Uber Hikes Prices Anyway After Buying Law That Exploits Workers

Uber said Proposition 22 would prevent price increases, but hiked fares to roll out benefits that come with a boatload of caveats.
December 15, 2020, 6:42pm
On Monday, Uber revealed it will hike fares on rides and deliveries to help subsidize new benefits doled out to its workers, charging up to $1.50 on ride-hail trips and $2 on meal deliveries.  In November, an Uber-led coalition of gig companies spent over
Justin Sullivan / Staff

On Monday, Uber revealed it will hike fares on rides and deliveries to help subsidize new benefits doled out to its workers, charging up to $1.50 on ride-hail trips and $2 on meal deliveries.

In November, an Uber-led coalition of gig companies spent over $200 million on Prop 22, a ballot measure to keep classifying their workers as independent contractors by exempting themselves from California’s labor laws. Part of their pitch for this Faustian bargain came with the promise of benefits including a guaranteed minimum wage, healthcare stipend, and some additional forms of insurance—and the threat of fare hikes or service reduction if Prop 22 were rejected.

Advertisement

"The vast majority of our cost is actually driver earnings," Uber chief executive Dara Khosrowshahi said at a virtual conference hosted by the Wall Street Journal. "Prices would go up, we estimate, between 25 and over 100 percent depending on what city you are. In larger cities, let's say San Francisco and LA, price increases will be in the 20, 30, 40 percent range. And in certain smaller cities, price increases would be 70, 80, 100 percent."

Now that Prop 22 has actually passed, prices are going up for riders anyway, while drivers are still left without the protections and benefits that traditional employment brings. Indeed, Uber’s “benefits” come with a boatload of caveats. 


Under Uber’s program, gig workers are supposed to be paid 120 percent of the state's minimum wage before expenses—$13 an hour this year, increasing to $14 next year. An additional 30 cents per mile would be paid for expenses (notably lower than the IRS standard per mile expense rate of 58 cents), but only for gig workers who use a car as opposed to couriers on foot or bicycle. 

This pay rate, however, would only be for "utilized" time or time with a passenger in the car—on average, ride-hail drivers spend over half of their time without a passenger as they move between trips, wait for orders, or sit in a queue. 

Advertisement

Under Uber’s program, gig workers would also qualify for a healthcare stipend, but only after hitting 15 hours a week and only if they already have health insurance that meets Uber’s requirements. Gig workers would also only keep 50 percent of the stipend until they hit 25 hours per week, which allows them to claim all of it. 

Uber did not immediately respond to Motherboard’s request for comment.

The price increase may come as a surprise for some, considering that a key talking point for the coalition of gig companies behind the Prop 22 campaign was that rejecting their ballot measure would actually increase costs. And yet, these companies not only have a long history of discriminatory price hikes, exorbitant premiums, and persistent driver fare cuts, but were quite open about this.

On Uber's third quarter earnings call, just three days after Prop 22 won, the company admitted there would be price increases. Chief financial officer Nelson Chai conceded it would "result in probably a 5 percent type increase" to cover the new labor costs and that "we do expect that much of it will be passed along." 

UC Berkeley professor and economist Matthew Reich has long examined these issues, and last week Reich and a team of economists released last week found that in the year since a driver pay standard in New York City was introduced, driver wages increased by 9 percent while rider prices increased by 6 percent. At the time, some commentators repeated Uber’s claim that significant wage hikes would increase and thus the "days of cheap Uber rides are over." For comparison, the price increase in New York City was similar to that of Chicago, which has no such pay standard.

While the post-Prop 22  price hikes are in line with Reich’s assessment, there is an important caveat. In California, the introduction of these flat fees are in response to drivers being paid 120 percent of the hourly minimum wage and provided benefits before expenses. In New York City, they came as ride-hail drivers were paid over $30 an hour before expenses.

After expenses, drivers in New York were being paid $17.22 an hour, with the driver pay standard covering time spent waiting, as well as vehicle expenses ranging from fuel costs to vehicle maintenance. In California, however, drivers could be paid as little as $5.64 an hour after expenses, according to a recent analysis by Reich and economist Ken Jacobs. Under Uber’s scheme, drivers won't be paid for time spent waiting, won't be compensated for expenses incurred during unpaid time, are being underpaid on their per mile expense rate, and are paying payroll taxes without receiving benefits provided to employees on a payroll.

Uber has insisted that New York City’s system has increased prices in low-income neighborhoods. The reality, however, is that Uber does that all by itself: Uber and Lyft have been repeatedly found to increase prices for trips coming to and from majority non-White neighborhoods.


And, as Uber’s price hike demonstrates, Prop 22 or not, the companies are happy to push the cost of meagre “benefits” on to consumers while drivers are still without crucial labor protections.