If you’ve taken an Uber or Lyft recently, you’ve likely noticed that it’s neither as cheap nor as convenient as it once was. Wait times for a ride have shot up to 20, 30, 40 minutes, and fares have followed suit. It’s not unusual to find that a trip from downtown L.A. to LAX, which should normally range between $40 and $50, is suddenly $120 to $160. But why?
To hear Uber and Lyft describe it, we’re in the midst of a perfect storm: more people are using rideshare services than ever before, yet there is a dearth of drivers.
And there is truth to that. “Demand levels are up anywhere from 60 to 70 percent,” explains Daniel Ives, managing director of equity research at Wedbush Securities, while there’s a shortage in drivers “somewhere between 40 to 50 percent below peak levels” pre-pandemic.
“In 2020, many drivers stopped driving because they couldn’t count on getting enough trips to make it worth their time,” Uber said in an April statement. “In 2021, there are more riders requesting trips than there are drivers available to give them—making it a great time to be a driver.”
But drivers don’t fully agree with this representation. What they see are on-going labor issues that have made this perfect storm inevitable.
According to Ben Valdez, who’s driven for Uber and Lyft for six years, drivers have been steadily leaving the platforms as Uber and Lyft have consistently slashed pay rates. Where drivers were once making 60 cents a mile with Uber, “at LAX, they dropped it from 60 to 32 cents,” Valdez says. “And for San Diego, they dropped it to 34 cents a mile. The IRS estimates that the cost is 57 cents per mile [for drivers], so we’re getting paid below whatever the IRS says operating costs should be.”
Valdez, who is also a member of Rideshare Drivers United, explains that rates have gotten so bad that most drivers quit after a short time driving. “Turnover is anywhere between three months to about six months for people to realize, hey, this is not worth it,” Valdez continues. “That contributes to a constant influx of new drivers. Uber will put out these incentives for new drivers to come in and they’ll say, ‘We’ll guarantee that you’ll make X amount of money.’” The new drivers will run their course, then get cycled out.
“It’s a major overhang on the business models, because it’s putting pressure on drivers and it’s putting pressure on the business models of these companies,” Ives tells Los Angeles. He notes that Uber and Lyft will have to become more aggressive with incentives to get drivers back on the road, but will also need to increase a driver’s cut of each ride. “The driver shortage was underestimated and it’s taken some 20 percent of demand off the table,” Ives says. “Look, investors are worried and it’s been reflected in the stock of both Uber and Lyft. At a time where demand is coming back, the pricing and the driver shortage are creating a black cloud over these stocks.”
But surely with fares jumping some 50 to 60 percent, drivers are making more too, right? “Drivers might be making a little bit more right now because of the incentives and dynamic pricing, but once that goes away, it’s going to be back to that normal rate,” explains Chris Gerace, contributor to the Rideshare Guy blog. A $20 ride might now be $30, but most of that additional fare is going straight to the rideshare platforms, not the drivers. “Unfortunately, they’re squeezing drivers as much as they can.”
To keep up with all the rate slashes and other changes, Valdez says he switched most of his driving over to UberEats so that he can see his destinations and keep his mileage low, He explains that when California’s AB5 legislation was enacted in January 2020, it forced Uber and Lyft to make certain concessions to the state’s drivers—like setting their own rates per mile (which drivers call “multipliers”) and enabling drivers to see where a queued up passenger was heading. Seeing destinations allowed drivers to strategize rides and maximize profits. For example, if you have a ride from downtown L.A. to Palmdale at 3 a.m., you might make a sizable fare, but then you’re stuck in Palmdale with no rides back which eats into your profits as you make your way back to busier areas in L.A. empty handed. Doing a series of quick trips around downtown or Hollywood with little lag-time in between, on the other hand, is much more profitable. However, with the passage of Proposition 22 in November, Uber and Lyft rewrote the rules in their favor and did away with multipliers and destination previews all together.
“Uber and Lyft duped the California voters,” Valdez says. “They made them believe that if Prop 22 didn’t pass, prices were going to go up instead of actually starting to level out like they were.” The irony, he adds, is that drivers began dropping out of Lyft and Uber following the passage of Prop 22 because “they decided it wasn’t worth it anymore,” and passengers are still left paying a premium.
Uber did not respond to multiple requests for comment on these issues, while Lyft stated in an email: “We’re working to meet demand, including providing incentives to drivers, who are busier and earning more than they were even before the pandemic.”
Ultimately, some drivers will return to the platforms once extended unemployment benefits end in September and people scramble to pay their bills. “I do think the unemployment dynamic will send 60 to 70 percent drivers back onto the road,” Ives estimates, potentially lowering fares and wait times for passengers. Gerace expects “a bump in drivers coming back once unemployment ends, but it’ll taper off,” and then we’ll see a slow return to normal by next year.
In other words, don’t expect Uber/Lyft prices or wait times to drop until at least the end of summer—and even then, who knows by how much or for how long.
Will all this turn Angelenos on to the public transit in their own backyards? Ives claims that “it’s a big concern for [CEO] Dara [Khosrowshahi] at Uber.”
Metro bus fares are currently free, and the subway is $3.50 roundtrip day or night.