Passengers May Pay a Lot More. Drivers Won’t Accept Much Less.

Still, a major survey of drivers done last year by the analysis firm Ridester showed average raw earnings for UberX drivers of about $15 per hour, before projected deductions of about $8 per hour.

The bad news for the drivers, then, is that average pay will be low. Also, even if they convinced ride-share companies to raise the share of revenue the drivers keep and to increase benefits, the earnings boost would likely be ephemeral. Thousands of new drivers would enter the more lucrative market, bringing average earnings back down to the market rate.

The good news for drivers, though, is that it won’t be easy for ride-share companies to cut wages much lower. Many drivers will simply stop driving if wages fall.

One of the most important studies of driver behavior (conducted by professors from Yale and U.C.L.A. and, again, one Uber employee), confirms the sensitivity of drivers to earnings changes. On average, they increase their hours by 20 percent in response to a 10 percent increase in wages. That is about four times larger than the response by passengers to changes in the price of a ride.

Economics says that the likelihood that a person will bear the burden of an increase in profit margins is inversely proportional to their price sensitivity. In other words, because drivers are four times more price sensitive than riders, a reasonable guess is that 80 percent of the price burden will fall on passengers, 20 percent on drivers. Uber and Lyft are still building their networks and market share, which complicates matters, and may delay price increases.

Nonetheless, I think that as a passenger, you should take your Uber and Lyft rides now, while they’re still relatively cheap. And, if you’re an investor counting on wage cuts and robots to carry Uber and Lyft to profit nirvana, you may want to buy a certain bridge first.

Article source: https://www.nytimes.com/2019/05/31/business/passengers-drivers-pay-uber-lyft.html?emc=rss&partner=rss