Here's Why Uber Is Trying To Freak You Out
July 30, 2018, 12:20 p.m.
The company claims new legislation means the benefits of Uber 'could disappear.' But that's Uber's decision to make.
On Friday, Uber sent an email to its millions of New York-based customers warning that a series of bills proposed by the City Council “could make Uber more expensive and less reliable.”
One of the new measures is a cap on the number of for-hire vehicles (FHVs) at their current level for one year while the city studies the issue. Another bill would establish minimum wages for drivers through a novel formula proposed by a TLC study meant to reduce the amount of time drivers spend without passengers, or idling. Under this formula, a larger portion of Uber’s cut would go to the drivers, who could get a 23 percent raise.
Uber’s mass email went on to provide a link to a pre-written tweet tagging the City Council using the hashtag #DontStrandNYC. In an accompanying TV spot, Uber showed all the little cars on the map disappearing as the voiceover said “all this could disappear.”
But several experts characterized Uber’s concerns as overblown. The fact is, Uber—and other app-based ride-hailing companies—get to determine whether those scenarios come to pass based on how big of a cut they take out of every ride. The legislation could have a negligible effect on wait times and prices, or it could result in exactly what Uber warns. It is entirely up to Uber.
As Bruce Schaller, the foremost expert on the impact ride-hailing has had on New York City, put it, “it all depends on what kinds of decisions Uber makes.”
The City Council’s renewed effort to reign in FHVs, which de Blasio’s administration attempted to do in 2015 before getting infamously creamed by Uber’s public relations effort, is a response to ride-hailing’s unfettered growth and the accumulated knowledge of years of studies proving the situation is untenable.
Experts have largely found the promised benefits of ride-hailing services—lower vehicle ownership, less congestion, more efficient transportation—have not come to fruition, especially in New York. The number of Uber, Lyft, and other app-based cars have soared from fewer than 10,000 in 2014 to almost 60,000 today, a number which does not include taxis, liveries, black cars, and luxury limos, which when added into the mix bring the total well over 100,000 vehicles.
Schaller reported this year that the growth in ride-hailing has added 976 million miles of driving to city streets from 2013 through 2017, 365 million miles of which came in 2016 and 2017, which Schaller estimates as six percent of all driving in the city. According to the FixNYC panel convened to study congestion pricing, FHVs comprise 50 to 75 percent of all traffic on some of Manhattan’s busiest streets where traffic is often slower than walking.
It is because of this unrestrained growth that Schaller, who opposed the 2015 effort to cap for-hires, now supports it. “We’ve gone from 15,000 vehicles to 60,000,” he told Gothamist when asked why he’s switched positions. “It’s become a big problem, a very big problem.”
Uber’s counterargument is that it fills a vital service in the outer borough transit deserts, long neglected by the 13,000 yellow cabs, and for minorities who have historically struggled to hail cabs due to discrimination. The company hammered this point home in their recent ad, where several people of color are seen being refused service. Uber suggests a return to the bad old days where FHVs congregate in Manhattan, downtown Brooklyn, and other high-volume areas, leaving outer boroughs once again neglected.
Yet nothing about the proposed legislation necessarily foreshadows that outcome. “It’s far from inevitable” that FHVs will once again abandon the outer boroughs, Schaller said.
To explain why, Schaller likened FHV drivers to people waiting in line at the grocery store. When one line becomes shorter, it only takes a few alert customers to move to the shorter line and restore balance, even if the majority of people in line are lost in the ether of their phones. So, too, Schaller says, of FHV drivers. The whole dynamic, Schaller quipped, “would make Adam Smith smile.”
Nor is there any definite reason prices would have to substantially increase.
“I don’t think it’s easy to predict how an Uber cap will affect price, trip times, etc,” Jon Orcutt, Director of Communications and Advocacy at TransitCenter said. On the one hand, if demand for Uber trips continues to rise—which is to say, if subway service continues to be dreadful—and the supply of drivers cannot increase in kind, then prices might go up. Or maybe 100,000 vehicles is enough to satiate the city’s for-hire vehicle demand and the crux of the issue is utilizing those empty seats more efficiently.
Or, as transportation expert Charles Komanoff suggested, “Ubers that go out for five-hour shifts will go out for 10 or 15 hour shifts.” Or perhaps the already-registered vehicles will simply be on the road for more hours per day as friends or acquaintances loan each other their TLC-registered cars.
No matter what, Uber, Lyft, and the other apps control their own commission rates—around 16 percent in New York City, according to a TLC-commissioned minimum wage study—and more generally the price of rides. For all the bluster about what the legislation would change, it is the ride-hail companies with their hands on the scale.
Each of the policy proposals are part of separate bills, so it’s hard to predict what the regulatory changes will be and what impact they’ll have on people trying to get a ride. Josh Gold, a spokesperson for Uber, said that if the minimum wage and fare proposals go through, then prices will certainly rise because “the purpose of legislation is to increase fares.” But the TLC-commissioned study on which the legislation is based found that wages could rise 22.5 percent (or an average of $6,345 per year for most drivers) by mostly taking money out of Uber’s cut and utilizing the 35-40 percent of time drivers do not have passengers. Fares would increase by less than five percent and wait times by only 12 to 15 seconds.
This isn’t to say the proposed legislation is perfect. Every expert Gothamist spoke to agreed a cap is a clumsy mechanism to try and accomplish a policy goal, partly because a feature of capitalism is the possibility the regulated companies react poorly to that regulation. Komanoff summed it up succinctly: “You put in a policy and that company will react to that policy.”
Therefore, it is government’s job to come up with a solution that limits industry’s ability to throw a fit. To that end, the experts I spoke to supported a more dynamic, market-based effort such as congestion pricing (which must be enacted by the state) or more aggressive zone-based pricing to reduce traffic in the most congested areas.
Unsurprisingly, since they have spent the last several years studying the issue, the experts also scoffed at the idea that there was anything left for the city to study. I asked Komanoff what the city could possibly learn from this year-long study. “Absolutely nothing,” Komanoff snapped. “We know perfectly well. We have all the information we need.” If only Uber’s customers did, too.
