The Reason Uber Is Letting Some Drivers Set Their Own Prices

The overarching question is to what degree a business model designed around under-paying its workforce is sustainable in an era when there is so much competition for talent. JL

Chaim Gartenberg reports in The Verge:

The new feature allows for drivers to increase fares to up to five times more than Uber’s original price, and it follows other changes Uber made in California in response to the new gig work law. Uber’s goal is to continue classifying drivers as independent contractors that Uber simply helps connect with riders. Classifying drivers as employees would cost the company hundreds of millions of dollars a year by forcing it to provide benefits like minimum wage guarantees, overtime, unemployment insurance, and workers’ compensation.

Uber is experimenting with a new feature in California that allows drivers to set their own prices for rides in some circumstances instead of accepting Uber’s set price, according to a report from The Wall Street Journal. The new feature allows for drivers to increase fares to up to five times more than Uber’s original price, and it follows other major changes Uber made in California in response to the new gig work law.

According to the WSJ, the new changes let drivers increase fares in 10 percent increments, up to five times what Uber sets the base price of the ride. The new feature effectively creates a bidding system where drivers with lower prices get the first customers. As demand increases, drivers who had set higher prices will be matched with riders, too.

IT’S PART OF UBER’S ATTEMPT TO CLASSIFY DRIVERS AS INDEPENDENT CONTRACTORS UNDER AB5

Right now, the test is limited to drivers who are going from airports in Santa Barbara, Palm Springs, and Sacramento. Uber reportedly wants to see how it works with smaller cities in California first before it decides whether to roll it out statewide to far larger markets like Los Angeles or San Fransisco.

Much like the other changes in California that Uber announced earlier in January, the new fare-setting system here is designed to give drivers independence to better comply with the state’s newly enacted gig work law. Uber’s goal is to — despite the new law — continue classifying drivers as independent contractors that Uber simply helps connect with riders. Classifying drivers as employees would cost the company hundreds of millions of dollars a year by forcing it to provide benefits like minimum wage guarantees, overtime, unemployment insurance, and workers’ compensation.

Along with the newly revealed fare-setting system, Uber previously announced that drivers in California will get more trip information up front before accepting a rider, including travel time, distance, destination, and estimated fare. Drivers in California can now also reject ride requests without any penalties. Additionally, riders in California are no longer given an exact price up front; instead, the app presents them with a range of prices, with the final price depending on the actual time and length of the trip. Passengers will also be able to select specific drivers as “favorites” to request them again.