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Uber and Lyft Surges: what you need to know

Weeks after receiving the second dose of a coronavirus vaccine, Debora Lima reverted to an old routine: she pulled out her phone and requested an Uber ride so she could meet friends for dinner.

But instead of making the five-minute trip as she expected, Uber surprised Ms. Lima with a 19-minute wait and an expensive fare. It was not a one-off problem. Ms. Lima, a 28-year-old Miami resident, planned to spend $ 100 a month on frequent trips with Uber. Only two recent rides have eaten half of its monthly budget.

As the coronavirus pandemic appears to be receding in the United States and more people return to travel, socialize and use ridesharing apps, they are finding that these cheap and fast rides have become more expensive and less easily. available. Customers across the country say they were surprised by the price hike. In some cases, they say, their Uber trips from airports cost as much as their plane tickets.

Uber and its main rival, Lyft, acknowledge that prices are on the rise and wait times are longer, but they will not provide details. A recent analysis by research firm Rakuten Intelligence found that the cost of a ride was 37% higher in March than it was a year ago. In April, the cost was up 40%.

Like many other industries, transportation companies say prices are going up because they can’t find enough workers. But more than most other types of businesses, Uber and Lyft can easily pass the cost of finding these workers – in their case, drivers treated like contractors – directly to their customers.

When there aren’t enough drivers to meet demand, companies pay them more, sometimes using what are known as peak prices to attract drivers to areas with high demand. Some recent surges have pushed prices up 50% or more, said Daniel Ives, managing director of equity research at Wedbush Securities. Power surges can be a boon to drivers, but they sometimes cause driver outrage, especially during holidays and major events when demand can drive prices up.

“By organizing with Uber and Lyft, the drivers being contractors, they kind of put the riders in the position of employing these contractors,” said Wendy Edelberg, Project Manager Hamilton and senior fellow. at the Brookings Institution. “Every time we open our Uber app, maybe we feel a bit like the small business that can’t fill the vacancy after showing the ‘Help Wanted’ sign.”

Uber and Lyft have invested money in additional incentives for drivers, like cash bonuses for making a certain number of trips. But the incentives don’t seem as effective as they were before the pandemic. Some drivers said they were not back on the road because they were still afraid of getting sick.

Other financial incentives could also deter drivers. While they do not normally receive unemployment insurance because they are classified as independent contractors, Uber and Lyft drivers are eligible for pandemic unemployment assistance funds under the law. CARES, which alleviates the financial pressures that might otherwise have forced them to get back behind the wheel.

“We have given people significant financial support,” Ms. Edelberg said. “We have made it possible for people not to make these transitions in desperation, to put their health first, to put their families first. So it will take a little time.

In an earnings report in early May, Uber said it had 3.5 million active drivers and couriers in the first three months of the year, down 22% from the previous year. “We haven’t seen the supply of drivers keep up with the growth in demand in the United States,” Dara Khosrowshahi, chief executive of Uber, told the JP Morgan media conference last week. and communications.

In the past four weeks, however, more than 100,000 additional drivers have also returned to the platform, a spokesperson for Uber said. Uber has dramatically increased its incentive spending, investing $ 250 million in the drive to recruit drivers and calling it “incentive.”

Lyft also said it does not have enough drivers and is spending a lot to recruit them. In the first quarter of the year, the company spent $ 100 million in bonuses for drivers, according to an earnings report.

“This is something that we take extremely seriously, but something that we are extremely confident and that I have already started to see significant movement,” Lyft President John Zimmer said at the conference. by JP Morgan. Lyft saw a 25 percent increase in what it calls “leads” from drivers – drivers interested in working for the platform – between late February and May, Zimmer said.

The incentives are starting to have an effect, according to Gridwise, a service that helps workers track their earnings. Increasing income has grown steadily this year, rising to $ 25 an hour in May, from $ 18 an hour in January, Gridwise said.

The higher salary appears to be enough to entice some drivers to return. While the number of drivers is still below pre-pandemic levels, Gridwise estimates it is down only 11 percent, an improvement from the 25 percent deficit in January. Uber also said the total number of trips with rising prices was declining after peaking in March.

“When employers say they can’t find the workers they need, always add the phrase ‘at the wages I want to pay’,” said Heidi Shierholz, director of policy at the Institute for Economic Policy. “We know how to attract workers – give them better jobs, better wages, better working conditions. It is not rocket science; This is how you do it. “

But customers are eager to return to fast, cheap journeys. In Miami, Ms Lima said she hopes the company keeps prices low while trying to get more drivers back on the road. “Keep customers happy,” Ms. Lima said. “At least with the price.”

Right now, she said, it’s impractical to use Uber as it once did due to the price hike. Instead of an everyday utility, she said, Uber is likely to become madness.

Cristine Sanchez, a hotel worker in New York City, used to pay around $ 20 for Uber rides to Brooklyn from Queens. Now the fare is around $ 38, she said, and a trip to the Bronx costs almost $ 45.

Ms. Sanchez recently realized that the air fares were about the same as her Uber rides. When she found a $ 60 roundtrip flight to Miami this month, she booked an impromptu trip with friends.

“If the choice is to go to the Bronx or to go to Miami, I go to Miami,” Ms. Sanchez said. “It’s like come on, Uber, come on, Lyft, let’s go.”

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