Uber is effectively bribing drivers to get back on the platform

Uber is spending US$250 million to persuade drivers to get back on the road so it can pay them less again.

USA & CANADA — Uber has announced it plans to spend an additional US$250 million on “boosted incentives and guarantees” to persuade drivers to get back on the road amid a shortage during the COVID-19 pandemic.
​
“In 2020, many drivers stopped driving because they couldn’t count on getting enough trips to make it worth their time. In 2021, there are more riders requesting trips than there are drivers available to give them — making it a great time to be a driver,” Dennis Cinelli, the head of Uber’s US and Canada ride-hailing business, said in a blog post.

But Uber also warned the increased pay won’t last forever.

“We want drivers to take advantage of higher earnings now because this is likely a temporary situation. As the recovery continues, we expect more drivers will be hitting the road, which means that over time earnings will come back to pre-Covid levels,” Cinelli said.

Uber claimed in the blog post, drivers in Philadelphia, Chicago, Austin, Miami, and Phoenix are currently earning pre-tip median incomes between roughly $26 and $31 per hour.

Uber’s ability to provide on-demand rides at low prices depends on having lots of drivers active when passengers are looking for a ride. If only one driver is competing for a passenger, that driver can refuse the job until Uber’s algorithm jacks up the pay – which is essentially what some DoorDash drivers are doing to boost their pay for food-delivery gigs.

If 100 drivers are competing for that same job, Uber can offer much lower pay and one of them will still probably do it, and therefore Uber can charge the consumer less and still make more money itself.

But the pandemic caused a massive drop in the demand for rides, and has kept many drivers – who are especially concerned about getting sick because Uber doesn’t provide healthcare or sick pay – off the road, even as rider demand returns.

That’s a bad situation for Uber, which doesn’t want riders returning to the app only to find no drivers are online and that they’re waiting 20 minutes for a ride and still paying surge pricing.
​
So, Uber is effectively bribing drivers to get back on the platform until there’s enough competing for those returning passengers that Uber can start whittling down driver pay again.

More news in our April 2021 Edition here.