Uber changed how its surge pricing works last year. Not for riders, but for drivers. The changes have resulted in drivers earning less from surge pricing, but riders still paying the same inflated costs, with Uber pocketing the difference.
We had heard from drivers that this was a big blow to their already precarious income. So a little over a month ago, we asked Uber drivers to send us screenshots of their surge fares to find out the extent of this pay cut. We received hundreds of responses, many of which included missives of desperation and anger at the unilateral price change from the ride-hailing giant, as well as pity for riders who are, as one driver from Phoenix put it, subject to “egregious price gouging.”
Surge pricing goes into effect when Uber’s algorithm determines there is more demand for rides than drivers available. The company then increases fares through what’s called a multiplier. The larger the multiplier, the higher the fare.
Several dozen drivers interviewed for this story nearly unanimously confirmed the 50/50 split as typical during surge periods under the new structure.
A spokesperson for Uber disputed these findings. Uber said 175 fares isn’t enough to draw conclusions from. “Given millions of trips take place every day in the US, 175 ride receipts is not a meaningful sample size and a 47/53 split is simply not representative of what we currently see on our platform.”
Uber is right that 175 fares is not a meaningful sample considering the scope of the company’s business. But Uber refused to make anyone from the company available for an interview to discuss in detail how the new pricing model works, share any raw fare data with Jalopnik, or provide any further information on the company’s “take rate” beyond what it discloses to regulators, which indicates a take rate closer to 20 percent.
So, we want to collect more fare data. Much more.
That’s why we are launching fares.jalopnik.com. We want to learn more about how Uber and Lyft—the latter of which was not a part of our initial investigation but has since made similar changes to Prime Time as Uber did to surge pricing—split their revenue with their workers.
Using a quick form at fares.jalopnik.com, drivers can
anonymously submit information about recent fares, including how much the rider paid, how much the driver got paid, and how much the company pocketed. We will then use that information to dig deeper into Uber and Lyft’s take rate.
The form does not ask for any personal information, and it asks drivers to round amounts to the nearest dollar to anonymize each fare. However, we do require each fare be accompanied by a screenshot to verify the information. After verification, the screenshot will then be deleted. Drivers can read more about how we protect their privacy by going to fares.jalopnik.com and clicking on “About” in the upper-right corner.
These changes to surge pricing is just the latest example of the ride-hail giants—worth a combined $90 billion on the stock market as of this writing—unilaterally changing their pricing structures, a practice that underscores the inequities in the industry.
Under current U.S. law, drivers are unable to collectively bargain because they are technically independent contractors, not employees. But they are also unable to set their own prices, unlike independent contractors in nearly any other industry.
The dynamic was perhaps best captured by a Utah driver posting in an Uber forum, as quoted by researcher Alex Rosenblat in her book, Uberland: How Algorithms Are Rewriting the Rules of Work:
This is the scam Uber is playing, calling us contractors when we’re obviously not. If you’re a painting contractor, do you accept a job without knowing what it is or how much it pays? Of course not. But this is exactly what Uber is doing to us. Like telling the painting contractor you have a job for him but he has to accept it before he knows what it is. Paint the whole house for 50 bucks and you the contractor have to supply the paint. You’d tell them to go pound sand, the paint alone costs more than 50 bucks. Then the painting contractor is told he already accepted the job and if he cancels he’ll never work in this town again.
Although Uber and Lyft have often tinkered with their respective pricing algorithms, the change to how surge pricing works is particularly noteworthy because it undercuts the logic both companies have used to justify the controversial feature.
The entire idea of surge pricing is that the free market principles of supply and demand could be harnessed in a “dynamic pricing” model to better serve both riders and drivers. By letting an algorithm determine when demand far exceeded supply, the logic went, Uber could incentivize additional drivers to work by raising prices (while similarly dissuading price-sensitive customers from booking rides) to reach market equilibrium. The higher prices riders paid would be passed onto drivers in the form of higher earnings.
Although consumers loathed the feature which was often equated with price gouging, economists love it. And while drivers had their frustrations with “chasing the surge” only for it to disappear, they often relied on the significantly higher pay it offered, particularly during high multipliers or long surge rides, to compensate for the otherwise poor compensation of ride-hail driving.
But now, under the new model, Uber moved to a “flat surge” structure, where instead of getting the bounty of the multiplier, drivers merely get a flat fee, typically around five dollars. Riders, meanwhile, continue to pay the high “multiplier” surge pricing of 2x, 3x, or more. Uber keeps the rest, meaning in many cases the vast majority of the surge fare lines Uber’s coffers rather than boosting driver pay. For its part, Lyft introduced a nearly-identical change to its “Prime Time” pricing around the same time.
Uber told Jalopnik that “These changes are designed to make surge a less stressful and more reliable way for drivers to earn, not increase Uber’s share of earnings.” Further, Uber contends this amounts to a pay raise, not a pay cut; the website further states “If you choose to drive to surge, you can expect your weekly surge earnings to remain steady or increase.”
But the drivers Jalopnik heard from don’t see it that way. One driver from Washington, D.C. said the change has had the opposite effect. “Because of this new surge policy,” the driver wrote in an email, “I rarely drive during surge conditions because it’s not worth the traffic/risk of puke, etc.” The extra couple of bucks they make per surge trip is further counterbalanced by the fact that riders often tip less on surge trips, if at all, under the assumption drivers are making bank on the surge pricing.
Another driver from Los Angeles observed that the change in the surge model hurts drivers most the higher the surge is, meaning drivers are now missing out on the occasional massive paydays they might get during extreme surges.
Sometimes, Uber will kick a couple extra bucks to the drivers on longer, most expensive surge trips, but the algorithmic logic behind this additional pay is opaque, and it still pales in comparison to what drivers used to make under the old model. For their part, drivers who ask Uber for more information on how pricing works are typically told any pricing algorithm information is “proprietary” by customer support or representatives at driver support centers or given the runaround by support personnel in the app.
“I see this as a scam that Uber is perpetuating on the riders,” the LA driver continued. “If they know that they can get enough driver coverage at a time of high demand for, say, an extra $10, then why are they charging the rider hundreds of dollars more for that ‘surge price’? How can they possibly justify that?”
For now, the company doesn’t attempt to justify it. They simply argue it isn’t happening. If you drive with Uber or Lyft, go to fares.jalopnik.com and help us prove otherwise.