A nationwide 24-hour strike of rideshare drivers this month came amid an already widespread driver shortage as Uber and Lyft both struggle to lure drivers back to their rideshare apps. Strikers called on legislators to pass the PRO Act which includes stronger protections for gig workers, as Uber and Lyft fares skyrocketed while drivers’ pay decreased. This imbalance has existed since the rideshare apps first came on the scene, but the companies have been taking increasingly larger cuts of earnings each year, and drivers are fed up.
Why Are Rideshare App Drivers Striking?
While drivers have complained of excessive commissions, hidden fees, and continuously declining rates for years, the spark that led to the July 21st strike came when Uber rates at LAX were slashed from an already low $0.60 per mile to just $0.32 per mile—a rate so low, it doesn’t even cover gas, let alone compensate drivers for their time.
At the same time, passengers saw fares for rides to and from LAX skyrocket from $40-$50 to $120-$160 per trip. According to the company, the more than doubling of fares is the result of increased demand and a shortage of drivers.
While it is normal for prices to go up when faced with demand that outstrips supply, one would also expect those higher fares to translate to higher earnings for the drivers, but this is not the case because the amount Uber pays its drivers is not based on the fare passengers pay.
Instead, while passengers are charged a “surge price” ostensibly to cover the increased cost of gas or time spent driving during peak hours, drivers actually receive a flat fee per minute and per mile. So longer trips would pay more than shorter ones, but that extra surge pricing doesn’t end up in driver’s pockets.
Further eating into those profits is the fact that Uber and Lyft take a commission out of driver’s earnings, in addition to charging hidden fees. While Uber claims that it takes just 25% of fares on average, investigative journalists and researchers are repeatedly discovering that the average take rate is actually about 35%. When researchers factored in the extra fees the apps charge, the total cut that goes to Uber or Lyft is around 40% to 50% but can be as much as 75% of the fare.
So How Much Do Rideshare Drivers Actually Make?
Uber told Business Insider that drivers in San Diego and Austin are seeing median earnings of almost $42 per hour and in other major cities, it’s $35 per hour. Similarly, Lyft claimed its drivers make about $30 per hour in its top 25 markets.
However, both companies refuse to disclose the data that would verify those numbers, and the wave of strikes in nearly all of the cities where the rideshare companies claim their drivers are earning these generous wages tell a very different story.
The external research that has been done on driver pay also tells a different story. In a survey of 6,500 Uber and Lyft drivers, researchers found that the real hourly rate was just $9.63 per hour. Another survey in San Francisco found that drivers in the city were making as little as $360 per week after expenses for 30 to 50 hours of work. An MIT study in 2018 found that drivers made a median profit of $8.55 per hour and that 8% of drivers are actually losing money on the job because expenses incurred while driving—like gas and vehicle maintenance which aren’t fully compensated—end up costing more than what the driver earned.
This gap between what Uber and Lyft claim their drivers earn and what drivers are actually earning is so wide that the Federal Trade Commission (FTC) actually fined Uber $20 million in 2017 for misleading prospective drivers with exaggerated earnings claims.
Even after the FTC fine, however, the rideshare companies continued to make misleading claims about earnings. In a recent PR piece published by Uber in April, the company claimed their drivers were earning between $25.35 and $37.44 per hour. The difference now is that the company includes fine print at the bottom stating, “this is not a guarantee of future earnings.”
What Are Striking Rideshare Drivers Demanding?
The July 21st strike was coordinated by Rideshare Drivers United (RDU) a Los Angeles-based independent association of drivers working to improve compensation and conditions for Uber and Lyft drivers.
Their main demand is centered on getting Congress to pass the Protect the Right to Organize (PRO) Act. The act, which the House passed last year and for which President Biden has expressed support, has stalled in the Senate as Republican senators filibustered the bill. If passed, the bill would implement strict, enforceable penalties on companies who interfere in union elections or use intimidation tactics to discourage organizing efforts. It would enhance collective bargaining power and bolster the legal remedies and resources workers have for combatting an employer’s unfair or illegal labor practices.
For rideshare drivers, the passage of the PRO Act would narrow the definition of independent contractors enough to likely reclassify them as employees, a reclassification that would entitle them to more benefits and stronger worker protections.
It would also invalidate the clause in Uber and Lyft’s terms of agreement which waives a driver’s right to file a complaint in a court of law—opening up the possibility for drivers to file class-action lawsuits and generally seek justice if the company violates the terms or the driver’s rights.
Essentially, if the PRO Act passes, app drivers would be classified as employees and RDU could potentially become an official union with access to enhanced collective bargaining power. With that bargaining power, it could renegotiate terms with Uber and Lyft to improve driver pay, benefits, and job security.
Among the terms that RDU is already fighting for but would have more leverage to get after the PRO Act becomes law are:
- A 10% cap on Uber/Lyft commission
- Pay drivers for the mileage and time en route to pick up a passenger
- An hourly minimum pay of $27.86 before expenses (which would translate to about $17 per hour after expenses).
- Enforcing a “just cause” standard for deactivating a driver’s account (meaning drivers can’t be removed from the platform without just cause).
- Displaying the estimated fare payment and the trip destination on a ride request before the driver accepts the trip.
- Provide a complete fare breakdown on passenger receipts to show Uber/Lyft’s take
- An elective driver representative on Uber/Lyft’s boards of directors to advocate for drivers during corporate decision making.
These changes would push median wages up closer to what Uber and Lyft like to claim their drivers are earning.
If you’d like to support RDU and the drivers it represents, here are some of the ways to do that:
- Contact your senator to demand they vote in favor of the PRO Act—especially if your senator is one of the Republicans currently stalling the bill’s passage.
- Join in on an upcoming PRO Act phone banking session to call or text other voters to encourage them to support the PRO Act.
- Join or donate to Rideshare Drivers United