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8 min read

    8 min read

    Uber recently cut the per mile rate by 25% in Los Angeles and it appears that these rate cuts may have been a tipping point for many frustrated drivers. But how do these rate cuts affect drivers and could they be coming to other cities? Senior RSG contributor Jay Cradeur summarizes what’s going on and shares his spreadsheet for calculating the difference in pay.

    It’s Monday morning and my news feed is blowing up.  It has been shouting at me about Los Angeles Uber drivers going on strike.  And in case you live under a rock, here’s why. Uber has decided to do some “rate rebalancing” which is Uber’s way of saying ‘We are cutting your rates’.

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    Drivers are PISSED OFF.  And they have every right to be.  Uber is lying to the drivers, telling them the net pay has not changed (as they’ve done in the past). But we did our homework and the net pay has most definitely been cut, and significantly so!  I’ll share the details below but here’s the e-mail Uber sent drivers in LA.

    Uber Cuts Drivers’ Pay: The Last Straw

    On March 11, Uber sent out the above e-mail to drivers in Los Angeles and cut the per mile rate from 80 cents to 60 cents, increased the per minute rate from 18 to 21 cents per minute and reduced the minimum fare driver payout from $3.75 to $2.62.

    Here is one of the hundreds of emails we have received here at The Rideshare Guy from drivers who are livid and now must seriously consider whether they are going to continue on as a rideshare driver:

    Email from an RSG reader upset about the Uber rate changes

    Uber says that ‘these changes did not have the intended impact’ but intended impact for who or for what – what was the intended impact? Drivers are now making less so is Uber implying that the rate increases made drivers more money and that was a bad thing?

    Telling drivers their pay is about to be cut is a tough job but whoever wrote this was clearly taking a page out of old Uber’s book when they used to tell drivers that ‘we’re going to lower rates but magically, you’ll make more money’, which their own study later disproved. Duh.

    Uber Drivers Strike in Los Angeles

    We’ve seen strikes in the past whenever Uber has cut rates but I have to give credit to the organizers (Rideshare Drivers United) of this one since there were a few hundred drivers out there as evidenced by The Apptrepreneur’s (and Dave the Uber Slave’s live stream here) live stream below (audio is a little rough):

    Drivers met on Monday outside of the Redondo Beach Uber Greenlight Hub and went on strike and while it’s tough to gauge the effectiveness, there were a number of large media outlets that covered the event and I’m curious to see what the next steps will be.

    This strike comes at a bad time for Uber and if this organization can get drivers mobilized, they could have some real bargaining power on the heels of Uber’s IPO.

    Uber Driver Pay Structure Then and Now

    In order to determine how much of a pay cut Los Angeles drivers are facing though, we created a spreadsheet and took a look at a recent week of driving.

    I took my week of March 4 – March 10 which contained the following stats:

    • 90 trips
    • Average distance per trip = 5.05 miles
    • Average time per trip = 16.42 minutes
    • Total earnings = $666.18

    In the first comparison, I applied the pre-March 11th LA rates to the new rates.  Up to March 11, the per mile and per minute rates for a driver (on the 75% commission structure) were 80 cents per mile and 18 cents per minute.

    The new rates are 60 cents per mile and 21 cents per minute.

    Old rates vs. new rates comparison

    What we see here is that the net effect is a loss of $68.86 in a week, or -10%. Depending on your driving habits, if you do a lot of longer trips, the difference could be as high as 20%. Uber did increase the per minute rate so that offsets the rate cuts by about 5-15% in most cases.

    But this does not include any bonuses.  In an article from the Daily News, I read this:

    In a statement issued Friday, Uber acknowledged it changed the rates but said the company has introduced a Quest promotion that allows drivers to earn bonuses based on the number of rides they provide.”

    Uber already had quest in LA so not sure what they’re talking about, but if they meant they increased the Quest bonuses, then I would need to see the specifics of this bonus.  At a minimum, it would need to cover the $68.86 in addition to the current bonus being offered to a driver.

    I have seen this type of reaction in the past to changes Uber or Lyft has made that negatively impact drivers.  The news becomes sensationalized.  We see headlines like “Rates slashed 25%!”

    And while rates were definitely slashed, it wasn’t 25%. The per mile rates were cut 25%.  Few words are written about the increase in the per minute amount which wipes out some of the loss. But lowering the minimum fare is another blow to drivers since even though this wasn’t talked about a lot, it is a bad thing for drivers. The minimum fare payout for drivers dropped from $3.75 to an ‘insulting $2.62’ as one of our astute readers pointed out.

    Bottom line, if you drive in Los Angeles, the rate changes are real and unsettling.  They are not as bad as the headlines would indicate, but they are still significant.

    To test this point, let’s give everyone who works at Uber a 10-20% pay cut and see if they don’t react with similar contempt.  Your $100K software engineer would now make $80-90K.  He or she better cancel that vacation to Thailand, or add another roommate to lower the rent!

    This callous behavior on the part of Uber is exactly what we have come to expect from the company.  You would think Uber would learn its lesson.  All the while, Lyft must be happy as can be, watching all the drivers on strike and the negative national press aimed directly at Uber.

    I hope that Lyft doesn’t follow in Uber’s footsteps but if history is any indication, they probably will.

    Comparing LA Uber Driver Rates to San Francisco

    If the drivers in Los Angeles want something else to be upset about, they should be upset about how much less they are paid than their fellow drivers in San Francisco.  Here are the rates I get paid here in San Francisco:

    Uber driver pay rates in San Francisco

    For each ride, a San Francisco driver earns a base rate of $1.65.  Our per mile rate is 68.25 cents per mile (75% commission structure).  Our per minute rate is 29.25 cents per minute.  I have heard of people like Will driving for Uber in San Francisco, all the way from Los Angeles, just to work a long weekend.

    Is it worth it?  How much more does a San Francisco driver earn?  Let’s see how the cities compare based on my same week with 90 trips.

    Comparison of average full-time Uber driver pay rates in LA vs. San Francisco

    This shows us that in 90 trips, a San Francisco driver can earn an extra $302.31 over a driver doing the same work in Los Angeles without bonuses.  That is quite a bit of extra money.

    Is it worth driving all the way from Los Angeles to work in the city by the bay?  I still don’t think so.  When you incorporate the hours to drive to San Francisco and back (at least 12) and the gas and room expense, you can make more money driving in Los Angeles to cover the pay difference and sleep in your own bed.

    What Will Lyft Do About Uber Rate Changes?

    Lyft almost always follows Uber’s lead.  When Uber changed the rates here in San Francisco last year, a few weeks later Lyft did the same thing.  The only time I can recall in which Lyft held its ground is with the destination filters.  When Uber went from six down to two daily destination filters, Lyft remained at six.

    Time will tell.  During the last rate change, Uber took all the heat and then Lyft quietly copied Uber’s rate plan.  Let’s hope for all of us that Lyft stays put and doesn’t get as greedy as Uber.  Since Lyft has an IPO  coming up, I would think they would want to stay out of the spotlight with regards to this incendiary topic.

    Overall, Uber’s New Rates in LA are Bad for Drivers

    If I were a driver in Los Angeles, I would be mighty angry.  If Uber tries to pull the same doublespeak rate balancing here in San Francisco (again), I will be wicked fuming mad.

    It’s not good.  There is no denying this is terrible news for all drivers.  We are not Uber’s “driver partners.”  No, instead, we carry their water until it gets too heavy to carry.

    But it is not as bad as you might have, at first, thought.  Do your homework.  Check your numbers.  Then you will have an appropriate reaction.  See things for what they are and what they are not.  They say the truth shall set you free.  Be free.  Los Angeles, I feel your pain.  Be safe out there.

    Readers, have you calculated how your pay will change if your city is affected by Uber’s rate changes?

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    -Jay @ RSG

    Jay Cradeur

    Jay Cradeur

    Jay Cradeur, a graduate of the Haas School of Business at UC Berkeley, is a full-time driver with over 26,000 rides. Jay has a driver-focused podcast: Rideshare Dojo with Jay Cradeur. When Jay isn’t writing articles or making videos, he is traveling the world. You can see what Jay is up to at www.nomadjay.com.

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