CHICAGO (CBS/AP) — Thousands of Uber and Lyft drivers are taking action today, planning a strike in dozens of cities, as they demand better pay and working conditions.
Chicago Rideshare Advocates spokeswoman Barbara Lloyd said about 17,000 drivers in the Chicago area have committed to turn off their Lyft and Uber apps on Wednesday, in solidarity with a global protest. Lloyd said that’s about half the number of drivers who would be working on a normal Wednesday.
Drivers for the two ride-hailing services plan demonstrations in dozens of cities and countries, calling for reform similar to New York, where there is now a minimum wage guarantee for the drivers.
In Los Angeles, Uber and Lyft drivers also plan to turn off their apps and go on strike today.
In Chicago, drivers plan to gather at Buckingham Fountain this afternoon, and then march to the Loop, for a rally outside City Hall.
Advocates say the number of Uber and Lyft vehicles in Chicago has vastly increased in the last three years, while drivers’ earnings have dropped.
In a statement, Lyft said its drivers’ hourly earnings have increased 7% over the last two years, and on average earn more than $20 per hour.
“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 spokesperson stated in an email
In a statement, Uber said it cannot succeed without its drivers.
“Thousands of people come into work at Uber every day focused on how to make their experience better, on and off the road. Whether it’s more consistent earnings, stronger insurance protections or fully-funded four-year degrees for drivers or their families, we’ll continue working to improve the experience for and with drivers,” an Uber spokesperson stated in an email.
The protests come ahead of Uber’s planned initial public offering on the New York Stock Exchange on Friday.
The top executives, board members and early investors in Uber Technologies stand to reap billions of dollars off their stakes in the ride-hail company when it goes public later this week. Ousted founder and former CEO Travis Kalanick, who still owns 8.6% of Uber, is expected to make nearly $9 billion on his stake, while early investor Jeff Bezos of Amazon.com — the world’s richest man — stands to make $400 million off his investment.
Eligible Uber drivers won’t see anywhere near the same kinds of returns, although some of them will have the option to buy Uber shares when they start trading between an expected $44 and $50 apiece this week.
Here is how the IPO math works for drivers: About one-quarter, or 1.1 million, of Uber’s 3.9 million drivers around the world who have completed at least 2,500 trips before April 7, including at least one in 2019, and are in good standing with the company, will be eligible for a one-time “driver appreciation reward.” The bonuses, based on a driver’s number of completed rides, range from $100 for drivers who have completed 2,500 trips to $40,000 for drivers who have completed 40,000 trips.
U.S.-based drivers will have the option to use those bonuses to purchase up to $10,000 worth of stock in the company, an Uber spokesperson told CBS MoneyWatch. The ride-sharing company has set aside 5.4 million shares — or 3% — of its common stock for drivers. Any shares not purchased by drivers will be offered to the public, Uber said in an SEC filing last month.
Uber has long had a contentious relationship with its drivers, who are classified as independent contractors rather than employees. Some drivers plan to strike during Wednesday morning’s rush hour to protest what they say are long hours and low pay. Uber, Lyft, and other ride-hail service drivers who are members of the New York Taxi Workers Alliance argue that Uber executives and insiders are getting rich off of drivers’ hard work while they struggle to make ends meet.
“When you compare early investors and executives and what they stand to make, that obviously contrasts significantly with the drivers, even though they are the hearts and lungs of the Uber economy,” observed Wedbush stock analyst Daniel Ives.
Uber drivers earn money on a dual per mile and per minute formula, while Uber collects service and booking fees that vary by geography each time a trip is taken. One study from the left-learning Economic Policy Institute estimates that Uber drivers earn the equivalent of $9.21 in hourly wages after taking into account Uber’s fees plus drivers’ vehicle and other expenses.
Other studies estimate they earn more. Gridwise, a software company that helps drivers maximize their earnings across ride-hail apps, estimates Uber drivers earn $18.65 hourly before expenses. In Chicago, for example, where a driver’s average reported earnings per hour are $18.82, the average profit per hour is $15.03, according to Gridwise.
Among drivers’ demands are that Uber keep a smaller percentage of each fare. Its ride-sharing “take rate” in 2018 was 21%, varying from 12% to 24%, depending on the geographic region, according to the company’s SEC filing, and it’s expected to rise to 22.3% later in 2019, according to Wedbush’s Ives.
And Uber still loses money: In the decade since its inception, it has yet to turn a profit — and might not ever make money. In 2018, the company lost more than $3 billion, the equivalent, on average, of losing 58 cents per ride last year.
“Wall Street investors are telling Uber and Lyft to cut down on driver income, stop incentives, and go faster to driverless cars,” New York Taxi Workers Alliance Executive Director Bhairavi Desai said in a press release. “Uber and Lyft wrote in their S-1 filings that they think they pay drivers too much already. With the IPO, Uber’s corporate owners are set to make billions, all while drivers are left in poverty and go bankrupt.”
Uber says drivers’ status as independent contractors affords them flexibility they otherwise wouldn’t have — a perk whose value is not lost on drivers. The flip side is that they must provide their own vehicles, and are responsible for associated costs including gas, car insurance and miscellaneous expenses.
The company also acknowledges in its IPO filing that its “business would be adversely affected if drivers were classified as employees instead of independent contractors.”
While Uber drivers will have an opportunity — at IPO time — to own a part of the company they work for, there’s no guarantee that it will be a good investment. Uber competitor Lyft, which debuted on the Nasdaq in March, has seen its shares drop more than 30% since its IPO.
“The same thing was done for the Lyft IPO and there wasn’t much of a benefit [for drivers] because the stock was trading below IPO price,” said Kathleen Smith, principal and manager of IPO ETFs at Renaissance Capital, a provider of institutional research and IPO exchange-traded funds.
“It’s a creative move by Uber and Lyft — and we’ve seen it before — but sometimes it doesn’t work as planned and if employees don’t get what they expect. If things don’t go well, they could be unhappy,” she said.
Smith also expects many drivers to keep their cash reward and not exchange it for stock. “To me, the profile of an Uber driver isn’t someone who is taking shares and holding them, the profile we see is someone taking the cash and spending it on expenses,” she said.
Either way, Uber must find some common ground with its drivers if it hopes to scale the company to meet the estimated $80 billion in market value that some on Wall Street are giving it. Uber would do well to reward its drivers who could ditch the platform altogether for rivals like Lyft or Juno, if working conditions become too unfavorable.
“There is some benefit to employee loyalty, but when given a bonus like this it might work the opposite way, if the stock goes down, it may cause grousing among drivers,” Smith said.
It’s clear the IPO will produce some big winners, and the share program is an effort by Uber to ingratiate itself to drivers.
“[The stock options] speak to the balancing act that Uber is going to have over the coming years,” Ives said. “Drivers are the fuel in the engine and they have to be careful with [company] take rates and profitability on rides because there is a certain line in the sand where drivers could leave or go work for another competitor. Uber needs to, from a PR perspective, handle this such that drivers feel like they are a part of this company, and them getting shares in the IPO speaks to that.”
(© Copyright 2019 CBS Broadcasting Inc. All Rights Reserved. The Associated Press contributed to this report.)