Life Tech Uber’s bait and switch: passengers taken for a ride

Uber’s bait and switch: passengers taken for a ride

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Uber has a great reputation. It’s the high-quality car service with drivers who care about their work. Right?

On closer inspection, that impression may be out of date. The latest trend is articles like this one from Philadelphia, full of stories of drivers texting and serious mechanical problems.

The shiny new taxi service perfectly attuned to the age of the mobile phone may be starting to look a little mud-spattered.

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Uber offers two main products. Uber Black, which is for limousines, and UberX which is for regular cars. But even UberX launched with a promise of style.

The brand attracted a certain class of technology-aware drivers. The suggestion being that you can expect a lucid, competent driver with a good attitude towards personal hygiene and a decent car.

In the early days UberX made big claims about the money that could be made. At one stage it even said the median driver in New York could make $90,000.

The ranks of Uber drivers were full of professionals. Not just professional drivers but professional people from other walks of life dabbling in a spot of driving on the side.

But Uber’s business model has proved to be less friendly to drivers than it seemed. Some of the PR spin equates revenue with earnings, as though drivers don’t have costs like petrol or wear and tear.

Uber’s drivers have become quite outspoken about how little they are paid. That can’t be helping with attracting and retaining good drivers.

The company’s signature move hasn’t helped either – cutting fares. Uber tries to announce that as a good thing for drivers, suggesting that the extra patronage will offset the loss of the base fare. They say:

As we have seen in many cities, when prices are lowered, demand among riders increases. Increased demand creates greater efficiency for the driver partner, more trips per hour, and more earnings for every hour on the road.”

But experience suggests drivers end up worse off. This story of a journalist going “undercover” as an Uber driver is one of the best:

“Driving for UberX isn’t the worst-paying job I’ve ever had. I made less scooping ice cream as a 15-year-old, if you don’t adjust for inflation. If I worked 10 hours a day, six days a week with one week off, I’d net almost $30,000 a year before taxes. But if I wanted to net that $90,000 a year figure that so many passengers asked about, I would only have to work, let’s see … 27 hours a day, 365 days a year.”

Uber logo
Uber cut fares across Australia to compete with taxi companies. Photo: Getty

Last Friday, Uber raised prices by 10 per cent. But that money is going to flow through the drivers to the taxman for GST.

Before that, Uber cut fares in Sydney by 20 per cent in May 2014, and again in June this year by 10 per cent, although only for a limited period.

They cut fares in Melbourne in 2014 then again by 15 per cent in May; by 20 per cent in Perth in April; and by 20 per cent in Brisbane in 2014 and then 10 per cent in 2015.

As fares have fallen and Uber has cut into the taxi market, it’s likely that many of the new drivers Uber is recruiting are taxi drivers.

Uber does not make public information on the aggregate quality ratings of drivers, so there is no way of knowing if the star-ratings given by customers have fallen over time. They could even be rising if customers are happy to make the trade-off of a slightly worse experience at a much better price.

Criticism of Uber could just be a blip, or perhaps a backlash against the consumer adoration that followed its launch.

“We are proud of the excellent customer service our driver partners provide and our built-in quality assurance rating system ensures that standards are always kept high,” an Uber spokesperson told me.

“The consistent feedback we get from our riders is that they love the Uber experience and want it to stay!”

What’s your take? Have you used Uber? Have you even driven for the service? Please share your opinion on whether the quality has changed.

Jason Murphy is an economist and journalist who has worked at Federal Treasury and the Australian Financial Review. His twitter handle is @jasemurphy and he blogs about economics at Thomas The Think Engine

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