Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Mohammed Mohammed became a driver for Uber and Lyft about
Speaker 2: nine years ago. He'd been a yellow cab driver in
Speaker 2: New York City for a decade before that, but switched
Speaker 2: to the apps in part because they offered him more
Speaker 2: control over his schedule.
Speaker 3: You are very free, very flexible to have the job,
Speaker 3: to do whatever you want.
Speaker 2: Mohammad likes working mornings.
Speaker 3: I wake up five o'clock, six o'clock after the early prayer.
Speaker 3: Then I keep working until one two o'clock, three o'clock.
Speaker 2: Nearly every day for the past nine years, that was
Speaker 2: Mohammed's schedule, wake up, pray, drive. He'd open the Uber
Speaker 2: app on his phone, press the big go button that
Speaker 2: signals he's ready for passengers, and start picking people up
Speaker 2: around the city until this summer in August.
Speaker 1: He clicks go and nothing happens, and in staid he
Speaker 1: sees a message that you aren't able to go online,
Speaker 1: and another message that says go to a busy area
Speaker 1: to go online.
Speaker 2: Natalie Lung is a tech reporter for Bloomberg, and she
Speaker 2: says that when Muhammad tried to log into Lift that day,
Speaker 2: he was locked out too. Over the next few weeks,
Speaker 2: Mohammed kept getting locked out of both apps again and again,
Speaker 2: and he sent Natalie voice notes from the road chronicling
Speaker 2: his experience.
Speaker 3: Sometimes many days when I start work, it's lucked out
Speaker 3: both of them. That means tell you go back home,
Speaker 3: go back to sleep, or wait in the car until
Speaker 3: we open the air for you.
Speaker 2: The lockouts were disruptive and frustrating. Mohammed couldn't predict when
Speaker 2: he'd be able to work.
Speaker 3: When you are coming out of your bid and you
Speaker 3: take a shower and you are ready to work, and
Speaker 3: the till you know you're not going to work. Now,
Speaker 3: before the luckouts, you are very free, very flexible to
Speaker 3: have the job. But now after luck out, you are
Speaker 3: very controlled.
Speaker 2: Natalie and her colleagues discovered that over the course of
Speaker 2: the summer, lockouts were affecting thousands of drivers like Mohammad
Speaker 2: all over the city. It was part of an intentional
Speaker 2: strategy by Uber and Lyft to cut down on the
Speaker 2: time drivers spend without passengers in the car and the
Speaker 2: amount of money these companies would have to spend next
Speaker 2: year to compensate them.
Speaker 1: The issue here is a classic demanded supply problem. Uber
Speaker 1: and Lyft have onboarded too many drivers, so in an
Speaker 1: attempt to fix that supply issue. To balance it, they
Speaker 1: are locking drivers out.
Speaker 2: Today on the show, an investigation into Uber and Lyft's
Speaker 2: summer of lockouts, what the company's strategy costs drivers and customers,
Speaker 2: and what it says about the future of regulating the
Speaker 2: gig economy. This is the big Take from Bloomberg News.
Speaker 2: I'm Sarah Holder. The story of Uber and Lyft's twenty
Speaker 2: twenty four summer of lockouts actually starts way back in
Speaker 2: twenty eighteen, when New York City passed a law establishing
Speaker 2: a minimum wage for ride share app drivers, the first
Speaker 2: of its kind in the US. Bloomberg Tech reporter Natalie
Speaker 2: Lung told me it was an extra complicated rule for
Speaker 2: the city's Taxi and Limousine Commission to design because of
Speaker 2: the way ride hill drivers work. The commission, called the
Speaker 2: TLC for short, wanted to find a way to make
Speaker 2: sure drivers were compensated fairly for all their working hours,
Speaker 2: including the time they spent on the job waiting for riders.
Speaker 1: The TLC commissioned to economists to study how to implement
Speaker 1: that rule effectively.
Speaker 2: The economists found that drivers weren't making enough each hour
Speaker 2: through fares alone. Uber and Lyft would have to step
Speaker 2: in to compensate drivers for the time they spent working
Speaker 2: without passengers in the car. But how much of the
Speaker 2: driver vers time should be paid for by passengers and
Speaker 2: how much should be covered by the companies. To find
Speaker 2: the sweet spot, economists developed a formula.
Speaker 1: The economists came up with the model where drivers would
Speaker 1: not only be compensated for per mile and per minute,
Speaker 1: but there will also be a component or a multiplier
Speaker 1: called the utilization rate, which measures how busy drivers are
Speaker 1: and would compensate drivers or when they don't have a
Speaker 1: passenger in their car.
Speaker 2: A utilization rate. It basically measures how much of an
Speaker 2: Uber or lyft drivers on time is spent with an
Speaker 2: actual passenger in the car versus how much is spent
Speaker 2: driving around waiting for a passenger. Because it would be
Speaker 2: too complicated to calculate a different utilization rate for every
Speaker 2: driver every day, the city sets an industry wide standard
Speaker 2: rate each year based on data from all the drivers
Speaker 2: in the city. When the minimum wage lock came into
Speaker 2: effect in twenty nineteen, that utilization rate was set at
Speaker 2: fifty eight out of every one hundred minutes on the job,
Speaker 2: the average Uber or Lyft driver in New York City
Speaker 2: spent about fifty eight minutes with passengers.
Speaker 1: And the other forty two minutes are on the road
Speaker 1: going to a passenger or waiting for right requests.
Speaker 2: Those forty two minutes idle time not covered by passenger
Speaker 2: fares are what Uber and Lyft are on the hook for,
Speaker 2: and Natalie says, companies want that idle number to be
Speaker 2: as low as possible and that utilization rate, the efficiency rate,
Speaker 2: to stay as high as possible because.
Speaker 1: The higher the utilization rate, the companies out of pocket
Speaker 1: pay would be lower. And conversely, if the utilization rate
Speaker 1: is lower, meaning drivers out waiting around more, the companies
Speaker 1: will have to pay more out of pocket to compensate
Speaker 1: for the idle time.
Speaker 2: The idea was that this utilization rate would be refreshed
Speaker 2: every year by the TLC based on updated statistics submitted
Speaker 2: by the ride share companies.
Speaker 1: But then the pandemic has in twenty twenty and that
Speaker 1: really plummeted right share demand, and that caused the TLC
Speaker 1: to just keep the rate as fifty eight percent, and
Speaker 1: it went on until.
Speaker 2: Now until now because in the first two months of
Speaker 2: twenty twenty four, that utilization rate dropped below fifty three percent.
Speaker 2: The problem was there were too many drivers on the
Speaker 2: road and not enough riders. Idle time was increasing, and
Speaker 2: that was very bad news for Uber and Lyft.
Speaker 1: Fifty three percent is like a floor that is set
Speaker 1: by the city. If they go below that, they would
Speaker 1: have to pay more out of pocket next year or
Speaker 1: whenever the TLC evaluates it again.
Speaker 2: So the reason that they're trying to meet this utilization rate,
Speaker 2: this rate of fifty three percent activity for drivers, is
Speaker 2: to save themselves money.
Speaker 1: Right, And their argument is that they wouldn't want to
Speaker 1: pass all that cost to riders, and riders would be,
Speaker 1: you know, scared off by the higher prices, and that
Speaker 1: would lead to lower demand for the service and less
Speaker 1: jobs for drivers. So they feel like this is a
Speaker 1: cycle that they don't want to see.
Speaker 2: So to make sure drivers were spending more time driving
Speaker 2: each hour, to keep that utilization rate from dropping more,
Speaker 2: and to save themselves tens of millions of dollars in
Speaker 2: future driver wages, Uber and Lyft did something drastic this summer.
Speaker 2: They started locking drivers out of the app. Drivers were
Speaker 2: outraged they were being locked out of their livelihoods. Many
Speaker 2: took to the streets in protest. Bloomberg broke the news
Speaker 2: about the first Uber lockouts in June, lifts started locking
Speaker 2: out drivers shortly thereafter. The companies didn't deny what they
Speaker 2: were doing. They said they needed to lock some drivers
Speaker 2: out some of the time because of a mismatch between
Speaker 2: rider demand and driver supply. But Natalie and her team
Speaker 2: had a hunch this wasn't the full story. They wanted
Speaker 2: to know more about just how many drivers were impacted
Speaker 2: by Uber and Lyft's decision and how much money was
Speaker 2: on the line for companies. So the reporters started a
Speaker 2: massive crowdsourcing campaign who they heard from and what they
Speaker 2: found after the break to understand the impact of the
Speaker 2: Uber and Lyft lockouts on New York City's ride hill system.
Speaker 2: Bloomberg reporter Natalie Lung and her colleagues needed a way
Speaker 2: to hear from as many drivers as possible.
Speaker 1: And so we created this automated WhatsApp tip line to
Speaker 1: let them send screenshots off lockouts when they encountered them.
Speaker 2: They opened the tip line in mid August, and the
Speaker 2: response was overwhelming.
Speaker 1: By the end of this three week collection period, we
Speaker 1: had close to nine hundred drivers sending us a screenshots
Speaker 1: off their lockouts.
Speaker 2: Wow, and were by the level of response.
Speaker 1: Yeah, we were surprised that so many people responded to
Speaker 1: us within a short period of time, but at the
Speaker 1: same time, we understood drivers were really desperate and eager
Speaker 1: to seek out someone who would listen to their plight.
Speaker 2: Armed with more than five thousand screenshots and after more
Speaker 2: than one hundred interviews, Natalie and her team found that
Speaker 2: the lockouts were more frequent and more damaging than was
Speaker 2: previously reported. Uber and Lyft had told them earlier that
Speaker 2: summer that they were only locking out drivers during low
Speaker 2: demand times. The Bloomberg found lockouts were actually happening at
Speaker 2: almost every hour of the day, even during periods of
Speaker 2: high demand.
Speaker 1: The fact that these lockouts are unpredictable makes them hard
Speaker 1: to plan out there how much they need to earn
Speaker 1: and how much they need to work. For Mohammed's example,
Speaker 1: he told me that he has incurred around two thousand
Speaker 1: dollars in credit card debt. A lot of them are
Speaker 1: behind on Texas. Some of them they're behind on their
Speaker 1: auto loan payments, insurance payments.
Speaker 2: To make up for the lost time drivers started working
Speaker 2: more and taking fewer breaks.
Speaker 1: They feel like if they took a break and went
Speaker 1: off line on the app voluntarily, it makes it impossible
Speaker 1: for them to get online again. And so one driver
Speaker 1: I spoke to he would just forego bathroom breaks or
Speaker 1: lunch breaks and just keep driving so that he could
Speaker 1: make the most out of his online time.
Speaker 2: It was a little ironic. Uber and Lyft have long
Speaker 2: argued to regulators the drivers are independent contractors, not employees.
Speaker 1: A lot of drivers told us that this is completely
Speaker 1: the opposite of the foundational flexibility that they were promised
Speaker 1: when they switched over to the platforms, and it makes
Speaker 1: it complicated because they have unpredictable hours they cannot work
Speaker 1: when they want to work.
Speaker 2: It was frustrating for riders too, as Uber and Lyft
Speaker 2: limited the supply of drivers on the road prices in
Speaker 2: some areas.
Speaker 1: Rose found more than four hundred instances of drivers being
Speaker 1: locked out in search zones, and in about half of
Speaker 1: those instances, the price for consumers did increase after a lockout.
Speaker 2: But for the companies, all this pain for drivers and
Speaker 2: customers may have been worth it, because Natalie and her
Speaker 2: team found that for Uber and Lyft, the lockouts served
Speaker 2: an important purpose protecting the company's bottom line. Based on
Speaker 2: Bloomberg's analysis, by stopping the utilization rate from dipping too
Speaker 2: low through lockouts, Uber and Lyft would save themselves from
Speaker 2: having to make millions of dollars in extra minimum wage
Speaker 2: payments next year.
Speaker 1: So our analysis found, using historical data from the first
Speaker 1: six months of the year, even one percentage drop in
Speaker 1: the utilization rate would cause Uber and Lift tests of
Speaker 1: millions of dollars.
Speaker 2: So, just to make sure I'm understanding the impact of
Speaker 2: these lockouts from what your reporting shows, companies say tens
Speaker 2: of millions of dollars, drivers worked longer hours, went into
Speaker 2: thousands of dollars of debt, and customers paid more for rides.
Speaker 2: M that's a pretty staggering impact, right. Spokespeople for both
Speaker 2: Uber and Lyft have pushed back on this calculation, saying
Speaker 2: that the financial model Bloomberg used doesn't take into account
Speaker 2: how a lower utilization rate would make the companies pass
Speaker 2: more costs onto riders, in turn scaring more business away.
Speaker 2: How did Uber explain why they were doing these lockouts
Speaker 2: when you asked about them?
Speaker 1: So they said, it's actually by the ruse design, saying
Speaker 1: the ROUE incentivizes companies to increase their utilization rate so
Speaker 1: that drivers would be kept busier and so that the
Speaker 1: supply would manage better. So they say lockouts is actually
Speaker 1: a feature of the rute, not a bug. What did
Speaker 1: Lifts say, Lift In a letter that they sent to
Speaker 1: a TLC, they said, it's also unnecessary too, even though
Speaker 1: it's a lots of resort for them, because they noticed
Speaker 1: that Ryesha demand has been weaker than anticipated, even though
Speaker 1: they already stopped onboarding new drivers last year.
Speaker 2: What did you think about those explanations that Ubernlift gave.
Speaker 1: Obviously, lockouts are a feature that the companies decided to
Speaker 1: do themselves, like the regulator did not force them to
Speaker 1: do it. There's definitely more that they could have done earlier,
Speaker 1: or there were other ways that this could have been
Speaker 1: resolved before resulting to lockouts.
Speaker 2: Natalie says the situation in New York City shows how
Speaker 2: complicated it is to calculate the right way to set
Speaker 2: a minimum wage for independent contractors and to get companies
Speaker 2: like Uber and Lyft to follow both the spirit and
Speaker 2: the letter of the rules.
Speaker 1: This is sort of a loopho and gray area that
Speaker 1: the regulator has not included in their route and allowing
Speaker 1: this sort of thing to happen.
Speaker 2: These rules could be changing soon. New York City regulators
Speaker 2: have agreed to revisit the drivermen and wage by the
Speaker 2: end of the year to make sure the system works
Speaker 2: for all parties, drivers, customers and companies alike. And what
Speaker 2: would those new rules be.
Speaker 1: The TLC says they're still in deliberation on those rules,
Speaker 1: but one thing that was clear was that they would
Speaker 1: limit how many new drivers the companies could on board.
Speaker 1: Another thing that they're considering is sort of looking at
Speaker 1: that utilization rate to see how it actually reflects the
Speaker 1: driver's experience so that they can be compensated fairly. But
Speaker 1: drivers who are most impacted in this instance, they may
Speaker 1: not be able to afford to wait for new rules.
Speaker 1: A lot of them told us they're already are considering
Speaker 1: other jobs to complement income.
Speaker 2: In the meantime, after months of lockouts and several driver protests,
Speaker 2: Uber Lift, the Mayor's office and the TLC made a deal.
Speaker 2: Uber agreed to stop its lockouts as long as Lifted
Speaker 2: more to keep its own utilization rate up. And what's
Speaker 2: this status of these lockouts? Now are drivers like Muhammad
Speaker 2: still signing onto the app, looking for the go button
Speaker 2: and instead being turned away.
Speaker 1: So Uber has stopped blockouts as of early September per
Speaker 1: the agreement, because Lyft is now trying to keep their
Speaker 1: promise with the utilization rate, So Lyft is still contoing lockouts.
Speaker 1: So for Mohammed, he's been able to drive for Uber,
Speaker 1: but he's still locked out by Lyft.
Speaker 2: Mohammad says the whole experience has left him exhausted. He
Speaker 2: used to wake up each morning knowing he'd be able
Speaker 2: to jump into work as soon as he wanted. Now
Speaker 2: it's unpredictable how and when he drives, doesn't feel under
Speaker 2: his control anymore.
Speaker 3: So it's like this is like a monkey business. This
Speaker 3: is this is make you depressed many days. Many days
Speaker 3: I feel depressed. I go back.
Speaker 2: This is the big take from Bloomberg News. I'm Sarah Holder.
Speaker 2: This episode was produced by Thomas. It was edited by
Speaker 2: Stacy Vanicksmith and Dana Wallman. It was mixed by Alex Sugia.
Speaker 2: It was fact checked by Adrian A. Tapia. Our senior
Speaker 2: producer is Naomi Shaven. Our senior editor is Elizabeth Ponso.
Speaker 2: Our executive producer is Nicole Beamster born Sage Bauman, is
Speaker 2: Bloomberg's head of podcasts. If you liked this episode, make
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Speaker 2: for listening. We'll be back next week.