Will Rideshare Incentives Disappear Once Government Benefits End?

As businesses opened up and passengers started heading out into the “new” world, there has been one lingering issue—a lack of drivers.

There are several theories as to why there aren’t enough drivers. These theories have ranged anywhere from laziness, to drivers finding better jobs elsewhere, to drivers “milking” the unemployment offerings from the federal government, an option they had not been given pre-pandemic.

Below, we’ll cover the idea that drivers have stopped driving for rideshare because they’re using/relying on unemployment benefits instead of driving. What might change after those benefits end at the beginning of September, and will drivers return to rideshare once all federal and state extra unemployment is gone?

Check out Harry’s article Where Have All the Drivers Gone? The Complex Reasons Behind the Driver Shortage to learn more about reasons drivers are not on the road.

Federal Pandemic Unemployment Assistance (PUA)

On March 11, 2020, the World Health Organization (WHO) announced that the COVID-19 disease had reached pandemic levels. March then also saw the introduction of stay-at-home orders across much of the U.S. With everyone in a lockdown of sorts, a lot of people were left without jobs, or at least, without places to go.

As the world started adjusting to being closed down, the U.S. government passed the CARES Act that allowed for added unemployment benefits, even for those not typically qualified for those benefits.

On top of allowing people to access unemployment insurance and receiving those payments, there was an added weekly benefit payment given to all those on unemployment. It was originally set to end on December 31, 2020, but was extended as COVID-19 cases were still on the rise over the winter months.

It was extended until September 6, 2021, which is the last day to receive these benefits (in some markets September 4 is the last day).

Some States End Aid Early

There were some states that decided to end the Federal PUA benefit payments earlier than September. With the first implementation of the PUA benefits, the added weekly payment was $600 on top of whatever unemployment compensation the individuals were qualified for. With the extension, it was lowered to $300 per week.

In May 2021, 24 states announced their intentions to end the Federal PUA benefits early. This was in an attempt to get those who were unemployed to fill the many job vacancies in those states.

Some of these states even offered payments to people who left unemployment and worked a certain number of weeks or returned to work between certain dates.

Has it worked? The latest news looks like that’s a “no.” According to The New York Times, “a total of 26 states have moved to end some or all of the expanded unemployment benefits… recent studies have concluded that the extra payments have only played a small role in this year’s labor shortages.”

In addition to not “encouraging” people to return to work, studies have also shown that cutting benefits has led to, go figure, a decrease in spending, hurting local economies.

As we reported in our driver shortage article, this makes sense. Many drivers who’ve reached out to RSG report COVID concerns being the main reason they’re not returning, in addition to other opportunities (driving for delivery is almost as lucrative as driving for rideshare – and requires fewer human interactions) – not federal unemployment benefits.

Uber and Lyft Initiatives for Getting Drivers Back on the Road

Of course, with the added payments from the government, it might be difficult to encourage drivers to come back to the unpredictable and sometimes low wages of rideshare work. Both Uber and Lyft started sending out bonuses and rewards to encourage drivers to get back out there in markets where passengers were experiencing longer than usual wait times due to the lack of drivers.

Back in April, we covered the news that drivers were being offered big bonuses to get on the road. In fact, Uber claimed they were spending $250 million toward that goal.

Lyft was also doing what it could to encourage former drivers to drive again by offering big referral bonuses.

Despite these bonuses, there were still markets lacking in drivers. And, now that the unemployment benefits for drivers are disappearing in September, some drivers are afraid that Uber and Lyft will take away the bonuses.

One Redditor said,

“I work in an area where there’s not any bonuses and surges already. They are not guaranteed. Whenever the supply and demand equalizes, the algorithm eliminates them.”

Others pointed out that with the unknowns around the Delta variant of COVID-19, bonuses may be sticking around for a while in some markets because drivers who didn’t drive specifically out of safety from the disease may still avoid driving despite unemployment benefits ending.

Drivers Aren’t Returning to Rideshare Because They’re Relying on Unemployment Benefits

When we polled our Facebook audience about why they aren’t returning to rideshare driving, some agreed that unemployment benefits were a factor:

“I would agree. I started back driving again in April. When Tennessee ended the extra $300 for unemployment I noticed more drivers out. They should back now that the college students are back.” – Sherry W.

“Agree. At least in my market. It died within a week of unemployment ending.” – Andrew S.

One driver cited the slow pace of Uber and Lyft processing background checks as a major impediment to returning, in addition to unemployment benefits:

“I’d say it contributes to the shortage. Part of the problem is being kept offline for 3 weeks for a still yet to be completed background check.

No reason background checks take weeks upon weeks to complete.” – Chris B.

One driver agreed, but noted driver expenses (particularly gas) have not kept pace, even with an increase in driver earnings:

“Yes AND No. There are definitely some drivers doing this and milk the system. However, many states reduced the amount unemployed people get. I think increasing costs of doing business and not much of a pay increase to meet these needs. For me, the gas is a huge concern for me.”

Finally, one driver notes that when the extra benefits do officially end, we may see an influx of drivers:

Well, the additional $$$ ends on September 4th. There will be plenty of drivers in another 2 weeks. – Tosh B.

More Reasons Why Drivers Aren’t Returning to Rideshare

While some drivers agreed that unemployment benefits had an impact on the driver shortage, many others emphatically disagreed with this and cited numerous other reasons for the decline in drivers, including COVID and safety concerns, low earnings, and finding other jobs.

“In Chicago, it’s too dangerous with crime and Covid. Then you have gas prices so high. Add that to the mix. I would collect unemployment over that too or I’d find a new job.” – Jenny D.

With the threat of new variants being more contagious than the original, several drivers may still shy away from sharing their vehicles with passengers. This is especially true when you consider the hassle that some passengers have given drivers over the mask mandate and limited seating in vehicles.

“There’s a shortage because the pandemic is not controlled, and drivers don’t feel safe. Also, other gigs are easier because you don’t have to rely on entitled pax for your money. You can deliver food and groceries to people, mask up and keep your distance, and still earn money without the abuse to your vehicle at the hands of a pax who thinks they have a right to be abusive to your property.” – Dale B.

Aside from the heightened possibility of catching a variant of COVID-19 by allowing strangers in your vehicle, there’s also the simple fact that some drivers have moved on to other jobs.

“No, a lot of people used those funds to start their own business. A lot of people found better job opportunities. I don’t drive anymore because I learned to trade forex and make more in 1 hour sitting at home than in 8 hours running people around, using up gas and running up my mileage.” – Joselyn T.

Uber and Lyft as companies aren’t known for treating their drivers particularly well. In fact, driver rate cards have been lowered basically every year since the companies started business. Everyone has their number, and if Uber and Lyft have dipped under that number, they could be losing valuable drivers permanently (especially as gas prices rise, cutting into driver profit).

Driver Derek pointed out that COVID initially caused him to leave rideshare, then unemployment helped him study for a new job entirely:

“Personally, I quit for good when COVID hit, drew unemployment for 18 months and haven’t looked back. Rideshare firms had already been none-too-discreetly taking too many grabs from my profits for it to be worthwhile.

I’m busy getting my CDL right now and would strongly recommend Lyft/Uber holdouts do the same. The demand for drivers is at an all-time high and starting pay for new drivers is following suit. I’m halfway through a 4-week class and already have a few pre-hire letters in hand.”

Another major factor in the decline of rideshare drivers? More competition from the delivery and grocery spaces! As driver Scott succinctly puts it, there is a lot of competition for labor in general, and particularly in the delivery space. Why not drive for a delivery company instead?

“A lot of drivers switched to delivery.” -Scott M.

Final Thoughts

While I think it’s highly possible for Uber and Lyft bonuses to start disappearing in markets where the PUA benefit is ending, it is more likely to disappear if, and only if, the number of drivers in that market increases.

There’s always the possibility that markets will be oversaturated with an influx of drivers because of unemployment disappearing. But, with how many states have already ended unemployment benefits, I don’t think it’ll be a flip of a switch on September 6.

Personally, I don’t think PUA benefits ending will make a huge difference in the market overall. There may be dips and spikes just like any other day.

Drivers, have you noticed a decrease in incentives in your market?

-Paula @ RSG