with the apps.
Uber spokesman Matthew Wing reportedly said Uber’s cut it takes from driver earnings has remained the same, though he declined to provide an average that would account for potential disparities at the highest end of the spectrum. “On some trips, riders are offered a binding fare that is less than the time and distance rate, and Uber bears the expense of the difference,” he told the Washington Post. “In others, the binding fare is more than what time the distance rate ultimately is.”
Rondu Gantt, who has driven for Uber and Lyft for about three years in the Bay Area, told the Washington Post that the changes have slashed his pay. “It’s worse,” Gantt said of the new system. “It’s not a transparent pay system. So you don’t actually know how much the passenger’s paying, whereas the old system it was a multiplier based on demand at that given time.”
And since the gig economy companies’ win with Prop. 22, they are pushing that independent employment model, which includes a set of limited benefits, in other states across the country. Only the UK has been successful at pushing back, with Uber recognizing their labor union fairly recently.
As part of the changes for California drivers announced in Apr., Uber uncoupled driver earnings from passenger fares. Drivers used to receive a proportionate percentage of what customers paid, meaning they would see an earnings bonus aligned with the customer surge. But now, instead of receiving a portion of the true value of what customers pay, drivers will now be paid for their time and distance on the trip and a predetermined bonus, say $3, $5 or $10, for any price surges.
On the other hand, customers might be paying double what they usually would. “Let’s say you have a long airport ride in a busy [area]: previously the driver would be getting 20 percent more on that whole long ride,” the former employee reportedly explained. “Now they’re getting maybe an extra five dollars on the front.”
And this isn’t the only change Uber has made recently for its workers. The company recently rolled back some driver privileges it had introduced last year. Drivers were allowed to set their own price multipliers for much of the year in California. Uber claimed too many drivers took advantage of this, which ultimately hurt their business. The company said cancellations had increased by 117%.