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Uber, Lyft struggle to meet resurgent demand

Uber, Lyft struggle to meet resurgent demand
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Demand for ridesharing services is beginning to pick back up as Americans get vaccinated against coronavirus, but many eager riders are running into the same problem: a lack of drivers.

Both Uber and Lyft have acknowledged the mismatch between demand for rides and supply of drivers, which is resulting in longer waits and higher fares for consumers.

Uber has announced that it is investing $250 million into bringing back past, and recruiting new, drivers.

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“As vaccination rates arise, infections fall and restrictions lift, people quickly breathe a sigh of relief and start moving again,” the company’s CEO Dara Khosrowshahi said during an earnings call last week. “One of our top priorities is to rebuild the driver base.”

A spokesperson for Lyft told The Hill that the company is “working to meet demand, including providing incentives to drivers, who are busier and earning more than they were even before the pandemic."

Despite those economic incentives and verbal commitments to protect workers from COVID-19, many drivers remain hesitant to start giving rides again.

Multiple workers who stopped driving during the pandemic told The Hill in interviews that going back is not worth it for them without bigger changes to how the companies operate.

“I'm not sure I’ll ever feel comfortable going back because of the amount of pay,” said Daniel Russell, who drove for both Uber and Lyft in the San Francisco Bay Area before coronavirus.

“It's not a safe feeling job, you don't have a lot of support from the company,” he added, saying that the platforms had not done enough to crack down on riders who endangered drivers by not wearing masks.

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Anna, a driver in Los Angeles who preferred to use only her first name for fear of retribution, told The Hill that she is making more on unemployment than she would giving rides again.

And Mekela Edwards, who drove in the Oakland area, said that she’s reflected on the costs she incurred while driving — like gas and oil and tire changes — and decided “it’s not worth it,” especially if it means “dealing with the public that may be a little bit hostile right now.”

Low pay has been a recurring concern for Uber and Lyft drivers, who say that the problem was exacerbated before the onset of the pandemic by there being too many drivers on the road.

Incentives being offered by the rideshare companies to fix the current shortage could replicate that problem, experts warn.

“It's going to inspire people who have not driven before who don't really understand how dangerous and precarious the work is,” Veena Dubal, an associate professor at the University of California’s Hastings College of the Law, told The Hill. “Their business model is to always have a glut of drivers because if you have a glut of drivers then you don't have to worry about matching supply with demand … any risks and liabilities in business like dips in demand are really borne first and foremost by the workers themselves."

Drivers who spoke with The Hill expressed similar hesitancy to start working again because of potential over-hiring.

“When I hear these incentives to get back on the road it’s like Lucy and the football,” one driver who preferred to remain anonymous told The Hill. “I actually had to go on food stamps before the pandemic began because I was making so little … this was completely [due to] the number of drivers that were flooding the road.”

Spokespeople for Uber and Lyft touted drivers’ median earnings in response to questions about these concerns.

Uber drivers in major metro areas are making between $22 and $37 per hour before expenses, the spokespeople said, while Lyft drivers in the company’s top 25 markets were making more than $30 per hour in April.

Russell said that those earnings are a “bait-and-switch” that are not going to be sustained.

“They may make it look like they're offering money to get us back out on the road but they're taking money from us in other ways,” he said, pointing to Uber removing the ability for drivers in California to set fare multipliers last month.

Both companies are bullish that they will be able to ramp supply back up to meet demand soon.

“We expect to see organic tailwinds to driver supply in the coming months,” Lyft President John Zimmer said during an earnings call last week. He suggested that many drivers who have shifted to delivery work during the pandemic could move back to giving rides as businesses reopen.

Harry Campbell, founder of the RideShare Guy blog, said that Uber and Lyft could retain more drivers and compete better with other gig economy services by simply raising base pay permanently.

“However, right now Uber, Lyft and other gig companies are struggling to prove profitability,” he added. “They don’t want to raise rates to lose customers, and they can’t pay drivers more without raising rates or cutting into their tenuous profitability.”

For critics like Dubal, even if the rideshare companies are able to weather this particular driver shortage, their business models make future ones inevitable.

“I think it's almost an irrational business model because it is built on instability and churn,” she said. “It just seems like they are like doing everything that they can in the short term to actually turn a profit without thinking about the possibilities of longevity for the firm, for the workers or consumers.”