Gag Me on the “Gig Economy.” A note to UberX and Lyft Riders:

Isn’t it great that UberX and Lyft rides cost you less than half what they did just a year ago?

Here's a breakdown of the typical UberX/Lyft ride for a little insight on this deal: drivers receive no pay for a three to five mile drive taking an average of 10 to 12 minutes to get to rider’s pickup point.  Add no compensation for a five to ten minute wait for the rider, friends and sometimes, pets, to load into the car. (With Lyft, a nominal wait charge begins upon arrival to the pick up location.)  The mileage charges commence when the car starts moving.  Using a four-mile drive taking about 10 to 12 minutes as an example, the rider pays about a $4.00 fare for this ride.  The driver earns 75%, or  $3.00 for approximately 30 minutes on the clock, minus gas, insurance, depreciation, the cost of bottled water, car washes, interior shampoos, the purchase of extra phone chargers, and more.  

Many riders are pretty cool people.  Very pleasant, and often interesting.  This can blunt the sting of these harsh economic realities.  But there are psychic costs as well.

Often along for the ride are a fair number of riders who barely know their destination addresses,  passengers who routinely get car sick, and some who smell like smoke, skunk weed or reek of  bad BO.   Heavy cologne wearers are common.  They can be welcome when they swoop in on the heels of the stinky ones. But always a surprise are the people who quickly exhibit personality disorders,  a garden variety of bad moods or sloppy eating habits, sometimes in combination.  

Using the breakdown above, that’s a whopping six bucks an hour, less all of the associated costs.  This is a fairly extreme, but not an uncommon hour on the road for a ride share driver.  Ten to fifteen dollars per hour before expenses is typical.  Factor in the inherent risks and dangers of being on the road.

Beats a fast food job, right?  But wait, do burger flippers supply the meat they serve you or the cleanser they use to scrub the counters? 

Very few riders tip their UberX drivers.  Until recently,  Uber gave the false impression to riders that fares paid were inclusive of a gratuity.  This was never true.  Most Lyft riders also withhold tips, citing the Uber policy that was never true.

It is understood that the service is the service.  But how many of your favorite services will remain available to you when those businesses can't raise prices to reflect the costs of staying in business?  Drivers have no control over the rates charged to deliver rides to riders.

How much do Uber and Lyft make from that ride?  From that $4.00 ride example dissected above, Uber or Lyft earns just $1.00.  But add the Uber/Lyft Safe Ride/Trust and Service Fees: about $1.50 or more per ride.   The driver’s share of the Safe Ride/Trust and Service Fees is $0.  Uber and Lyft retain the entire Safe Ride/Trust and Service Fees of $1.50 or more, to use at their discretion.  In the four mile ride detailed above, the Uber or Lyft total gross fare is at least $2.50.   Remember, the driver receives $3.00 gross, before expenses, for the same ride.

Yes, the app works pretty well in terms of connecting riders to drivers.  True, it keeps a lot of drunk and drugged people off the roads, making the highways and byways a bit safer for all of us.  Sure, people who used to get stranded can get the rides that passed them by before. Absolutely, it’s a good thing that drivers can choose their own hours.

But, riders, consider this: Uber and Lyft are cutting fares to the rock bottom for multiple reasons.  They include killing an established, old school industry that admittedly is due for some shaking up. The ride share companies make a ton of money every single day without having to produce anything more tangible than a piece of innovative software. (As a capitalist, I am all for this.)   And third, to change your behavior so you come to accept a new technology available to you not as a novelty, but as a necessity… as a must-have need comparable to electricity, running water or your cell phone.  

Hmm, remember when that cell phone was a “want” and not a “need”?  That wasn’t so long ago.    If Uber and Lyft can get you to change your lifestyle and to accept ride share as a necessity, imagine the value of that stream of income to future investors when Uber and Lyft go public.  After the companies start experiencing heavier regulation wherever they operate to comply with local safety and taxation regulations…long after its founders and early investors have sold out with billions and billions of dollars in their wallets…after the taxi industry has been driven out of business so you no longer have that transportation option,  and well after the rates have gone up with Uber and Lyft in order to pay for the true costs of running a business…who will pay these costs?  The riders.

Not that long ago, work time flexibility was but one driver benefit to providing this service. It was the perfect side job.  After a good few hours on the road, drivers may have actually pocketed a few dollars after expenses.   Today, admittedly,  the occasional “surge” fare allows a driver to make a good amount on one ride. But it happens so rarely that it is comparable to winning a hundred bucks on a dollar scratcher. 

Riders hate the surge, but most fail to do any of the math to assure them the true cost of most of their rides.   Riders also fail to remember they are now paying less than half as much for their rides today as they were little over a year ago. So when riders see a 2.0 surge, that’s still less than the old rate.

UberX and Lyft will continue to attract new drivers for the flexible hours and their need for at least an alternate source of income.  But Uber and Lyft misleadingly market to drivers the possibility of earning a generous wage as a driver on a low number of hours behind the wheel.  Worse, Uber and Lyft promote relationships with financing companies and dealers that offer high interest loans and high cost leases to prospective drivers with no or bad credit, effectively locking the drivers into needing to drive many, many hours just to make their exorbitant payments. That neat side job just became an indentured servitude. Think that may effect the level of service you receive?

True, no one is forcing anyone to drive for any of these companies. Most are between jobs or augmenting their income,  driving simply to pay some bills.  The reason a huge percentage of drivers stop driving altogether is because driving ride share is not paying those bills anymore.  

 By the way, these services are anything but actual ride sharing services.  More like “Ride Give” companies.   Drivers have no indication or say as to their riders’ destinations.  So they don’t share a ride with anyone, but they take them where they need to go.  Kinda like…a taxi service.

And as for safety, the majority of drivers, like the majority of riders, just want to go from pickup point A to drop off point B safely and efficiently.   Drivers are not opposed to fingerprinting or other assurances for riders.  But the “Ride Give” companies are.  Why?  They blame it as a burden for drivers. That’s a smokescreen.  The reality is this type of certification might be just one more thing that might make public officials view “Ride Give” drivers as employees rather than independent contractors.  That might mean employee taxes and benefits to be paid by the “ride give” companies, thus cutting into those millions of dollars of profits flowing into the owners and investors wallets each and every day.

The assumption is that independent contractors are in business for themselves. This tacit arrangement shifts employee benefits and taxes to the independent contractor him or herself.  When the independent contractors are making enough to meet their expenses, this is all well and good.  But when they are not, guess who pays for the benefits when the independent contractor needs medical or disability coverage that he or she can't pay for?  You do, fellow taxpayer.  Now, how much is the true cost of that $4.00 ride?

The way it’s going, riders, the free lunch rides will continue for as long as the “Ride Give” management team can keep enough drivers jumping behind the wheel to give this business a try.  But after the companies have you conditioned to see the need of using the “Ride Give” companies as a necessity, don’t be surprised if this coincides with two things: One, drivers wake up and stop subsidizing your rides, and two, the “Ride Give” companies raise your rates to realistic levels more in line with the cab companies that they worked so hard to put out of business.   

Everyone talks about the autonomous cars. No doubt they are on their way.  Remember, Uber and Lyft don't own, maintain or insure any cars driving on their platforms.  So who do you think will own the the self-drivers? Who will clean them? Who will keep them stocked with water and chargers?    Along with the average Joe and Jo's behind the wheel of today's cars, look for some of the big rental companies to step up.  Sounding kinda like a new age taxi company?

Ride share rates are artificially low.  Want to keep your rides relatively cheap?   Want to have assurances a ride share driver will come to get you when you are more than a few minutes away and not cancel on you when a closer option lights up on his screen?  (FYI - Most drivers rock Uber and Lyft concurrently in order to stay busy in a chosen area.) Want to  encourage decent, safe, fully insured drivers to be behind the wheel when they pull up to get you?  Try tipping them.

©2016 Tim Rogan