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Uber sign is seen on a car in New York, on April 12, 2019. Photo by Shannon Stapleton/Reuters

Why Uber and Lyft drivers are going on strike

Drivers across the country are going on strike Wednesday morning to protest their ride-hailing companies’ low wages and working conditions as Uber prepares to launch its initial public offering.

Drivers planned to log off Uber, Lyft, Juno and Via during morning rush hour — between 7 a.m. and 9 a.m. local time in cities across the country, including in New York, San Francisco and Chicago. In Los Angeles, one workers’ group is urging drivers to stay off the platforms for as long as 24 hours.

“The Lyft and Uber business model is to ignore and bulldoze basic labor rights in order to make as much profit as they can from their business,” said Nicole Moore, a Lyft driver who is part of the leadership of Rideshare Drivers United-Los Angeles, a group that advocates on behalf of the 100,000 ride-hailing drivers in Los Angeles.

Protestors are calling on the ride-hailing companies to allow drivers to keep a higher percent of their fares and implement a minimum wage, even as the company tries to prove to investors that it can become profitable. Uber estimates it keeps about 22 percent of the fares riders pay, but drivers have disputed that number. Some drivers reported that the companies they work for have taken up to 70 percent of the fares on certain rides.

Rideshare Drivers United-Los Angeles are also demanding a $17-per-hour minimum wage after expenses, a rate New York City implemented late last year.

How much do Uber drivers make?

It’s complicated. A number of studies have tried to calculate how much ride-hailing drivers make per hour. The answer depends on how earnings are added up because drivers are paid per ride rather than by the hour, which puts them at the mercy of how many customers are requesting rides, and are responsible for their own expenses such as fuel and car maintenance.

Lyft says its drivers are paid more than <$20 per hour, and Uber’s own research shows drivers are paid an average of about $20 per hour, not including expenses. Uber estimates costs range from $2.94 per hour for drivers with a small sedan to $6.46 per hour for a person who drives an SUV full-time.

A study from the left-leaning Economic Policy Institute found that when factoring in expenses such as fuel and vehicle maintenance, as well as self-employment taxes and the cost of health benefits, average wage for Uber drivers is much lower — on average, $9.21.

The EPI findings are similar to those of an MIT study that found Uber and Lyft drivers made between $8.55 and $10 per hour.

Uber officials have cautioned that driver wages vary widely by city and depend on how drivers use the app. A driver with a fuel-efficient car, for example, would have lower gas expenses. Other drivers plan their routes to minimize the amount of time they are waiting for a ride, which can lead to higher wages. Some drivers work part-time, while others log more hours.

“People work with different intensities in different places and the market rewards those different behaviors differently,” Uber economist Jonathan Hall recently told PBS NewsHour economics correspondent Paul Solman.

Hall said studies also do not take into account other factors that save drivers time and money, such as the fact that drivers don’t have a commute to work.

WATCH: How data drives Uber’s efficient but controversial business model

One other factor that makes a major difference is what Uber’s former head of economic research Keith Chen calls a “flexibility premium.”

“It’s really valuable to people to have a job that they can basically turn on and off at the tap of a button and and that can work around family and child care responsibilities,” he said. That kind of flexibility can come at a price, in the form of lower wages, Chen said.

But some full-time drivers, who say they play a crucial role in ensuring ride-hailing companies can provide service at all hours of the day, argue they don’t have flexibility because they are driving up to 60 hours per week to make ends meet.

Drivers have also reported a drop in wages in recent years as companies have changed their algorithms. Uber maintains that wages have remained steady. A Lyft spokesperson said its drivers’ hourly earnings have increased over the last two years.

“We know that access to flexible, extra income makes a big difference for millions of people, and we’re constantly working to improve how we can best serve our driver community,” a Lyft spokesperson said in an email.

What Uber’s IPO has to do with a minimum wage

As Uber prepares to launch its IPO on Friday, the company has been trying to prove to investors that it has the potential to make substantial profit.

It’s a monumental task that is being made more difficult by the latest protests, which have been specifically timed to align with Uber’s IPO.

“Investors need to know that they are investing in a company that is degrading America’s working class and degrading our economy,” Rideshare Drivers United’s Moore said.

Protests aside, Uber faces an uphill battle based on the shear numbers. Last year, Uber lost $1.8 billion because of its costs, despite bringing in $48 billion in sales.

It faces stiff competition from other ride-hailing companies such as Lyft, but it’s also investing heavily in new technology such as autonomous vehicles. Drivers say they would like to see more of those dollars going into workers’ pay, but start-up companies are often under pressure from investors to come up with the newest innovation that could make even more money.

Most immediately, the company is trying to avoid the same fate as Lyft. That company’s stock has tumbled from its initial IPO offering of about $78 per share when it launched last month to less than $61 per shares on Tuesday — mostly because of investor concerns that the company will not be profitable in the near future.

Uber is expected to launch its IPO between $44 and $50 per share. It hopes to raise as much as $9 billion and earn a valuation of $91 billion, nearly six times more than Lyft.

Some drivers will share the benefits of Uber going public. More than 1 million drivers who completed between 2,500 and 20,000 rides by April 7 are eligible for cash bonuses ranging from $100 to $10,000 and can use that money to buy stock in the company at the IPO price.

But even with the bonuses, drivers are not feeling like they are being given the share in the company’s profits that they deserve.

“They keep saying we are their partners, but they haven’t shown anything to prove that. They have been treating drivers as disposable items,” said Mustafa Maklad, who has been an Uber driver in San Francisco for four years and received a $500 bonus.

Uber has also said it plans to cut back on driver incentives as it tries to increase profits.

“As we aim to reduce Driver incentives to improve our financial performance, we expect Driver dissatisfaction will generally increase,” Uber said as part of its risk assessment in a recent Securities and Exchange Commission filing. The company noted that changes to its payment strategy could benefit some drivers while hurting others.

The company also noted that it is investing in autonomous vehicles, which could “reduce the need for [d]rivers,” a move it said could result in more protests.

But Uber and other ride-hailing companies must be careful, economist Mishel warns. Autonomous vehicles are likely still years away from becoming a reality, and, in the meantime, these tech companies will need to retain drivers if they want to survive.

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