RIDESHARE ISSUES

Friday February 8 2019

 Premise: Unscrupulous rideshare companies exploit both passengers and drivers in a regulation free environment that benefits nobody except the Silicon Valley VCs who own these companies.

Background:  The majority of rideshare drivers in Phoenix are unemployed or under-employed middle and working class people trying to make ends meet.  Rideshare companies have successfully put most taxi companies out of business by putting tremendous price pressure on them in much the same manner as Walmart has put mom and pop local stores out of business. The rideshare companies have a minimal investment in the community, passengers and the workers.  They are external predators. Their customer support, if it exists, is almost entirely offshore in the Philippines and India.

Major Issues

    1. Out of state drivers. In the winter tourist season, our market is flooded with out of state drivers who add to the supply of drivers that is already very over-saturated. These drivers frequently sleep in their cars and drive erratically.  This is a situation unique to Arizona as neither California nor Nevada permit out of state drivers like Arizona does.  These drivers are operating a commercial business completely unsupervised by the State of Arizona.  There are existing laws on the books that are not being enforced because of pressure from the state executive branch.  This has resulted in a government culture within ADOT wherein complaints about rideshare companies are ignored due to fear of retaliation.
      SOLUTION: Require rideshare companies to only employ drivers who are bona fide residents of Arizona, who have an Arizona driver’s license and whose vehicle is registered in Arizona.

    Car in Uber airport queue with Texas plates.

    Uber car with New Jersey plates at Sky Harbor Airport Queue

     

    1. Cutting Pay. Uber and Lyft have cut driver pay 3 times in the last 6 months and most recently this week. Two years ago the baseline driver pay for an Uber X ride was 1.40, then 1.00 then .70 and now 59. The IRS tax deduction is .585 cents per mile, so based on the IRS tables, an Uber X driver is making ½ of one cent per mile in profit.  This is literally a race to the bottom with no end in sight. Many Uber and Lyft drivers are desperate people who have lost their jobs and they have minimal options for other employment. Most Uber X/Lyft basic drivers make much less than minimum wage. Additionally, they tend to not realize that they are being exploited by the rideshare companies which literally employ teams of psychologists to manipulate the drivers. Drivers operate as “independent contractors” despite the fact that they clearly are not under the IRS definition of what an independent contractor is.Moreover, because Uber has decoupled the price the passenger pays from the amount the driver receives, drivers never know from ride to ride how much they are going to make which varies widely based on the whim of the rideshare company. In addition to being unfair, this exploitation of the local community by rideshare drivers also taxes local resources as many drivers are so poor that they are forced to utilize social services despite working 60+ hours per week. They also neglect vehicle maintenance because they can’t afford it.
      SOLUTION: Require ridershare companies to charge a minimum amount and pass through a minimum of 70% to the drivers.  Additionally require rideshare companies to display the amounts charged and paid in a uniform manner to both passengers and drivers so that everyone knows how much they are paying and who is getting it, much like the uniform disclosure requirements in place for consumer finance companies (payday lenders, pawn shops, car dealers, etc.).

    Typical fare example. Driver receives $2.74.

    1. Surge Ride Price Gouging. Uber and Lyft both use “dynamic pricing” which means that during peak times of high demand, passengers are charged more. This brings the cost of an Uber more in line with what rates used to be or what regular taxis charge. Because of the many cuts in what passengers are charged, surge rides are the only way that most drivers can still make money. Previously, drivers got 70% of the fare across the board and the rideshare company got 30%. Now, Uber and Lyft are oftentimes reversing the split wherein they take 70% and only payout 30% to the driver. This means, for example, that on a $30 ride, the driver might get $10 and Uber gets $20.  Even worse, neither the passengers nor the driver are often aware of this.
      SOLUTION:  The transparency requirement and 70% minimum pass-through stipulated in #2 above.

    Surge Ride Gouging Example: Uber took 66% and paid the driver 34%.

    1. Unsafe Cars/Unsafe Drivers. An almost total lack of regulation puts many highly unsafe cars on the road, particularly on Uber X and Lyft basic.  Additionally, a lack of any training whatsoever puts many drivers on the road (and essentially operating a commercial taxi service) who are lacking in basic driving knowledge, navigational knowledge and safety skills. Moreover, drug and alcohol issues are a serious and ongoing problem with drivers. Finally, the extremely low rate of pay for drivers means that they tend to neglect vehicle maintenance because they simply can’t afford it putting both passengers and other drivers at risk.
      SOLUTION: Require rideshare companies to use vehicle inspections by truly independent third parties and require registration and drug-testing of rideshare drivers.

     

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