This doesn't surprise me at all and it's because of hidden costs incurred by the driver, combined with an implicit bidding system that drives down wages.
Hidden costs:
1. Vehicle wear and tear (cars cost you money when you drive them)
2. Vehicle depreciation (cars cost you money even when you aren't driving them)
3. Interest and fees associated with auto loans and leases
4. Insurance premiums
5. Gas
6. Unexpected/unplanned for tax bills
But the feedback you're getting about your income is just the dollar figure that shows up in your account, which is vastly higher than the true amount you could reasonably keep as profit. It makes $10 feel like $100.
Combine that with the implicit bidding system. And by this I mean, market forces will naturally saturate Uber and Lyft with drivers until the price falls low enough that drivers won't accept it. And because of the factors I listed above, that natural price point is practically guaranteed to be well below minimum wage.
The whole setup is just beautifully engineered to trick poor people into thinking this can be a career. I've often thought about which is worse, this or Herbalife. I think Uber and Lyft might impact more people than Herbalife, and generally those people start with less, so I might give it to Uber and Lyft.
Actually, it's also a profession that has one of the highest rates of workplace fatalities, so I'd definitely give the title to Uber/Lyft over Herbalife.
The insurance point deserves further discussion - in many states your normal coverage is voided by driving for profit. So if you get into an accident where they can prove you were working, you aren't going to get anything. I know many people who are driving for Uber and Lyft and have no idea about this
Oh yeah, insurance and financial products in general are just silent murderers of people's finances. Families get wrecked financially for generations to pay for this stuff and they don't even realize it's happening.
And in order to even be eligible to become an Uber or Lyft driver, you first must navigate through that minefield of auto loans and auto leases and insurance companies. And Uber and Lyft is the opportunity that convinces you that it's a good idea to do that (more similarities to Herbalife).
I say all this as someone who uses Uber and Lyft almost every day. The drivers think I'm paying them to drive me somewhere, but what I'm actually doing is paying for them to take on the liabilities/debt/depreciation associated with owning a vehicle. That's where the value is for me, it has nothing to do with them driving.
Both Uber and Lyft have insurance policies that cover drivers and passengers during rides, and in most cases the maximum coverage per accident is $1 million.
However, the insurance provided by Uber and Lyft only cover when you have a passenger in the car -- they don't cover you when you are driving to pick up the next person. And your own insurance also doesn't cover you during that period, unless you buy a separate commercial rider.
> While you’re online with Uber before you accept a request, you are covered by our insurance policy for your liability to a third party if you are in an accident when you’re at fault
When I last renewed my insurance it offered me coverage for driving for rideshare for an extra $50 per 6 months (I think - I've never driven Uber/Lyft, so I didn't look too closely).
If I'm remembering it right that sounds like a very reasonable price
1 million is a laughable low coverage. Get into a single accident where someone has to get emergency surgery, a few months in the hospital, and then needs physical therapy to walk again. One million is gone faster than you can imagine.
Interesting. In Germany the lowest legally possible coverage is 7.5 million € for damages to a person plus 1.22 million for other damages, but 50 to 100 million is the general coverage. Just to give some perspective on how expensive accidents can be.
It's pretty easy to do so much damage. Imagine turning left without looking and an oncoming truck tries to avoid a collision and drives into a store front. Property damages will be very high and the injured people inside the store will need medical attention, too.
I caused something similar and accepted the accident as my fault.
I back-exited a parking space and turned left immediately after, while the truck tried to avoid me by going in the incoming lane; if he just hit the breaks without swerving I would most like have been killed.
Personal drivers. Prices might be higher than in the US but it's hard to give an exact price or even a range because it varies a lot by vehicle type. I'm paying about 600€/year for a small and older VW. But a bigger car doesn't necessarily need to be more expensive because the parts to repair it could be cheaper or it's less likely to get into expensive accidents due to break assistance.
I'm also covered for accidental damages caused by me outside of my car for up to 100 million € and that costs me only about 70€/year.
I’m paying about $1700/year for $1m coverage for two newer sedans with a combined value of about $40k. You can’t buy more coverage than that in the US without going to an insurance agent. It’s available but as a specialty product aimed at wealthy people. Most car insurance websites won’t quote coverage that exceeds $300k or $500k. The legal minimum, which is what many (most?) people have is like $60k.
I’m sure some of this is due to the differences in our healthcare and legal systems. Ironically, it seems intuitive that Americans should have higher insurance limits than Germans, not the other way around.
This is putting some stuff Uber did in Germany into perspective.
When Uber Pop launched in Germany insurance companies were quick to publicly state that no driver using Uber is insured under their personal policies and they needed to opt into commercial policies that are multiple times more expensive.
Then Uber stepped forward and put out a big anouncemnt that every driver is insured for up to 1 million €. Everybody was like "yeah, okay, that's not nearly enough to be allowed to drive here in Germany". Nobody understood why Uber would make such a dumb statement. Now that you explained how it's handled in the US, I'm not surprised anymore.
People are recommended to have more than the minimum if they own a home, or otherwise have a lot of assets to protect.
Commercial requirements are much higher.
It works different in the states because the person or property being injured also has insurance, which will cover them. Insurance covers you not the person or property being injured.
So if you smash a building with your car, the property owner will collect from their insurance. That insurance company will then sue you, and your insurance will cover you. If you don't have enough insurance, they'll take what they can get, and if you don't have any property or money, they'll give up after that.
Uber and Lyft both now verify that you have supplemental insurance. It's kind of screwy. If you have a passenger in the car, Uber/Lyft coverage is in place. If you are driving around working but no passenger, it's the driver's rideshare insurance - which is typically a rider on their personal policies. This probably changes regionally, but that's how it works in California.
Which is a good first step... but if I'm injured at a regular job? workers comp will cover my own bills and lost wages while I recover(usually even if it was my own goddamn fault) - Uber drivers don't get that benefit, and they are a lot more likely to be injured on the job than I am.
I drove a cab for beer money back in college, and a year or so ago, I had an interesting discussion with a cab medallion owner, after some typical uber driver cut us off. He thought it was a suckers' game where it looked like you were making money - until you had your first breakdown and you had no money and no income. He was pretty confident the average cab driver couldn't plan for this, and the whole thing would collapse like a house of cards. For him, breakdowns weren't an issue because he still had the old Crown Victoria.
He also said "they're all from turnip town" which I thought was hilarious.
My mom is fantastically bad with money. When I was ten my dad was murdered.
Our survivor benefits in 1987 were ~2400. Our three bedroom apartment in San Diego was 700 a month. My mom managed to make us broke in 2 weeks and we were getting food boxes at the end of the month. She just went fucking bonkers whenever she had cash like it was our last day on earth. Tons of fast food, buying toilet paper at 7/11 instead of bulk at a large store.
30 years later she is even worse. She considers payday loans and her credit card unused balances income. It is fucking absurd. A few years ago I paid off all her stuff and said not to do it again. This ended exactly how you think it would.
I took the long way around to explain that people like my mom are so short-sighted that she will just see the balance and never consider the cost that was occurred for that balance.
The implication was the drivers live in cheaper rural areas and come into the city on weekends to make money. Thus they don't know where they're going and are dependent on internet maps.
Back when I drove a cab, there actually was some skill to it - you had to keep all the streets and bars in your head and know the best routes.
Have a friend who did it for a couple of weeks and said pretty much the same thing. It's literally a race to the bottom, heard stories about drivers who come into the big cities and sleep in their cars for this wage. Uber & co calling drivers entrepreneurs makes me sick.
I had a driver once mention a promotion uber was running for their drivers if you hit "X rides' in a certain time period you'd receive a $Y cash bonus - the catch was the system made it extremely difficult but not impossible to achieve the goal through subtle gamification techniques.
Big picture tech/gamification has reached a point where oversight/legislation of some sort is long overdue. No restrictions + profit motive with our current understanding of human psychology and dopamine triggers is a recipe for a bad time.
This sounds like the basis for a class action lawsuit that eventually settles for a $15 gas card for the affected drivers and $2m in fees for the plaintiffs' lawyers.
To add in to that, Uber itself seems to offer a lot of "helpful" services for their drivers, such as the cellphone they provide that only runs the driver app and nothing else, that uber charges $10 a week to lose.
I agree that market forces push down the prices below minimum wage. I don't think that itself is necessarily a bad thing. For one this labor is relies on a skill that most people (in US at least) already can do, so is almost unskilled labor. And unemployed people who can't find a minimum-wage job (which may be limited especially in places that set high minimum wages) are actually able to earn something. Plus these low salaries do help lower transportation costs for Uber/Lyft users.
But what I don't like is how Uber/Lyft market themselves into tricking poor people that this can be a worthwhile career, especially when all these hidden costs are not clearly communicated to drivers.
I think the solution relies in potential drivers becoming aware about these hidden costs.
Subsidized public transportation is nearly essentially for a world-class city, but it anchors the value of a ride in people's minds, which is brutal for the private transportation market. My own labor is valued at a lot more than $12 per hour, but I don't even blink at getting in the car for 20 minutes for $4 - if anything, Lyft and Uber start to look expensive in comparison to the local metro.
Of course Lyft & Uber are more expensive than the local metro. They also pick you up & drop you off exactly where you need to be & don't make any additional stops. The anchoring for cost is to Taxi services not metro. Moreover, Lyft & Uber let you plan pretty precisely how much time you'll need even for the carpooling option in my experience; I've been in more buses/metros that broke down in the middle of my trip & am currently at 0 such issues for Lyft/Uber (I use it a fair amount for work).
Hidden costs:
1. Vehicle wear and tear (cars cost you money when you drive them)
2. Vehicle depreciation (cars cost you money even when you aren't driving them)
3. Interest and fees associated with auto loans and leases
4. Insurance premiums
5. Gas
6. Unexpected/unplanned for tax bills
But the feedback you're getting about your income is just the dollar figure that shows up in your account, which is vastly higher than the true amount you could reasonably keep as profit. It makes $10 feel like $100.
Combine that with the implicit bidding system. And by this I mean, market forces will naturally saturate Uber and Lyft with drivers until the price falls low enough that drivers won't accept it. And because of the factors I listed above, that natural price point is practically guaranteed to be well below minimum wage.
The whole setup is just beautifully engineered to trick poor people into thinking this can be a career. I've often thought about which is worse, this or Herbalife. I think Uber and Lyft might impact more people than Herbalife, and generally those people start with less, so I might give it to Uber and Lyft.
Actually, it's also a profession that has one of the highest rates of workplace fatalities, so I'd definitely give the title to Uber/Lyft over Herbalife.