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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: Mohammed Mohammed became a driver for Uber and Lyft about

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Speaker 2: nine years ago. He'd been a yellow cab driver in

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Speaker 2: New York City for a decade before that, but switched

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Speaker 2: to the apps in part because they offered him more

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Speaker 2: control over his schedule.

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Speaker 3: You are very free, very flexible to have the job,

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Speaker 3: to do whatever you want.

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Speaker 2: Mohammad likes working mornings.

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Speaker 3: I wake up five o'clock, six o'clock after the early prayer.

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Speaker 3: Then I keep working until one two o'clock, three o'clock.

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Speaker 2: Nearly every day for the past nine years, that was

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Speaker 2: Mohammed's schedule, wake up, pray, drive. He'd open the Uber

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Speaker 2: app on his phone, press the big go button that

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Speaker 2: signals he's ready for passengers, and start picking people up

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Speaker 2: around the city until this summer in August.

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Speaker 1: He clicks go and nothing happens, and in staid he

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Speaker 1: sees a message that you aren't able to go online,

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Speaker 1: and another message that says go to a busy area

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Speaker 1: to go online.

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Speaker 2: Natalie Lung is a tech reporter for Bloomberg, and she

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Speaker 2: says that when Muhammad tried to log into Lift that day,

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Speaker 2: he was locked out too. Over the next few weeks,

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Speaker 2: Mohammed kept getting locked out of both apps again and again,

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Speaker 2: and he sent Natalie voice notes from the road chronicling

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Speaker 2: his experience.

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Speaker 3: Sometimes many days when I start work, it's lucked out

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Speaker 3: both of them. That means tell you go back home,

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Speaker 3: go back to sleep, or wait in the car until

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Speaker 3: we open the air for you.

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Speaker 2: The lockouts were disruptive and frustrating. Mohammed couldn't predict when

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Speaker 2: he'd be able to work.

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Speaker 3: When you are coming out of your bid and you

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Speaker 3: take a shower and you are ready to work, and

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Speaker 3: the till you know you're not going to work. Now,

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Speaker 3: before the luckouts, you are very free, very flexible to

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Speaker 3: have the job. But now after luck out, you are

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Speaker 3: very controlled.

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Speaker 2: Natalie and her colleagues discovered that over the course of

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Speaker 2: the summer, lockouts were affecting thousands of drivers like Mohammad

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Speaker 2: all over the city. It was part of an intentional

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Speaker 2: strategy by Uber and Lyft to cut down on the

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Speaker 2: time drivers spend without passengers in the car and the

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Speaker 2: amount of money these companies would have to spend next

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Speaker 2: year to compensate them.

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Speaker 1: The issue here is a classic demanded supply problem. Uber

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Speaker 1: and Lyft have onboarded too many drivers, so in an

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Speaker 1: attempt to fix that supply issue. To balance it, they

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Speaker 1: are locking drivers out.

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Speaker 2: Today on the show, an investigation into Uber and Lyft's

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Speaker 2: summer of lockouts, what the company's strategy costs drivers and customers,

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Speaker 2: and what it says about the future of regulating the

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Speaker 2: gig economy. This is the big Take from Bloomberg News.

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Speaker 2: I'm Sarah Holder. The story of Uber and Lyft's twenty

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Speaker 2: twenty four summer of lockouts actually starts way back in

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Speaker 2: twenty eighteen, when New York City passed a law establishing

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Speaker 2: a minimum wage for ride share app drivers, the first

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Speaker 2: of its kind in the US. Bloomberg Tech reporter Natalie

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Speaker 2: Lung told me it was an extra complicated rule for

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Speaker 2: the city's Taxi and Limousine Commission to design because of

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Speaker 2: the way ride hill drivers work. The commission, called the

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Speaker 2: TLC for short, wanted to find a way to make

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Speaker 2: sure drivers were compensated fairly for all their working hours,

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Speaker 2: including the time they spent on the job waiting for riders.

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Speaker 1: The TLC commissioned to economists to study how to implement

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Speaker 1: that rule effectively.

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Speaker 2: The economists found that drivers weren't making enough each hour

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Speaker 2: through fares alone. Uber and Lyft would have to step

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Speaker 2: in to compensate drivers for the time they spent working

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Speaker 2: without passengers in the car. But how much of the

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Speaker 2: driver vers time should be paid for by passengers and

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Speaker 2: how much should be covered by the companies. To find

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Speaker 2: the sweet spot, economists developed a formula.

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Speaker 1: The economists came up with the model where drivers would

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Speaker 1: not only be compensated for per mile and per minute,

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Speaker 1: but there will also be a component or a multiplier

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Speaker 1: called the utilization rate, which measures how busy drivers are

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Speaker 1: and would compensate drivers or when they don't have a

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Speaker 1: passenger in their car.

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Speaker 2: A utilization rate. It basically measures how much of an

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Speaker 2: Uber or lyft drivers on time is spent with an

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Speaker 2: actual passenger in the car versus how much is spent

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Speaker 2: driving around waiting for a passenger. Because it would be

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Speaker 2: too complicated to calculate a different utilization rate for every

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Speaker 2: driver every day, the city sets an industry wide standard

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Speaker 2: rate each year based on data from all the drivers

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Speaker 2: in the city. When the minimum wage lock came into

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Speaker 2: effect in twenty nineteen, that utilization rate was set at

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Speaker 2: fifty eight out of every one hundred minutes on the job,

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Speaker 2: the average Uber or Lyft driver in New York City

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Speaker 2: spent about fifty eight minutes with passengers.

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Speaker 1: And the other forty two minutes are on the road

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Speaker 1: going to a passenger or waiting for right requests.

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Speaker 2: Those forty two minutes idle time not covered by passenger

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Speaker 2: fares are what Uber and Lyft are on the hook for,

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Speaker 2: and Natalie says, companies want that idle number to be

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Speaker 2: as low as possible and that utilization rate, the efficiency rate,

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Speaker 2: to stay as high as possible because.

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Speaker 1: The higher the utilization rate, the companies out of pocket

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Speaker 1: pay would be lower. And conversely, if the utilization rate

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Speaker 1: is lower, meaning drivers out waiting around more, the companies

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Speaker 1: will have to pay more out of pocket to compensate

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Speaker 1: for the idle time.

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Speaker 2: The idea was that this utilization rate would be refreshed

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Speaker 2: every year by the TLC based on updated statistics submitted

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Speaker 2: by the ride share companies.

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Speaker 1: But then the pandemic has in twenty twenty and that

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Speaker 1: really plummeted right share demand, and that caused the TLC

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Speaker 1: to just keep the rate as fifty eight percent, and

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Speaker 1: it went on until.

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Speaker 2: Now until now because in the first two months of

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Speaker 2: twenty twenty four, that utilization rate dropped below fifty three percent.

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Speaker 2: The problem was there were too many drivers on the

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Speaker 2: road and not enough riders. Idle time was increasing, and

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Speaker 2: that was very bad news for Uber and Lyft.

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Speaker 1: Fifty three percent is like a floor that is set

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Speaker 1: by the city. If they go below that, they would

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Speaker 1: have to pay more out of pocket next year or

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Speaker 1: whenever the TLC evaluates it again.

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Speaker 2: So the reason that they're trying to meet this utilization rate,

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Speaker 2: this rate of fifty three percent activity for drivers, is

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Speaker 2: to save themselves money.

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Speaker 1: Right, And their argument is that they wouldn't want to

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Speaker 1: pass all that cost to riders, and riders would be,

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Speaker 1: you know, scared off by the higher prices, and that

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Speaker 1: would lead to lower demand for the service and less

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Speaker 1: jobs for drivers. So they feel like this is a

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Speaker 1: cycle that they don't want to see.

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Speaker 2: So to make sure drivers were spending more time driving

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Speaker 2: each hour, to keep that utilization rate from dropping more,

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Speaker 2: and to save themselves tens of millions of dollars in

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Speaker 2: future driver wages, Uber and Lyft did something drastic this summer.

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Speaker 2: They started locking drivers out of the app. Drivers were

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Speaker 2: outraged they were being locked out of their livelihoods. Many

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Speaker 2: took to the streets in protest. Bloomberg broke the news

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Speaker 2: about the first Uber lockouts in June, lifts started locking

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Speaker 2: out drivers shortly thereafter. The companies didn't deny what they

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Speaker 2: were doing. They said they needed to lock some drivers

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Speaker 2: out some of the time because of a mismatch between

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Speaker 2: rider demand and driver supply. But Natalie and her team

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Speaker 2: had a hunch this wasn't the full story. They wanted

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Speaker 2: to know more about just how many drivers were impacted

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Speaker 2: by Uber and Lyft's decision and how much money was

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Speaker 2: on the line for companies. So the reporters started a

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Speaker 2: massive crowdsourcing campaign who they heard from and what they

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Speaker 2: found after the break to understand the impact of the

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Speaker 2: Uber and Lyft lockouts on New York City's ride hill system.

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Speaker 2: Bloomberg reporter Natalie Lung and her colleagues needed a way

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Speaker 2: to hear from as many drivers as possible.

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Speaker 1: And so we created this automated WhatsApp tip line to

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Speaker 1: let them send screenshots off lockouts when they encountered them.

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Speaker 2: They opened the tip line in mid August, and the

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Speaker 2: response was overwhelming.

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Speaker 1: By the end of this three week collection period, we

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Speaker 1: had close to nine hundred drivers sending us a screenshots

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Speaker 1: off their lockouts.

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Speaker 2: Wow, and were by the level of response.

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Speaker 1: Yeah, we were surprised that so many people responded to

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Speaker 1: us within a short period of time, but at the

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Speaker 1: same time, we understood drivers were really desperate and eager

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Speaker 1: to seek out someone who would listen to their plight.

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Speaker 2: Armed with more than five thousand screenshots and after more

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Speaker 2: than one hundred interviews, Natalie and her team found that

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Speaker 2: the lockouts were more frequent and more damaging than was

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Speaker 2: previously reported. Uber and Lyft had told them earlier that

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Speaker 2: summer that they were only locking out drivers during low

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Speaker 2: demand times. The Bloomberg found lockouts were actually happening at

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Speaker 2: almost every hour of the day, even during periods of

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Speaker 2: high demand.

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Speaker 1: The fact that these lockouts are unpredictable makes them hard

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Speaker 1: to plan out there how much they need to earn

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Speaker 1: and how much they need to work. For Mohammed's example,

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Speaker 1: he told me that he has incurred around two thousand

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Speaker 1: dollars in credit card debt. A lot of them are

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Speaker 1: behind on Texas. Some of them they're behind on their

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Speaker 1: auto loan payments, insurance payments.

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Speaker 2: To make up for the lost time drivers started working

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Speaker 2: more and taking fewer breaks.

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Speaker 1: They feel like if they took a break and went

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Speaker 1: off line on the app voluntarily, it makes it impossible

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Speaker 1: for them to get online again. And so one driver

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Speaker 1: I spoke to he would just forego bathroom breaks or

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Speaker 1: lunch breaks and just keep driving so that he could

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Speaker 1: make the most out of his online time.

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Speaker 2: It was a little ironic. Uber and Lyft have long

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Speaker 2: argued to regulators the drivers are independent contractors, not employees.

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Speaker 1: A lot of drivers told us that this is completely

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Speaker 1: the opposite of the foundational flexibility that they were promised

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Speaker 1: when they switched over to the platforms, and it makes

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Speaker 1: it complicated because they have unpredictable hours they cannot work

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Speaker 1: when they want to work.

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Speaker 2: It was frustrating for riders too, as Uber and Lyft

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Speaker 2: limited the supply of drivers on the road prices in

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Speaker 2: some areas.

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Speaker 1: Rose found more than four hundred instances of drivers being

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Speaker 1: locked out in search zones, and in about half of

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Speaker 1: those instances, the price for consumers did increase after a lockout.

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Speaker 2: But for the companies, all this pain for drivers and

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Speaker 2: customers may have been worth it, because Natalie and her

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Speaker 2: team found that for Uber and Lyft, the lockouts served

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Speaker 2: an important purpose protecting the company's bottom line. Based on

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Speaker 2: Bloomberg's analysis, by stopping the utilization rate from dipping too

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Speaker 2: low through lockouts, Uber and Lyft would save themselves from

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Speaker 2: having to make millions of dollars in extra minimum wage

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Speaker 2: payments next year.

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Speaker 1: So our analysis found, using historical data from the first

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Speaker 1: six months of the year, even one percentage drop in

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Speaker 1: the utilization rate would cause Uber and Lift tests of

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Speaker 1: millions of dollars.

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Speaker 2: So, just to make sure I'm understanding the impact of

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Speaker 2: these lockouts from what your reporting shows, companies say tens

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Speaker 2: of millions of dollars, drivers worked longer hours, went into

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Speaker 2: thousands of dollars of debt, and customers paid more for rides.

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Speaker 2: M that's a pretty staggering impact, right. Spokespeople for both

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Speaker 2: Uber and Lyft have pushed back on this calculation, saying

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Speaker 2: that the financial model Bloomberg used doesn't take into account

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Speaker 2: how a lower utilization rate would make the companies pass

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Speaker 2: more costs onto riders, in turn scaring more business away.

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Speaker 2: How did Uber explain why they were doing these lockouts

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Speaker 2: when you asked about them?

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Speaker 1: So they said, it's actually by the ruse design, saying

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Speaker 1: the ROUE incentivizes companies to increase their utilization rate so

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Speaker 1: that drivers would be kept busier and so that the

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Speaker 1: supply would manage better. So they say lockouts is actually

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Speaker 1: a feature of the rute, not a bug. What did

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Speaker 1: Lifts say, Lift In a letter that they sent to

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Speaker 1: a TLC, they said, it's also unnecessary too, even though

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Speaker 1: it's a lots of resort for them, because they noticed

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Speaker 1: that Ryesha demand has been weaker than anticipated, even though

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Speaker 1: they already stopped onboarding new drivers last year.

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Speaker 2: What did you think about those explanations that Ubernlift gave.

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Speaker 1: Obviously, lockouts are a feature that the companies decided to

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Speaker 1: do themselves, like the regulator did not force them to

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Speaker 1: do it. There's definitely more that they could have done earlier,

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Speaker 1: or there were other ways that this could have been

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Speaker 1: resolved before resulting to lockouts.

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Speaker 2: Natalie says the situation in New York City shows how

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Speaker 2: complicated it is to calculate the right way to set

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Speaker 2: a minimum wage for independent contractors and to get companies

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Speaker 2: like Uber and Lyft to follow both the spirit and

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Speaker 2: the letter of the rules.

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Speaker 1: This is sort of a loopho and gray area that

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Speaker 1: the regulator has not included in their route and allowing

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Speaker 1: this sort of thing to happen.

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Speaker 2: These rules could be changing soon. New York City regulators

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Speaker 2: have agreed to revisit the drivermen and wage by the

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Speaker 2: end of the year to make sure the system works

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Speaker 2: for all parties, drivers, customers and companies alike. And what

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Speaker 2: would those new rules be.

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Speaker 1: The TLC says they're still in deliberation on those rules,

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Speaker 1: but one thing that was clear was that they would

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Speaker 1: limit how many new drivers the companies could on board.

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Speaker 1: Another thing that they're considering is sort of looking at

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Speaker 1: that utilization rate to see how it actually reflects the

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Speaker 1: driver's experience so that they can be compensated fairly. But

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Speaker 1: drivers who are most impacted in this instance, they may

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Speaker 1: not be able to afford to wait for new rules.

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Speaker 1: A lot of them told us they're already are considering

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Speaker 1: other jobs to complement income.

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Speaker 2: In the meantime, after months of lockouts and several driver protests,

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Speaker 2: Uber Lift, the Mayor's office and the TLC made a deal.

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Speaker 2: Uber agreed to stop its lockouts as long as Lifted

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Speaker 2: more to keep its own utilization rate up. And what's

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Speaker 2: this status of these lockouts? Now are drivers like Muhammad

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Speaker 2: still signing onto the app, looking for the go button

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Speaker 2: and instead being turned away.

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Speaker 1: So Uber has stopped blockouts as of early September per

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Speaker 1: the agreement, because Lyft is now trying to keep their

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Speaker 1: promise with the utilization rate, So Lyft is still contoing lockouts.

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Speaker 1: So for Mohammed, he's been able to drive for Uber,

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Speaker 1: but he's still locked out by Lyft.

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Speaker 2: Mohammad says the whole experience has left him exhausted. He

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Speaker 2: used to wake up each morning knowing he'd be able

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Speaker 2: to jump into work as soon as he wanted. Now

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Speaker 2: it's unpredictable how and when he drives, doesn't feel under

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Speaker 2: his control anymore.

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Speaker 3: So it's like this is like a monkey business. This

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Speaker 3: is this is make you depressed many days. Many days

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Speaker 3: I feel depressed. I go back.

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Speaker 2: This is the big take from Bloomberg News. I'm Sarah Holder.

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Speaker 2: This episode was produced by Thomas. It was edited by

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Speaker 2: Stacy Vanicksmith and Dana Wallman. It was mixed by Alex Sugia.

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Speaker 2: It was fact checked by Adrian A. Tapia. Our senior

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Speaker 2: producer is Naomi Shaven. Our senior editor is Elizabeth Ponso.

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Speaker 2: Our executive producer is Nicole Beamster born Sage Bauman, is

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Speaker 2: Bloomberg's head of podcasts. If you liked this episode, make

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Speaker 2: sure to subscribe and review The Big Take wherever you

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Speaker 2: listen to podcasts. It helps people find the show. Thanks

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Speaker 2: for listening. We'll be back next week.