Rideshare drivers and app delivery workers are getting squeezed. Seven years ago, when companies like Uber, Lyft and DoorDash were first getting started, it was possible to make a decent living. The companies needed to recruit new drivers in large numbers, and especially benefited from every taxi driver they could lure away from traditional driving work.
Over time, however, pay has consistently gone down. Now that many taxi services have been driven out, competition has been reduced. Drivers find themselves working longer hours and being offered absurdly cheap fares. A number of studies have determined that most drivers earn between $7.25 and $9/hour–well below Connecticut’s minimum wage.
One driver recently drove across the center of Stratford for $2.53. The trip took over 17 minutes, which works out to an hourly rate of $8.93 –well below minimum wage. But the American Automobile Association suggests that maintaining and fueling a car takes 70 cents/mile. Since the trip was 3.4 miles, this means the driver had $2.38 in overhead. The result is pay of 17 cents, which works out to an hourly rate of 60 cents.
Of course, no driver could survive on this. But even factoring in the better days and the better fares, drivers are struggling. The fact that anyone would offer a fare like this–much less accept one –is ample evidence that something is wrong.
For the last six months, I have been helping Connecticut Drivers United (CDU) to organize rideshare and app delivery drivers across the state. I have spoken to many drivers who have simply given up. Many say that those who are still driving are being suckered by the companies. They don’t realize the long term costs in maintaining their car, and so are fooling themselves about their real pay.
It’s not just drivers who are feeling the pinch. Consider the following story: Quinnipiac University students get out of their classes in big clumps. The demand for rides to downtown New Haven can peak quickly. One would think that this would result in higher pay for drivers, who would then tend to congregate around the university at the appropriate time. But quite the opposite happens. The algorithms designed by Uber and Lyft have ascertained that they can charge students exorbitant fees while lowballing drivers. The result is an artificial scarcity. Students have been reported to have paid as much as $67 for the 11 mile trip, while drivers still net just a few dollars. Most students can’t find a ride, but Uber and Lyft cash in big on those riders who are most desperate or spendthrift.
The legislative solution suggested by CDU is simple. It builds on an approach already in place in several jurisdictions across the country: cap the percentage that rideshare and delivery app companies can take from each fare or delivery at 15%. The market can work when drivers actually see an advantage from increased demand. Coupled with minimums per minute and per mile, the result will allow drivers to maintain their cars and still make a living.
The other key suggestion is transparency. Drivers should know how much their clients are paying, so that they also know how much the app companies are taking.
The state itself has an interest in verifiable information about earnings and mileage. All of us as citizens of Connecticut deserve to know how much is flowing out of our state to pad the high salaries and perks of corporations headquartered in California. As things stand, the app companies hoard information just as much as they hoard profits.
The gig economy is here to stay. It has the potential for creating more efficiency for customers and decent jobs for workers, but only if fairness is taken into account. As it turns out, there is no app for that.
Kenneth McGill lives in New Haven.