Ask HN: Are ride-sharing pay rates sustainable?

https://news.ycombinator.com/item?id=11319288

by lscore720 • 10 years ago

34 19 10 years ago

news.ycombinator.com

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?

bchris4• 10 years ago

Even if they aren't, Uber will likely be able to survive the burn rate until the cars drive themselves. Uber just placed a "long term" order for 100k S-class cars.

fsaneq22• 10 years ago

When I talked to drivers, I came to the conclusion that the drivers are paid more than the passengers are charged, which makes sense. Uber makes huge losses every year.

The 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.).

pmorici• 10 years ago

"When I talked to drivers, I came to the conclusion that the drivers are paid more than the passengers are charged"

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.

fsaneq22• 10 years ago

Oh, yes of course. I meant to say that I came to this conclusion for the super cheap pools which this question was about (Lyft had (has?) $5 rides in SF, Uber had something similar).

phamilton• 10 years ago

That minimum exists in SF, which is not a new market. Source: my last Uber driver.

johnloeber3• 10 years ago

Remember that Uber subverts the traditional employee model. Drivers are contractors, responsible for their own hourly wage. Sometimes they will earn below the minimum wage, and at other times, well above it.

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.)

yardie2• 10 years ago

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.

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.

johnloeber3• 10 years ago

Clean cars, professionally dressed, courteous. The only thing separating uber from a DC taxi is the app and the driver.

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.

ProblemFactory• 10 years ago

Drivers are contractors, responsible for their own hourly wage. Sometimes they will earn below the minimum wage, and at other times, well above it.

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.

pink_dinner• 10 years ago

You used to have a much smaller amount of cab drivers making a pretty good living due to unions blocking competition and stifling the entire industry.

Now, you have many more people making a smaller amount of money. This is essentially what happens in any competitive industry.

ChuckMcM2• 10 years ago

Mechanically, the answer is until what ever is pouring money into the system runs out of money.

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.

revelation• 10 years ago

Mechanically, it will last until all the first generation Uber driver cars give out. I very much doubt many drivers are properly accounting for wear and tear on their vehicles and still make minimum wage.

ChuckMcM2• 10 years ago

I would push back on that thought a bit. Consider that in our existing history are door to door sales people who would use their own car to sell goods on a commission basis, the canonical example of that is the "Fuller Brush Salesperson".

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.

dpweb• 10 years ago

Recently took a Pool ride, although I was the only passenger picked up. Short ride. About 10 min. + the time it took to get to me (10 min.) $2.54 Shocking. In short, I love Uber.

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.

DrScump• 10 years ago

<Mechanically, the answer is until what ever is pouring money into the system runs out of money.>

Or, until all competitors of significance are run out of the market by losses, e.g. "Sidecar down, Lyft to go".

natrius• 10 years ago

We can't keep expecting "employers" to solve problems like this because fewer and fewer people will have employers. Coase's theory of the firm explains employment as a way to reduce transaction costs—it's hard to find the right person for each task and negotiate a deal with them each time, so just pay people to obey orders and use them to get things done instead.

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.

Ask HN: Are ride-sharing pay rates sustainable?

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