Ask HN: Are ride-sharing pay rates sustainable?
I recently did an UberPool. The passenger and I each paid $6 for the entire ride.
Between pickups and dropoffs, it lasted 45 minutes. The driver explained it would take him 15 minutes to return to an area with customer demand. After taking into account Uber's take, plus the other costs of being an Uber contractor/driver, how long can we expect these rates to last before either a driver revolt or significant price increase to customers?
19 comments
[ 4.7 ms ] story [ 51.1 ms ] threadThe hope is that this can last long enough before the drivers can all be fired and replaced with automated cars, or at least that the system will get better (i.e. better at stuffing cars full of people, more demand by training people to order the carpools, etc.).
That isn't true in general for an Uber driver. What you might have been seeing is that when Uber goes into a new city they guarantee a minimum amount of pay per hour for a driver during certain times if they are logged into the app accepting fares. It is only a temporary measure until they get established in a local market. Once they stop subsidizing earnings for drivers drop precipitously.
In the areas where Uber is prominent, it's hard for low-skilled workers to find any employment at all. Consequently, some of them turn to Uber. This means that no matter how bad the wage, Uber has a ready supply of drivers.
It's extremely important for Uber to make Uber a cost-effective alternative to driving or public transit. The drivers are less important to Uber -- both in the short and in the long run (automated cars), the drivers are the expendable part of the equation.
(However, do note that under certain circumstances, Uber subsidizes the drivers: sometimes they are paid more than the passenger is charged.)
Oh bullshit. The drivers are the face of the company. As in clean cars, professionally dressed, courteous. The only thing separating uber from a DC taxi is the app and the driver. I've had many good rides with uber drives who all said it paid more than their last gig. But already they were shopping around for other ride sharing apps that paid even more. Uber loses its drivers people use lyft.
And what's with the automated cars crap? It seems everyone is an expert and has a timeline on when they are going to rollout. 3 years, years, etc. is it an eventuality? Yes. But I wouldn't make business plans around it just yet.
No. People will always trade personal comfort for convenience and price. Look at airlines. Back in the 70s, a flight was a great pleasure. Then the airlines were deregulated. As it turned out, people didn't care nearly as much about their legroom and on-board meals as they cared about price. That's why nowadays, flying coach is generally uncomfortable, but also cheap.
And in that regard, Uber has a huge advantage: UberX is much cheaper than a taxi. In Chicago, a taxi+tip costs about 3x more than UberX (with Pool). It's similar in many other cities. That's the big advantage that UberX has on taxis.
Indeed, Uber's pricing is getting competitive with public transit -- in Chicago, UberX (Pool) is only 2x or 3x more expensive than public transit for a given distance, but much more comfortable (regardless of the niceness of the car) and much faster than public transit.
For UberX, the drivers and cars could be awful. It wouldn't matter. What matters is that UberX occupies a sweet spot in terms of pricing and speed that neither taxis nor public transit can match. Consumers value pricing and speed far above comfort.
I've never taken UberX in Chicago. I have used it in London, Paris, NYC and they were no cheaper than a taxi. In fact they were a little more in Paris. But I knew that going in because I chose comfort over price (and speed, UberX isn't allowed to use the bus lanes, yet).
Consumers value pricing and speed far above comfort.
I'm sorry, you keep coming back to this conclusion but none of the evidence you've presented holds up. Except in rare cases, Uber is more expensive than a taxi yet people chose them anyway. So people value comfort just as much as price. In fact when people talk about why they use Uber price is rarely the factor. typically they've had bad experiences with taxis.
I used Uber extensively in London this January. I actually found that for long distances, taxis were about 3-4x the price of an UberX (with Pool). London taxis are very expensive.
In NYC, Uber had a long-standing $5-for-anywhere-in-Manhattan offer. I lived there for a few months, and found Uber and Lyft to generally be significantly cheaper than taxi+tip, even disregarding promotions.
Finally, there was a good article on this topic by BusinessInsider at http://www.businessinsider.com/uber-vs-taxi-pricing-by-city-.... It indicates that Uber is generally cheaper than taxi, but that's as of 2014. With UberPool, prices have dropped significantly further yet.
I conclude that UberX/UberPool is generally significantly cheaper than a taxi, and more convenient except in areas where you can easily hail a cab off the street. Looking at the history of consumer goods and transportation, I think that those factors significantly trump comfort.
Aren't all taxi drivers in most cities of the world also self-employed? Even with brand-name services, they just pay a fee to the taxi company to use their logo and dispatch.
Now, you have many more people making a smaller amount of money. This is essentially what happens in any competitive industry.
But figuring out all the money flows can be quite complex.
So from the driver's perspective there will always be people available for whom "some money" is better than "no money." That is the part of the labor pool who have multiple jobs which each contribute some part of their overall income. Uber is good for those people because the hours are very flexible and so they can be "fit in" around a lot of other more scheduled economic activity.
So an interesting question is this, what is the supply of these laborers and is there any other activity that can get them the more income with the same flexibility? Is that the critical resource here? "remainder" laborers?
If that is the case, then that shortage will drive the price up in order to meet demand for Uber rides. And if the price for Uber rides goes up, it will mean that some Uber customers for whom it was marginally useful at the previous lower price will drop out.
And that summarizes to there will neither be a driver revolt nor a significant price increase. There may be fewer drivers which leads to a gradual price increase or there may be higher driver turnover and stable prices. Time will tell though, regulation could step in that changes the balance significantly in favor of one party or another.
Also, assuming these people file tax returns, if they are independent contractors then they are writing off their car mileage at 55 cents a mile against any income they make. Hard to know for sure without talking to actual drivers though.
Being an American worker, the amount of excess labor capacity (if you want to call it that) out there is terrifying. Non skilled work is cheap. People will work for almost nothing.
Or, until all competitors of significance are run out of the market by losses, e.g. "Sidecar down, Lyft to go".
The technology we build is driving transaction costs closer and closer to zero. Fewer tasks will need firms to coordinate them—they'll be coordinated by the market instead. More people will sell their work directly to the people who want it.
The basic income approach can solve the living wage problem without relying on the employment relationship. Any energy we spend trying to get Uber to solve the problem will be wasted when we build ride hailing marketplaces that don't require an Uber to connect the rider and the driver.