Uber and Lyft riders are coming back faster than drivers, causing price spikes

On a recent Friday evening, Alan Williams opened the app on his phone for the first time in a while and summoned an UberX, which eventually arrived, to his home in Logan Square.

He, his wife, and a friend rode about three miles to Fishtown to celebrate his wife’s birthday with a wood-fired pizza dinner at Wm. Mulherin’s Sons, a cozy neighborhood bar and restaurant. At 11:30 p.m., they took the ridesharing service back.

Total cost: about $50 before tip. Just before the plague shutdowns last year, when Williams was using Uber and Lyft as his go-to rides, he said the trip would have been $20 at most, before tip.

“If more of it’s going to bonuses or better pay for the drivers, I wouldn’t mind as much,” Williams said. “But I don’t really want to pay more money just to support Uber’s unsustainable business model.”

In Philadelphia and around the country, a shortage of drivers is pushing prices for Uber and Lyft rides to record highs, with fewer cars on the street and longer wait times for customers. Cities have been opening up, so the demand is there. On the supply side, many gig workers who drove for the services before COVID-19 have been reluctant to return.

“This situation is just going to [tick] people off and push them away,” Williams said. Ridesharing companies depend on the drivers being classified as independent contractors, with pay fluctuating based on an algorithm’s minute-by-minute calculation of supply and demand.

» READ MORE: Wawa, day care centers, and other Philly-area firms are offering signing bonuses to lure workers

Some former drivers still worry about taking on passengers with the highly contagious delta variant causing a spurt of coronavirus infections. Some have a cushion from enhanced unemployment payments. And others found better options in a tight labor market that is giving workers more leverage than they’ve had in some time.

On the next trip to Fishtown, Williams took the Market-Frankford Line. For a family outing to Penn’s Landing, he found a medallion taxi with the Curb app. The trip was pleasant and cost $16, he said. He has also begun riding the bus more. Six routes have stops within blocks of his home.

Businesses, especially in the hospitality industry, are feeling the same labor shortage as Uber and Lyft are. Like restaurants, Wawa, and others that are paying bonuses to attract workers, Uber has invested $250 million in incentives to draw back former drivers and recruit new ones.

Uber CEO Dara Khosrowshahi said on a May earnings call with Wall Street investors and analysts that driver earnings were at “historically elevated levels” — $37 an hour in New York and Philadelphia, $36 in Chicago, and $33 in Austin, Texas. Nationally, the number of Uber drivers was down 22% from the first quarter of 2020.

Drivers and experts who follow the ridesharing industry say that hourly rate was true several months ago for Philadelphia but has dropped since, though it is still above the pre-pandemic median of $18 an hour in the city.

And the top-line earnings don’t account for wear and tear, repairs, oil, gas, or car-loan payments. The Philadelphia Drivers Union found in a pre-pandemic survey of its members the typical salary was $12 an hour after expenses, said Angela Vogel, an organizer for the union, which advocates for gig drivers.

“Many of these drivers had the opportunity to look back and say, ‘When I factor all of that in … there’s not so much money left, and maybe I need to do something else,’” said Gad Allon, a professor at the University of Pennsylvania’s Wharton School who focuses on the gig economy. He was speaking on a recent Wharton podcast.

The long-term success of Uber and Lyft depends on their being able to retain drivers, but that comes at a cost. And the companies are walking a fine line because, though they have been stock-market belles for several years, neither has turned a profit. Both predict they will by the end of this year.

“Many of these firms will realize that short-term fluctuations, of giving people bonuses and then reducing those bonuses over time doesn’t really work all that well because they [drivers] will remember you the next time when you need them,” Allon said. “I think we’re going to see a little bit of a reckoning here from all sides.”

Customers, many of whom complain about how little the drivers are paid, would have to decide how much more they’d be willing to pay in fares toward that goal, he said.

During the height of the pandemic, food-delivery platforms grew in popularity, and many drivers flocked to Uber Eats, DoorDash, Grubhub, and the like as a safer alternative to ferrying around people.

The companies’ “goal all along was to create monopoly,” Vogel said. “They used billions in venture capital money to offer rides for less than cost, building up a market, and convinced drivers that could make a ton of money as independent contractors.”

Ridesharing decimated the taxi industry, with the value of their licenses to operate plummeting, and there are only a couple of cities in the United States where there is any ridesharing choice beyond Uber, the larger of the two, or Lyft, Vogel said. She drove for Uber Black, the company’s premium car service, from September 2016 until January 2020.

Most analysts, and the companies themselves, project the supply of drivers will increase after Labor Day as schools and more workplaces reopen, depending on the course of COVID-19.

Meanwhile, some of the price fluctuations customers experience are strange.

Patricia A. Burks of Germantown said she paid $30 the other week for an Uber round-trip between her home near Wissahickon and West Chelten Avenues to a Shop Rite 0.8 miles away. That was the same price she’d been charged for a one-way trip from King of Prussia Mall to Germantown earlier in the month.

And on July 17, Burks paid $20 to ride to and from A & N House of Produce, a store about two miles away. On the other hand, she ran a test on her Uber app Wednesday and was quoted $9 for the Shop Rite trip. It would have been about $6 before the pandemic, she said.

When she began using Uber several years ago, the rides were cheap, and she grew to appreciate the service. “They’re sharp. They set you up, with really good deals at first — like how a crack dealer gives out free samples of crack,” Burks joked.

Despite the recent price shocks, she will continue to use Uber when she needs to go to a doctor’s appointment or has bags of groceries that would be awkward to carry on the Route J bus. She said she can’t depend on taxicabs.

“Uber is reliable,” Burks said.