Economy

As Uber Slashes Prices, Cracks In The Gig Economy Begin To Show

CREDIT: Diane Bondareff/Invision for Mattel/AP Images

An Uber rider requests a free ride in a Dodge Charger modeled after a Hot Wheels Star Wars First Order Stormtrooper character car, Friday, Sept. 4, 2015 in New York, to celebrate Force Friday. (Photo by Diane Bondareff/Invision for Mattel/AP Images)

Uber announced this week that it was slashing prices by 15 percent in New York City to entice more riders to use the service. The move will drop the average fare from $8 to $7, but hopefully attract enough business to boost drivers’ pay.

But while Uber’s price-cutting is partly an attempt to undercut its top competitor, Lyft, it could be a sign the market is struggling to find the right balance between paying workers fairly and making sure there are enough of them to meet demand.

In a perfect world, contract workers would meet consumer demand head-on with the perfect number of drivers or personal shoppers available for every request, while getting the same pay and benefits as full-time staff. In reality, contractors who once gravitated to the flexibility and the extra money that comes from working for a company like Uber have become disenchanted with the gig economy because of declining or unstable wages.

The companies have fared pretty well with multi-billion dollar valuations but are now dealing with a revolving door of talent. For example, the personal grocery-shopping service Instacart reportedly lost about 8 percent each quarter since 2013, TechCrunch reported.

Lyft had comparable employee turnover hovering under 8 percent, and Uber lost under 6 percent of its employees. Those employee losses were offset by hefty hiring gains, but the steady shedding of workers, while not necessarily cause for alarm, is added pressure for companies that very publicly struggle with giving workers their fair share.

Uber’s drivers have complained about long wait times from 30 minutes up to three hours between rides. Some drivers don’t think working during peak ride times is worthwhile. Surge pricing, in theory, promises premium fares for drivers when there is high demand, but many drivers didn’t see a pay boost because riders balked at the high or inappropriate fares and opted to use Lyft or other transportation.

Uber, Lyft, and other companies that rely on consumers to double as contract employees have consistently fought with labor and wage issues. Lawsuits and regulatory challenges amassed across the country, combining with testimonials that only some workers — typically those who have full-time jobs — benefit from the gig economy.

Slashing fares is certainly a way to increase ridership and could possibly motivate drivers to stay active longer in the hopes they won’t idle between rides. But the core labor issues of fair treatment, wages, and benefits will likely entangle Uber and other gig-based companies until they can reach an agreement — on their own like Instacart or in response to class-action lawsuits and state regulations.