Uber and Lyft Fares Remain Elevated
Ride-Hailing Drivers Shun Service for Now
Uber (UBER) and Lyft (LYFT) fares remain high despite widespread vaccination rollouts. With enhanced federal unemployment benefits largely expired nationwide, both ride-hailing companies expected the majority of their drivers to return to the wheel. That has not happened, however, which is keeping prices high, since prices are tied directly to driver supply. Fares have only dropped slightly since the summer peak.
It makes sense that the ride-hailing companies would have expected a fully restored workforce by now. This past spring and summer, states that opted out of paying extra unemployment benefits saw fares decline as more drivers chose to go back to work. Nevertheless, since increased federal unemployment benefits expired at the end of September prices remain elevated. In October, Uber and Lyft riders paid 22% more compared to January. Prices are up 30% from 2019.
Demand Outstripping Supply
That is not to say drivers aren’t returning, they are just doing so at a slower pace than demand for the services. Uber said there are more drivers on the platform than at any point during the pandemic. Still in certain cities labor shortages are keeping prices elevated across the country. Both Uber and Lyft expect these increased fares to level out, but can’t forecast when. Another dynamic pushing fares higher is an uptick in the number of longer trips and fewer discounts for riders.
Companies across the country are reeling from labor shortages that have persisted despite widespread vaccinations and an end to extra unemployment benefits. Concerns about getting COVID-19, childcare needs, career changes, and early retirements are just some of the reasons economists point to when explaining continued labor shortages.
Fares Won’t Return to Pre-Pandemic Levels
To recruit drivers, Uber and Lyft have been spending millions, luring them with bonuses. In a sign they think the labor picture is improving, both companies began to rein in those incentives. That is particularly true in markets where drivers are returning to work.
Bringing on more drivers will reduce fares but it will not bring them back to pre-pandemic levels. Uber and Lyft are under pressure to prove they can slash costs and grow without cheap fares. They are phasing out discounts to riders as a result. Worker shortages are a big problem for Uber, Lyft, and their customers. Both companies report quarterly earnings next week so investors will be looking for more context around these labor bottlenecks.
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