Uber’s “black box” keeps drivers in the dark about their share of the fare

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The last time I flew out of DIA, my Uber fare was $80. My driver kept only $30 of that fare, pre-tip. But I found this out only by asking the driver how much he made. The driver doesn’t know the full fare and the rider doesn’t know how much the driver gets. That’s all left to the mysterious algorithm of the rideshare app and kept hidden from driver and rider.

The data is hidden, but that doesn’t mean you can’t get it!  You just have to nag your colleagues to record their rideshare costs and have them also nag their drivers about their fare payouts. Fortunately, my colleagues were fine with nagging in the name of social science!

Our own data collection supported the growing body of national studies which affirm that Colorado drivers and their families struggle to get by as a result of opaque, exploitative policies used by rideshare corporations to spike your fare while suppressing driver’s earnings.

And most drivers aren’t part-time workers or college kids earning extra beer money; a 2022 survey found that 6 in 10 drive to support a child or adult at home. Drivers receive just under 80% of their weekly income from app-based work on average and work a median of 38 hours a week.

The industry will tell you that drivers can make $30/hour. But that’s before out-of-pocket expenses like gas and car maintenance. And it’s based on the time driving with a paying customer in the car. Factor in the inevitable uncompensated working times when drivers wait between customers or head to the next gig, and it’s more like $10.50 an hour.

That wage would be a lot higher if “take rates” by rideshare platforms weren’t as high. Based on Colorado Fiscal Institute data, these take rates can be between 50-70% of the rider’s fare. The industry sure doesn’t advertise that figure.

We estimate that if current take rates were 25% lower in the state — a rounding error relative to the rideshare company’s revenue — Colorado drivers would earn more than $10 additional per hour. That’s $20,000 more each year to care for their families and $769 million more in economic value that’s currently leaking out of our state.

It’s true that Uber has operated in the red. However, a nuanced look at its long-game strategy reveals that this is the result of anti-competitive tactics, not the absence of huge profit opportunities.

A brief history lesson reminds us that the inherent dysfunction of the rideshare economy mirrors the economics of the unregulated taxi industry; the oversupply of rides led taxi companies and drivers to a race to the bottom to attract additional customers with unprofitably low pricing. History repeats itself as rideshare companies try to capture the “network effects” of being the biggest dog in the game, using predatory pricing to expand their market share, buy out competitors, and invest in emerging app-based markets, even if it means operating at a loss.

The upshot: The market operates in a way that inherently pits the desire of apps to expand against the welfare of the drivers, who bear the brunt of overhead and operating costs, yet see declining wages as the apps use their power to shirk accountability and employ wage-suppressing technologies.

High take rates and out-of-pocket costs eat away at drivers’ earning opportunities, but riders only see the total amount they pay to the driver. This creates an information gap that harms drivers when it comes time for consumers to decide how much to tip. Would you tip differently if you knew that only $30 of your $80 fare went to the driver? Tips have a large impact on a driver’s ability to put food on the table; more than one-fifth of the typical Denver driver’s income came from tips, according to Colorado Jobs with Justice.

Drivers are also at risk of being “deactivated” from the app (and therefore losing their livelihood) over discriminatory complaints, with no process for recourse. Colorado Jobs with Justice says more than 1 in 5 Denver drivers report being discriminated against on the basis of their identity, and the majority of drivers are workers of color.

Drivers work around the clock to get us home safely when it’s 2 a.m. and the bars aren’t open. Yet, their employers aren’t open or accountable with their formulas. Instead, big gig companies harvest on-the-job data to deploy algorithms and coercive incentives that deprive drivers of stable income. Drivers might see entirely different earnings for identical trips because this is decided in the black box of a company’s algorithm, which new research finds are programmed to differentiate fares and suppress wages in ways unknown to both workers and riders, a new method coined “algorithmic wage discrimination.”

We also know that the rideshare companies are claiming an increasing share of workers’ earnings. Colorado workers and riders deserve full information, so they can decide for themselves if they’re getting a fair deal. If you agree that this information should be transparent, you should support the Gig Work Transparency bill under consideration at the state General Assembly. It corrects the information asymmetry.

I know exactly my salary at Colorado Fiscal Institute and you probably know yours, too. There isn’t any black box that dictates how much you make each day. If there were, you’d want to know how it works.

*Sophie Mariam, is a labor policy analyst at the Colorado Fiscal Institute in Denver.

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