The great driver shortage of 2021: What does it mean for earnings and the future of rideshare?
This past year has been at least a bit less weird than 2020, but it still has held its share of surprises. As we’re sure you’ve noticed, some of them have rocked the rideshare business. One of these is the driver shortage. Whether you think it’s real or imagined, there surely has been a lot of talk about it, and there have been plenty of efforts to deal with it in the past year.
In this blog post, we’re going to look at the driver shortage of 2021, what caused it, what the companies did to make it less painful for customers, and how they even tried to make it easier for drivers. Here are the things we’ll explore:
- How did the driver shortage happen, and what did it do to rideshare?
- The salad days of driver incentives – did they help?
- How did Uber and Lyft earnings change as a result of the incentives?
- Is there going to be another driver shortage in 2022?
- How to keep on top of your rideshare game in the face of uncertain times
How did the driver shortage happen, and what did it do to rideshare?
The origins of the Uber and Lyft driver shortage aren’t the least bit mysterious. As it did for so many industries, the COVID-19 shutdowns hit the rideshare industry like the proverbial ton of bricks.
First of all, rideshare business went down to a mere trickle when offices, bars, restaurants, and schools closed down. Travel for pleasure as well as business ground to a halt. Even if drivers who were courageous enough to take to the road found very slim pickings when it came to getting rides.
Drivers were designated as “essential employees” in many states, in that they were needed to transport medical and emergency personnel to their places of work. This meant that they possibly could work. However, not many were willing to go out in the middle of a pandemic, ferrying passengers as they breathed on them in proximity that was far closer than the recommended six feet.
The government also made it easy for drivers to sit out their rideshare shifts when the CARES Act permitted independent contractors such as rideshare drivers to collect unemployment benefits. They were also given access to the generous federal supplements that sweetened the deal even further.
This situation may not have been intended as a disincentive for drivers to work, but for many of us, it turned out that way. Why go out and risk getting the killer virus when you can sit it out and collect as much or more money?
Passengers really felt the pain of the driver shortage, especially if they tried to get around during the height of the shutdowns. Long waits and high prices made it extremely difficult for customers to easily get rides from Uber or Lyft. Many times, the apps would tell them, in essence, “Uber: no cars available” or “Lyft: try us again later.”
With people who depended on rideshare raising the demand for drivers, and so few drivers willing to go out on the road, something had to be done. Both Uber and Lyft took action and poured money into their efforts to incentivize drivers to come back to work.
Gig driver incentives – did they help?
To make it easier for customers to find rides, and for drivers to feel more motivated to get back to work, Uber and Lyft heaped incentives onto the drivers’ pot. Uber spent more than $250 million in the second quarter of 2021 on driver bonuses. Lyft, meanwhile, is on track to up the ante to almost a billion dollars in extra enticements for the entire year.
There were times when an Uber driver could go out, complete three rides, and come home with $100. Even before 2020’s woes hit, and on a good shift, it would take way more than three rides to get that kind of cash. This “easy money” made drivers happy, and they did begin to return to work, if not in droves.
It’s no surprise to those of us who are familiar with the antics of rideshare companies to find out they didn’t really absorb these costs. They were, by and large, passed on to their customers.
Answers to the question “How much does an Uber cost?” reached numbers people had not heard before. They began to be more discerning and hesitant about their rideshare use, enquiring “How much does Uber cost per mile?” or “What are the cheapest rates for Lyft in my area?”
How did Uber and Lyft earnings change as a result of the incentives?
There are two sides to the earnings coin in rideshare. One is company profits, and the other is the one we care about most: driver earnings. Or Gridwise data show that in the first ten months of 2021, Uber driver median earnings rose more than 32 per cent. Beginning at almost $11 per trip, earnings peaked at $16 or so in the spring, and stabilized at a level around $14 in the fall.
Lyft drivers, similarly, experienced increased median earnings per trip. Growth throughout the spring was not as drastic as the Uber rate, but earnings did increase over the ten month period by about 33.5 per cent, from a little more than $10 per trip in January, to over $13 per trip in October.
The tactic of attracting drivers back to work with financial incentives worked, because as the earnings figures show, the incentives eventually got spread more thinly over a greater number of drivers. This is why the earnings leveled off at the end of the third quarter. It’s also worth noting that driver incentives are tapering off in the fourth quarter. While rideshare volume is still under 2019 levels, things do seem to have stabilized.
Now that we’ve established that the incentives and bonuses the companies offered over the course of the year boosted driver earnings, let’s look at the effects they had on the companies. Investors in the companies were concerned, initially, that the immense amounts of money being poured into driver incentives would hurt company profits.
In the cases of both Uber and Lyft, this was not the case. The reasons behind the success of the companies vary, but it is notable that both achieved profitability, in adjusted earnings reports, for the first time.
Uber’s success came from delivery as much as it did from rideshare. Uber Eats booked $30 billion in business during 2020, and its earning potential shows no signs of waning. Lyft also managed their business well enough to show an adjusted profit at the end of the third quarter. Their success was attributed to higher revenue per customer ride, which means, as we stated earlier, the costs of driver incentives were absorbed not by the companies, but by their customers.
This was a viable, if not totally fair, option for two companies who were under immense stockholder pressure to attain profitability. As customers are dependent on rideshare to get from place to place, they have become accustomed to the higher prices. While this has worked to the advantage of both Uber and Lyft, the bounty may not last forever.
In bigger cities, people are turning back to a source of transportation they’ve been using for decades: the taxi. It’s interesting to note that, between January and October of 2021, taxi rides rose 106 per cent. New York and Chicago, simReports from bigger cities tell us that, in the face of higher rideshare rartes, people are turning back to a source of transportation they’ve been using for decades: the taxi. It’s interesting to note that, between January and October 2021, taxi rides in San Francisco rose 106 percent. In New York and Chicago, similar rises in taxi ride volume were apparent. Also, these cities saw a decline in the number of rideshare trips in their metropolitan areas.
Is there going to be another driver shortage in 2022?
The answer to this question will depend on many variables. Driver incentives are off the table after the end of the year, most likely. Will drivers still be motivated to keep working rideshare? Drivers have lots of reasons to think twice about that. They include:
- Food and parcel delivery
When the pandemic struck, many drivers switched to delivery, and most of them came to like it! They realized they didn’t have to deal with difficult people quite as often, and they could make just about the same amount of money. In some cases, parcel delivery offers them the option of being employees of a company. Check out the hottest delivery driving trends to learn more!
- Driver classification issues
In some states, there have been major movements toward getting more benefits for drivers. Many drivers went on strike to protest against lack of benefits and low pay. The companies have fought these issues fiercely, and in the case of California, put together their own way of keeping drivers satisfied without making them employees. These issues are ongoing, and future strikes could cause another shortage.
- Rising fuel prices
These days, when drivers come home after a long shift and do the math, figuring out how much their earnings actually are once they factor in their expenses, the numbers have changed. With gas prices up way higher than they were a year ago, the cost of being a driver can potentially outweigh the benefits at a much more rapid rate. Use Gridwise to help you calculate your true earnings by tracking your activity and recording your expenses, including fuel. Also, now’s the time to get Gridwise Gas, so you can save up to 25 cents per gallon.
- Fear of COVID and its Variants, and government pressure on the rideshare industry
With new variants affecting even those who have been fully vaccinated, the fear that shooed drivers away from rideshare could rear its hideous head once again. Also, there could be restrictions on rideshare, due to COVID and its variants as well as court rulings. One such court edict states that drivers are private individuals, and therefore not eligible to provide taxi rides. You can read more about that in this article from The Street.
- Wearing masks and making sure passengers do, too
The burden of remaining masked for hours on end as a driver is only made worse by the fact drivers have to ensure passengers are also wearing masks. This is an extra duty that improves everyone’s safety, to be sure; but it also has the potential to strain the driver-passenger relationship. What do you think about this? Let us know in the comments below.
How to keep on top of your rideshare game in the face of uncertain times
While we like to think the worst days of the COVID-19 pandemic are behind us, and that rideshare driving can return to “normal,” we must face the fact that we still live in uncertain times. Because of this, it’s important for us drivers to remain alert and able to pivot in the event that circumstances change. Here are actions you can take:
Think local
Check alerts from your local news apps that might clue you in on COVID outbreaks, restrictions, and potential closings. You will probably find local Uber and Lyft driver groups across social media that will give you some inside information. Also check in with Where to Drive and When to Drive from Gridwise to get a real time view of what’s going on in your area.
Know your niche
Check the Gridwise blog regularly to get the latest news about the rideshare business, and how changes in the world affect you, the driver. Be sure to join the Gridwise Facebook group, where you can get current info. Before long, you’ll be able to use many of our popular Gridwise features to compare earnings between rideshare and other services, such as food, grocery and parcel delivery in your area. When the rideshare going gets rough, you can always switch to another way to get paid.
Spot your opportunities
You need to know what’s going on in your town, from events in the city center to activity at the airport. Gridwise gives you all this information and more, including alerts about when events are starting and when they’re estimated to let out. Passenger volume, arrival times, and departure times are available right on the Gridwise app, too.
We know that you love rideshare driving, and we love serving our rideshare drivers. No matter what happens in the world, there will always be a place for you in the mobility market. What would your passengers do without you?
The key is to remain flexible, and be informed, so you know if and when it’s time to make some moves. One move we hope you’ve already made is to be a Gridwise driver. If you haven’t yet, it’s about time, wouldn’t you say?
