
Ask HN: Are ride-sharing pay rates sustainable? - lscore720
I recently did an UberPool.  The passenger and I each paid $6 for the entire ride.<p>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&#x27;s take, plus the other costs of being an Uber contractor&#x2F;driver, how long can we expect these rates to last before either a driver revolt or significant price increase to customers?
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ChuckMcM
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
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.

~~~
ChuckMcM
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.

~~~
Spooky23
There is a big difference between driving while selling and selling your
driving.

------
johnloeber
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.)

~~~
yardie
_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.

~~~
johnloeber
> 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.

~~~
yardie
I don't deal in absolutes and most people don't. People will chose the best
option based on a range of factors. Some people will put up with cheap
uncomfortable flights for a few hours, <4\. They are more concerned with
getting to their destination. Some people won't fly with Easyjet or Ryanair at
all. You'll notice there are no long haul low-cost airlines. The cheap
airlines would have to supply things like food and water. The sort of things
that cost money.

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.

~~~
johnloeber
> I have used it in London, Paris, NYC and they were no cheaper than a taxi.

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-...](http://www.businessinsider.com/uber-vs-taxi-pricing-by-
city-2014-10). 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.

------
fsaneq2
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
"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.

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

------
natrius
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.

------
pink_dinner
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.

------
bchris4
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.

