It looks like Uber is lowering rates again, but in addition to decreasing mile rates, they’re also increasing time rates. On the surface, this doesn’t seem to make a huge difference in what drivers will get paid, but as any veteran driver will tell you, it’s important to have a healthy dose of skepticism when it comes to Uber and their rate changes. Let’s find out if drivers will be getting paid more or less after this rate change.
Based on Uber’s e-mail to drivers, the company is ‘updating rates to better value your time’. But the messaging is eerily similar to what we’ve seen in the past when Uber has lowered rates and told drivers that we’d earn more – which turned out to be false. Who would have thought?
Which Cities Are Affected?
So far, only a handful cities have had rates updated, but as always, Uber likes to pilot new products before launching to the rest of the country, so it wouldn’t surprise me if they rolled these changes out nationwide over the next year. And when you combine this pilot with Uber’s new surge experiment, it indicates a clear shift in the way Uber wants to pays its drivers: they are aiming for more consistent earnings and less volatility, which makes sense when you think about it.
Here are the cities affected by this latest round of rate updates:
|City||Time Rate||Distance Rate|
|Salt Lake City||+82%||-18%|
You can see that the distance rate is dropping by 10 to 19% while the time rate is significantly increasing anywhere from 50 to 83%. With the new rates, drivers will now be paid more on shorter trips in traffic but less on longer trips with no traffic. But is that a good thing?
Your Overall Trip Earnings Will Stay the Same Though???
In Uber’s e-mail to drivers, they obviously had a hunch drivers would worry that this was a rate decrease so they bolded the line that read: Your overall trip earnings will stay the same. They also included a couple examples to illustrate their point.
Here are the two examples they included in an e-mail to Minneapolis drivers:
These examples make it seem like the rate change will have a pretty minimal effect, but I couldn’t get the math to add up! For the short-distance example, I calculated that a 3.5 mile, 20 minute trip should pay a driver $5.51 with the old rates and $6.48 with the new rates.
3.5 miles * $0.788/mile + 20 minutes * $0.12/minute + $0.353 base fare = $5.51 (not $5.30)
3.5 miles * $0.638/mile + 20 minutes * $0.195/minute + $0.353 base fare = $6.48 (not $6.24)
Either way, the driver makes 98 cents more with the new rates, which is pretty close to the difference calculated in Uber’s short-trip, high-traffic example. I still don’t know how they came to their numbers though.
Now that my suspicion level is increasing, let’s move on to the long-trip example, notice anything funny? How about the fact that to travel 20 miles in 12 minutes would require you to be driving 100 MPH! Clearly whoever wrote this blog post is not a driver, but let’s say it was possible to drive 100 MPH. Even then, I got different numbers again for this long-distance trip example:
The old rates would net the driver $17.54 and the new rates would net the driver $15.44 so this long-trip will actually earn a driver $2.10 less. This is obviously a lot more than the 29 cent difference Uber calculated. No idea how Uber got $11-ish for these trips.
If we assume a more reasonable 20 mile trip in 25 minutes, a driver is only earning $1.13 less with the new rates vs the old rates.
I didn’t check all the calculations for every city but I did also do Houston and I was able to match their short-trip example, but again their long trip example was way off and also not feasible since it required you to average 82 MPH. If you’d like to check my work, my spreadsheet is available here.
(Update: I reached out to Uber and they told me the time and distance components were flipped and have updated the posts but even with the new numbers, I still wasn’t able to match the payout for MSP, but I was able to now match both payouts for Houston. Uber, let me know if you need me to check your math next time!)
So Will Drivers Make More or Less?
A couple of readers (Jeff R and Jeff M) were kind enough to give me access to their Uber driver accounts so I could pull their last month’s worth of trips and see how they would have been paid for all those trips with the new rates. I ended up pulling 144 trips from Jeff R in Minneapolis over the period of 6/11-7/2 and found that with the ‘new rates’, Jeff would have made just $1.36 less than with the old rates.
Basically, Uber was telling the truth and drivers actually will make nearly the same amount! I was actually surprised that the difference was so small over such a large sample size. In any given week, the difference was never more than +/- $2 in either direction too.
The graph above shows that as the length of the trip increased, Jeff would have been paid less with the new rates system vs the shorter trips that would have paid him more. This makes sense since the mileage rate is decreasing so long trips are not as valuable and the time rate is increasing so shorter trips are now more valuable. But as you can see, it pretty much all evens out in the end since the difference in new vs old rates is negligible.
Why Did Uber Make this Change?
Uber’s recent tests with surge pricing and these new rate changes indicate they’re seriously focusing on more consistent earnings for drivers. Fine, I guess they also said that in the e-mail, but you get the point. No one likes income volatility without increased returns and although drivers are always resistant to change, I think more consistent earnings over time will be a good thing for drivers. This isn’t an innovative idea since Amazon Flex already does this and is extremely popular with drivers, and Asher brought this up a couple years ago in a good post here.
My biggest problem with this announcement is that Uber missed yet another opportunity to curry favor with drivers. Over the long run, I bet this will make drivers’ earnings more consistent, but in the short term, all drivers see is a change to their pay structure (nobody likes change) yet they earn the same amount of money – so what’s in it for us? Kind of feels like we’re being experimented on again without our approval – do these companies not learn anything from past mistakes?
If I were in charge, I would have rolled out this program with similar changes to mileage and time BUT instead of paying drivers the same overall, I would have made sure that drivers are now getting 5% more across the board. On top of that, I would have given drivers a backpay bonus for the last month to really put my money where my mouth is.
Even if Uber were to do it my way with all 1.9 million drivers, since drivers earn an average of $375 per week (or $1,500 per month), a 5% raise would only cost Uber $142 million for a month of backpay. That sounds like a lot, but when you think about the fact that Uber just spent over $500 million on Dara’s ‘We’re Sorry’ TV campaign, it’s clear that drivers still aren’t a priority for Uber.
If Uber is so confident this new scheme will pay drivers more, don’t just tell them in an e-mail, actually show them with cold hard cash. That’s how you start to win drivers over – not by changing pay and telling drivers to trust us, we got this! Even if you do got this.
Drivers, have the rates changed in your city? Let us know in the comments.
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-Harry @ RSG
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