Labor advocates on Monday pointed to Lyft's latest driver pay reduction scheme as proof that the Biden administration needs to focus on more effectively regulating the so-called gig economy.
"I knew that this just was another way for the company to take more money from the drivers."
Toronto Lyft driver
On Friday, CNET reported the ongoing partial nationwide rollout of Lyft's new "priority mode," in which drivers are promised more rides, but with the caveat of having to agree to accept 10% less pay for each fare.
Some drivers on online forums have been derisively calling Lyft's latest effort to cut their pay "poverty mode."
"I knew that this just was another way for the company to take more money from the drivers," Earla Phillips, a longtime Lyft driver in Toronto, told CNET. "The first week I didn't even bother turning it on."
I learned about a new feature Lyft quietly rolled out a few months ago. Drivers hate it. It's called priority mode and Lyft pitches it to drivers as a way to "stay busy... We'll prioritize you over other drivers." But it comes with a 10% pay cut. https://t.co/kbgqJZKUVz
— Dara Kerr (@darakerr) January 22, 2021
It's a familiar story for many longtime Lyft and Uber drivers, who have seen numerous cuts in pay and bonuses over recent years as the app-based companies, which went public in 2019, try—and fail—to turn a profit.
In the mid-2010s, app-based drivers could easily earn $20 or more an hour in many metropolitan areas. Both Lyft and Uber offered weekly bonuses, which could be as high as $500 for completing over 150 rides, with some conditions including peak-hour and weekend rides.
Full-time drivers in the San Francisco Bay Area regularly reported gross earning of more than $2,000 per week until the latter years of the 2010s. New driver and referral bonuses added thousands of dollars to many drivers' earnings. Some drivers in more lucrative markets reported earning over $100,000 annually before expenses.
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Those days are long gone. According to a 2019 study by the Economic Policy Institute, Uber drivers now earn around $9 per hour after factoring in expenses. Additionally, the cut taken by ride-hailing companies from each fare has risen from as low as 20% to sometimes more than half.
The declining pay and bonuses that some drivers and critics have called a "race to the bottom" was in full gear even before the coronavirus pandemic dramatically reduced passenger demand. However, Covid-19 pushed many drivers to the breaking point. Phillips told CNET that she drives around for hours waiting for passengers.
Labor advocates argue that the app-based companies' businesses models require a response in the form of more robust regulation of the so-called gig economy. They say that when state and local efforts to rein in ride-hailing, delivery, and other gig companies fail—as occurred in California last year when voters approved a $204 million corporate-funded ballot measure preventing drivers from being classified as employees—it is up to the federal government to step in.
In a Monday op-ed originally published at Inequality.org, Bama Athreya, an expert on economic inequality at the Open Society Foundations, asserts that "governing the gig economy will require both a committed labor policy team and a committed digital policy team, and they will have to work together."
"For too long, the platform giants have exploited the space between the experts on labor law and those focused on the digital economy, cloaking themselves in claims that their product was simply technology."
Open Society Foundations
"For too long, the platform giants have exploited the space between the experts on labor law and those focused on the digital economy, cloaking themselves in claims that their product was simply technology," writes Athreya, who argues that the Biden administration should take steps including supporting a $15 minimum wage, taking strong action against "disguised employment and rampant misclassification," protecting non-traditional organizing, and regulating data ownership.
"The way forward with respect to some platforms may be to turn them into public utilities," Athreya continues. "In other cases, governments must break data monopolies on the principle that data is part of the public 'commons.'"
"If gig companies can't make their business model work in ways favorable to the public interest, they should go out of business and clear the field for genuine innovators who aren't simply making their profits off scofflaw practices," Athreya concludes. "The digital economy today is part of the problem and not the solution. It's not too late to change that."