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Uber’s Driver Dilemma: Fare Hikes and Cuts Don’t Change Pay (wsj.com)
45 points by prostoalex 10 months ago | hide | past | web | favorite | 29 comments



For those paywalled out, here is the meat.

> The dilemma is laid bare in a recent study by Uber, conducted in cooperation with a New York University assistant professor, that found that no matter which direction fares go, drivers inevitably take home about the same earnings over time. That is because of how easy it is for drivers and riders to jump on and off the system, according to the study

> When there is a fare cut, drivers’ pay per trip falls but riders flood the service, offering more business. A price hike eventually lures more drivers than Uber needs and scares away riders. The changes are short-lived as an equilibrium is reached after about eight weeks, and drivers’ average pay comes out the same.

> All of this means Uber, and other ride-sharing services, must lean heavily on pricey incentive payments—cash for completing a certain number of rides a week, say—to bring driver earnings above what typically amounts to around minimum wage


Thanks!

> All of this means Uber, and other ride-sharing services, must lean heavily on pricey incentive payments—cash for completing a certain number of rides a week, say—to bring driver earnings above what typically amounts to around minimum wage

This seems kind of obvious to me. Uber's main drawcard for drivers is that there's almost no barrier to entry. Most jobs earning more than minimum wage have some significant barrier to entry (required qualifications, experience, skills, knowing the right people etc.) and so if Uber pays more than minimum wage, anyone in a minimum wage job will switch to driving for Uber. This lowers individual earnings for drivers until other low-barrier-to-entry minimum-wage jobs become competitive again and drivers start switching back to those jobs.


You need a suitable car in order to drive for Uber don’t you? That would be a barrier for entry for many minimum wage employees I think.


Uber owns and runs rental car companies, such as Lion City Rental in Singapore, whose fee structure is designed specifically for the car-less to sign up as drivers (minimum rental duration for discounts to apply, a discount based on Uber rides driven, etc.).

Lion City Rental has grown so fast as to affect the price of the car ownership permit [1]. Anecdotally, about 1 in 20 of my drivers in Singapore owned their cars.

[1] http://www.straitstimes.com/singapore/transport/uber-bids-co...


> must lean heavily on pricey incentive payments

...or they could raise driver's revshare, and have drivers compete based on quality metrics instead of only price.

This is a submarine article using handwavy logic to rationalize drivers' low pay due to Uber corp's market power.

I doubt that the care hire market coincidentally balances at almost exactly the legal minimum wage for employees.


That's exactly what incentives do. They increase driver revshare.


For those who are paywalled out, the article refers to this paper done by a NYU professor and Uber's own economics team.

http://john-joseph-horton.com/papers/uber_price.pdf


Uber drivers don't get paid much regardless of the marketing schemes and of course they feel unappreciated and resentful because of that.

The real problem though is not that the pay isn't very good.

The problem is that within a few years the pay will go away completely in many places due to self-driving cars.

If people are lucky then they will still be able to make a small amount of money by letting some self-driving service use their car and cleaning it out now and then. But eventually the fleets will be owned by the companies.


Then what the hell is incentive for drivers to come out and drive during peak hours?


I believe this is talking about overall hikes and cuts in fees charged overall not the increase the is charged during peak hours.


If you don't, your pay goes below statistical average.


For those paywalled out and have Facebook you can use this bookmark tool to get around the WSJ pay-wall.

Create a bookmark with this content:

  javascript:window.location.href='https://m.facebook.com/l.php?u='+encodeURIComponent(window.location.href);


and now everyone thinks facebook give them 100% of their traffic


> ease its strained relationship with drivers, who have long sought better work conditions and higher pay.

Who knew sitting on your butt, listening to the radio and driving your car around the city were poor work conditions. They should try working in a coal mine for a living. Man some people don't know how good they have it..


Coal mining? You should try harvesting tantalum with your bare hands from open pit mines in the sweltering heat of sub-saharan Africa! Americans these days have it so good in their "coal mines" with all those "safety regulations".


I'm tired of hearing coal miners complaining about their work conditions. It's not like they're child slaves harvesting cocoa in the Ivory Coast.


I'm making some assumptions about the contents of the article, but there's a certain delicious irony to the fact that I can't get past the first paragraph due to the WSJ paywall.


What's ironic about it? The only real sources of income most sites now have are either ads, donations or subscriptions. Ads are often intrusive and usually make the site much heavier to load, donations don't usually work very well, and people are loath to pay for subscriptions either


Reading the summaries posted in this thread, the article describes an economic equilibrium in which a lower per-ride price structure turns into more demand. Within the tested range, the variables are in equilibrium, and higher per-ride prices don't turn into greater driver revenue.

The irony is that the WSJ is effectively (hopefully?) running this same experiment. I don't read non-paywalled WSJ (or Wired etc.) content, because I don't believe in that business model at their price point ($20 / month) but respect their choice to erect barriers to readership [1]. So, the WSJ has effectively chosen to go with a high monthly price, which is the equivalent to Uber's higher per-trip fares. One wonders if the WSJ would make more money with a lower rate plan and a broader audience, either via lower monthly rates or free access for casual readers (with a presumption of later conversion).

[1] I do pay for a few other press subscriptions, but all of them allow some level of across-the-board read-as-you-go trials, which I wholeheartedly agree with, or have a lower absolute cost per month, which I can stomach.


Ahh, right, now I get your point


On a related note, is there a way to filter out links to paywalled sites from hacker news results?


I don't get paid more when CPC goes up, either. Pay is related to the value of the work done, but it is not yoked to it. An important additional factor is how much it costs to convince someone to work for you. For some reason, this is a unpleasant concept for a lot of people, even though these people in turn shop for deals at stores and on professional services.


To be honest, this just sounds like a bunch of hand-wavey excuses as to why someone shouldn't be paid more when the value of what they're doing goes up.


Where do you see that the value of driving for Uber has gone up? I'll grant you that Uber customers are valuing the services more, but how much of that "value" should be going to the drivers vs. the programmers and support staff? How much should be divided among the accountants and cleaning staff at Uber offices? More importantly, who should be the one deciding what the most effective distribution of "value" should be -- maybe Uber should democratize it and ask you to vote on companywide compensation through their app? Let's cross our fingers their users have done their homework before voting, else the drivers and everyone else will have to find new jobs.


The drivers are the entire reason the company is successful. Why should they not share in that success?


If drivers were the entire reason, why do they need Uber at all?


I wasn't trying to make a normative statement (should vs. shouldn't), just an indicative one.


Eh -

For a lot of marketing companies, fee is based on a % of ad spend. So increased CPC does increase the overall fee.


As someone with quite a bit of experience negotiating and scoping agency fees, I'll say this only works to an extent.

Sure a % of media pricing model might net them more in the immediate term. But if it comes at the expense of reduced performance, that relationship won't last because at some point, the client will fire them.

Various fee models have their own strengths and weaknesses, and each has their own weighting of which party shoulders the bulk of the risk. % of media models shift that burden heavily to the client whereas rev-share models do the reverse.




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