In what world would that make business sense?

Apparently they already lose money (counting marketing costs and incentives) per ride, how can they expect to operate a going concern by striving to increase expenses?

If you need drivers to stay on the platform, and acquiring drivers is extremely expensive, paying them less won't help with driver retention (unless you're making them so rich they retire). If you engage in a race to the bottom on rates with your competition, you'll end up having to spend more on driver acquisition and retention.

If you take care of your drivers, they will want to drive for you more frequently, and your rides will have more drivers available. Sure, the price of rides will be a bit higher, maybe a lot higher, but it'll be sustainable.

And here's me speculating... there's only one case where lowering driver pay makes sense, and that's lowering your prices to drive someone else out of business. If Uber is facing so much competition from Lyft & others, they won't be around once people get sick of giving them money. And by pissing off their drivers, they're creating a spot in the market for a higher end competitor to come in. Once a socially responsible, fair trade competitor gets established, it'll be hard for Uber to raise their rates again, because they have a bottom of the barrel reputation.

Of course I'm not in charge of running a ride sharing company, and there are plenty of people who have good intentions at suck at business. Maybe I'm one of the people that naturally walks the path of good intentions that leads straight to hell. Who knows.

I'm going to put an alternative view here.

My guess is Uber has actually done enough legwork and figured out that contrary to these sob stories in the press, there are more than enough drivers that 1) have efficient vehicles that are cheaper to operate and 2) are willing to work for that profit in quantities to cover demand.

If the rates Uber is providing drivers are so dismal they're protesting in the street, frankly, they should quit. No one is forcing drivers into a money-losing proposition. I'm especially unsympathetic given that they're paid on a per-transaction basis and there are alternative ridesharing companies out there.

Those drivers can go work for a company that charges more for rides, and passengers who care about that can choose that option. The fact that passengers currently seem unwilling to pay for that (somehow we never consider it "socially responsible" that passengers are provided cheaper service...) makes me think that will be unlikely in the short term.

Right?? So many commenters are acting as if these drivers are somehow obligated to work there. Just. Go. Elsewhere. You are not entitled to the perfect job simply because you are alive. What the hell happened to personally responsibility/accountability?

The solution to getting a better job is not simply leaving your current job. A lot of people have a shit job because they can't get a better job. A lot if people are homeless because they can't get a job at all. It's not that damn simple.

Source: white middle class male in San Francisco couldn't get a job for most if 2009, eventually ended up homeless.

Why did you assume it's expensive to obtain drivers?

A world in which business cares about more than just profit.

https://en.wikipedia.org/wiki/Benefit_corporation

OK, let's be concrete -- how much should they pay them?

Keep in mind that Uber currently operates at a loss.

The IRS deduction rate per mile plus minimum wage per hour. Anything below that is so low that it is immoral (and would be illegal in any civilized country).

It'd be illegal in this country if not for some very creative stepping around the issue on the part of the "gig economy". (Which may itself be illegal but it appears Uber has become to large for this to matter)

Its a voluntary agreement between two parties - they should be able to make whatever deal they want as long as both parties are amenable. If not amenable, go elsewhere.

They don't agree voulnatrily on that low payoiut per mile because Uber and indivudual drivers have very different bargaining power. A free market can only exist between well-informed rational actors that can both walk away from the deal. In the face of huge power disparities you need limits on the power of the stronger player for a long term market to exist. This is exactly what minimum wage is. So don't trode out the tried old propaganda of cut-throat capitalists such as "they took the deal".

The comment I was replying to said they would optimize for paying them “as much as possible”, not minimum wage.

Perhaps a collective makes more sense here.

Someone should explore doing it.

I like the services, and many drivers like the work, but almost all of them hate the pay and overall relationship.

Then they should seek alternatives. Electing to not participate in a voluntary agreement is always an option.

No, sorry. Given the terrible job scenario and way too suppressed wages, "voluntary" is too much of a reach.

Seeking alternatives in tandem with regulation?

Yeah. Us all saying these over exploitative companies are OK?

No way.

Fact is, these companies, and many others, simply do not have to be as toxic to people as they are, and because of that, I am perfectly fine with attempts to clean things up.

Or, they can do it.

I do not care which, only that improvement happens.

That doesn't make sense for a real business. For a non-profit ride share service that can gather donations? Maybe.

And if I were them, I'd be paying for R&D on automation.

I think I will be right, long term.

I agree. For Uber both riders and drivers are their customers. So keeping drivers happy and paying them well would pay off long term.

It’s a strange market dynamic though — if Uber pays drivers more per mile, you’d have more people that will want to drive for Uber. This would mean fewer rides (per driver), which would cause the average take-home pay for a driver to be lower.

Which would cause drivers to leave, but everything would eventually equilibrate.

But if you also lower the per-mile rate (and total take home pay), then drivers won’t have much left over to “invest” in their independent businesses (their cars). So, the fleet will start to skew to older cars, which might start to drive away riders.

So, if you wanted to keep a steady supply of drivers, a player like Uber should want to maximize the total take-home pay for a driver, but not necessarily the per-mile rate (eventhough the two are obviously confounded).

But by and large, I completely agree with you. I can’t understand the logic behind lowering the per-mile rate for drivers. Given their inherent competition with Lyft for both drivers and riders, they should be working to keep both groups as happy as possible. Maybe they aren’t doing well and are trying to get their books in order before their IPO?

> Maybe they aren’t doing well and are trying to get their books in order before their IPO?

That's probably what it is. They're still not profitable. They might be hoping that this will tip them over the edge into profitability just before the IPO. This is a 25% cut. That's likely to piss off many drivers and make them want to do something else, but they might be counting on the fact that they have a steady supply of new drivers. The new drivers will never have experienced the higher rate.

Well it is a matter of what they are trying for - growth or profitability and how much in either direction. Amazon is an example of a success story of 'pump growth and then pump margin when huge'. What they are doing now is losing money and trying to make up for it through scale.

The sustainable equilibrium approach is the summation of profit margin x ride numbers.

> if Uber pays drivers more per mile, you’d have more people that will want to drive for Uber. This would mean fewer rides (per driver), which would cause the average take-home pay for a driver to be lower.

How so? Uber can and does control the number of drivers on their service at any given time.

The long term plan for Uber was to replace drivers with self driving taxis. They were open about this for a long time, though after the recent problems with their self driving program (killing someone), I'm not sure how on track the plan is.

I am skeptical that self driving cars will be a real thing anytime soon. Too many edge cases to worry about.