In major U.S. cities today, Uber and Lyft drivers went on strike in protest of their low pay and terrible working conditions. Frequent users of those ride-sharing services are advised to find alternate methods, such as (ironically) the standard taxi, or public transportation. Well, jokes on them because I always take the bus to work so, you’re welcome, Uber and Lyft drivers: I’ve joined in honoring your protest through no change in my commuting habit.
Jokes aside, I am completely behind those drivers fighting for a decent wage and other ancillary benefits for their job. However, from a macro perspective I’m not sure how Uber and Lyft can provide what they are asking for – profitably, anyways. Indeed, Lyft has recently gone public, and Uber will be doing so this coming Friday; according to each respective company’s S1s, both of them have yet to make a single dime of profit since inception, with the possibility they might never make a profit.
How is Uber and Lyft going to pay their drivers better when they are already deeply in the red, to the tune of over a billion dollars a year in Uber’s case. Surely both companies are seeking to achieve profitability as soon as possible (if you’re not cynical), so an increase in labor costs is not exactly friendly to those ambitions.
Paying drivers more money would mean the prices of rides will have to go up as well, because Uber and Lyft aren’t simply going to eat that cost – again, neither company is currently profitable. Higher ride costs will deter people from hailing a car; the main attraction for ride-sharing on the customer side is it’s less expensive than a cab and only slightly more expensive than public transportation so that the comfort of a private car is worth the extra cost. That equilibrium falls apart if price of a ride creeps to par or beyond a taxi.
So what we have here is a stalemate of sorts, and sadly I think ultimately the loser will the drivers. I am a big fan of ride-sharing; I think it has done a positive service to bring mobility to people that were underserved by traditional taxi companies. Uber and Lyft have forced them to step up their game, and despite the cab driver suicides and low wages for ride-share drivers, both companies have been a net positive to society.
It’s just too bad they can’t make money, other than the initial IPO bonanza for their investors and founding members.