Personal Finance

Petrol prices bruise car drivers in US gig economy


The recent surge in fuel prices across the US has hit the country’s gig economy drivers, forcing many to overhaul the way they work or give up their jobs.

Drivers for ride-hailing and delivery apps and analysts covering the sector say that on top of changes in payment algorithms, the 59 per cent rise in the cost of petrol over the past 12 months has sent chills through the industry.

Uber and Lyft, the two biggest ride-hailing apps, are trying to ease the burden by encouraging a switch to electric vehicles, but many drivers are frustrated.

“Drivers seem to be driving less,” said Melissa Berry, editor at The Rideshare Guy, an industry blog. This change in the way they work in response to fuel prices “has no doubt exacerbated the driver shortage Uber and Lyft have been periodically finding themselves in”.

Petrol prices, posted at corner stations, have been among the most visible indicators of accelerating inflation in the US. A retreat in oil markets over the past week may bring down retail petrol prices, but so far drivers have experienced little relief.

And the reason for the oil market reversal — fears that the Omicron coronavirus variant could clamp down on mobility — will hardly cheer drivers on ride-hailing apps.

To cover extra fuel costs, many gig drivers have adapted with changes including rejecting more customers who are far away. Others are quitting.

“Some drivers have been decreasing the amount of hours that they do. Some drivers have gone looking for other jobs,” said Beth Griffith, a former Uber and Lyft driver who heads the Boston Independent Drivers Guild.

An online poll conducted this week by The Rideshare Guy found that 91 per cent of rideshare drivers were worried about petrol prices, and about half of drivers were driving less. Twelve per cent said they stopped driving entirely as a result of high prices.

The population of gig drivers is hard to estimate. Many sign up for multiple apps or work for food delivery services. About 1.6m Americans participated in app-based work in 2017, the most recent year in which the Bureau of Labor Statistics collected the data. Some estimates put the number of active Uber and Lyft drivers in the US at 1m.

Last month, Uber partnered with the apps GasBuddy and GetUpside to offer fuel discounts in a bid to help drivers. Lyft said it has a similar partnership in the works.

“We know that gas is a top expense for many drivers, especially as prices are on the rise,” Uber said.

Willy Solis says he drives an extra hour each day to compensate for a 50% rise in petrol prices

But drivers are sceptical that the companies will provide enough relief.

“There is a true cost associated with gig work. That cost continues to be handed down to gig workers by gig companies,” said Willy Solis, lead organiser for the Gig Workers Collective, who also works for delivery groups Uber Eats and Shipt.

Solis drives a 2018 Nissan Sentra in Denton, Texas, normally putting 40 hours on the clock each week. He says he now spends 50 per cent more on petrol than five months ago and is driving an extra hour each day to compensate.

While payment models vary across platforms, rideshare and food delivery drivers typically get paid a base rate for how long and far they drive, and can receive bonuses and tips.

But the vast majority of these workers are classified as independent contractors, not employees, so they must cover their own expenses, including fuel. Those who deduct these costs from income taxes say the savings don’t amount to much.

“Platform-based gig work shifts economic risks to workers. As gas, car and other expenses go up, workers are left to cover them out of pocket. At a time when wages need to rise, gig work is getting more expensive,” said Shelly Steward, director of the Future of Work Initiative at The Aspen Institute.

Eventually, high petrol prices might speed electrification of the gig economy’s vehicle fleet, say analysts.

Line chart of Regular gasoline, $ a gallon showing US petrol prices are on the rise

Last month, Uber announced plans to provide 50,000 Tesla electric cars for drivers to rent. Lyft has a similar rental programme, and both rideshare companies have plans to go all-electric by 2030.

Rentals for Uber’s Teslas start at $344 a week, almost double the American Automobile Association’s average cost of owning a new vehicle.

Luke Thompson, a full-time Uber and Lyft driver in Seattle, said he had planned on buying an electric car — but then car prices jumped above his budget.

“I’d actually be economically better off flying across the country, buying the car there, and then road-tripping back,” Thompson said.



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