Uber, Lyft competition drives rates off a cliff
Like many students, I flew back to Pittsburgh after winter break. Upon arriving at the airport I found the 28X to be full, and a line of people were wrapped around the corner waiting for the next bus coming in a half hour. The bus was late, I was tired, and my bags seemed to grow heavier as I stood there, weighed down by both impatience and exhaustion. After being unable to board the bus when it finally arrived, and with prospects looking bleak for the next one arriving, I decided to call an Uber, and within twenty minutes I was at the door of my residence hall, faster than it would have taken for the next 28X to arrive at the airport.
Since Uber was founded in 2009, the ride-sharing industry is one that has forever transformed not only how people view transportation, but also the availability of part-time jobs. Companies like Uber and Lyft not only give hope to people when they are running late and the bus hasn’t arrived yet, but also gives hope to people who have lost their job or can’t find a job, and are facing the dire straights of unemployment.
My Uber driver from the airport was one such employee. As I learned from my long conversation with him, my driver was an acting student at Point Park University. He was attending classes at night while trying to make a living and care for his family during the day. He told me that the reason he loves ride-sharing is because he can make his own hours. If he wants to go to his six-year-old son’s play at the elementary school at one in the afternoon he can, because he just won’t accept ride requests during that time. If he has an audition, he can go to that and on his way back home earn a few hours of pay by picking up people who are headed in the same direction. “The system isn’t perfect,” he said, “but for people like me it’s a lifesaver.”
I have heard other, similar sentiments from both Lyft and Uber drivers I have ridden with in the past few months. Ride-sharing provides a flexible part-time employment option that allows drivers to make their own hours in order to accommodate the rest of their lives. In this same conversation with my driver, however, he mentioned that Uber has recently cut down the cost of rides, without giving any notice to the drivers. This, he admitted, is fantastic for the customers, but not so much for the drivers. What he was the most upset about, however, was the fact that Uber gave drivers no notice in implementing this change. This past month Lyft has also cut some of their rides by 62 percent. Once again, great for the customer, but not so great for the employee. Recent claims that there is a price war between Lyft and Uber are not far fetched. There certainly does seem to be a race between the two companies of who can offer the cheapest rides and attract the most customers.
If this price war continues, the price of ride sharing will just continue to get lower, benefiting the consumer, but continuously hurting the drivers. It is important to remember that drivers need an incentive to continue working for the company. Not that long ago, these companies were offering drivers large monetary incentives to switch platforms, but these companies are now becoming so greedy and competitive among each other that they risk collapsing their own system.
If Lyft and Uber continue trying to one-up each other, it may very well turn out that they will just keep losing drivers until the whole system falls apart. There is a very delicate balance that must be found between a price that will keep the customer happy and one that will continue to draw in drivers. I can’t say that I am not excited by the e-mail I just got from Lyft this afternoon about a 20 percent reduction in cost for the month of February, but at the same time I think of my driver that night and wonder if this change was sprung on him as suddenly as it was on me and how it is affecting him.
The ride-sharing industry is an ingenious one, and one that truly benefits all involved. It would be very sad to see it begin to crumble because of a few poor economic choices made by the companies involved playing chicken with each other. There is no easy answer to the problem except to keep the prices fair and the company motives in the right place. Ride-sharing connects people who otherwise would have no reason to cross paths. So I challenge you to start a conversation with your next Lyft or Uber driver; you just might walk away with a story that will impact your perspective.