Uber revises driver pay algorithm in 24 U.S. cities

Hoping to attract more drivers, Uber Technologies Inc. is testing a new earnings algorithm in 24 U.S. cities, allowing drivers to see pay and destinations before accepting a trip. The algorithm also raises the incentives for drivers to take short rides.

The changes, now in pilot programs, mark the most wide-ranging updates to Uber’s driver pay algorithm in years and come at a time when the company is still trying to win back drivers who left when the pandemic began. Passenger fares won’t change.

Drivers have long demanded the ability to see the fare and destination before accepting a trip, but Uber has resisted, saying it could open the door to drivers cherry-picking trips or discriminating against riders in disadvantaged neighborhoods.

Uber already has a similar program in California, launched in the wake of a 2020 state battle over gig worker rights to prove its drivers are independent contractors.

Uber says the U.S. pilot program was not related to gig worker regulation. The test has been rolled out in cities across Texas, Florida and the Midwest where gig worker reforms are not on the agenda.

“Gig work is very competitive, not just with Lyft but other platforms,” said Dennis Cinelli, Uber’s head of mobility in the United States and Canada, “and we think this feature really enhances our platform’s competitiveness versus others.”

Cinelli said the pay changes at this point would not impact consumer prices, adding the changes “aren’t financial features.”

Uber declined to comment on the financial impact the changes have on the company, which could mean it has to incur higher costs for short trips.

Cinelli said the company had not seen any discrimination by drivers in California since the policy launched there in 2020.

“Otherwise, we wouldn’t have rolled it out at this time,” he said, adding that Uber had the ability to deactivate drivers who repeatedly declined trips based on race or low-income areas.

Providing drivers with upfront pay details meant the company also had to reduce earnings for longer trips to prevent drivers from avoiding short rides, Cinelli said.

Uber said data from some cities with upfront pay have shown a 22 percent average increase in driver earnings for trips in which the distance to the pickup location is longer than the trip itself.

Driver responses were mixed on online groups. Some complained the new algorithm seemed arbitrary and no longer allowed them to calculate pay based on a per-mile basis.

“My earnings are already destroyed by the high prices for gas and now Uber is taking even more money away from me on long trips,” said Kevin Hernandez, a Houston driver.

Other drivers in online groups said the upfront fare information allowed them to select only higher-paying rides, with several drivers sharing screenshots of increased earnings since the altered algorithm was launched.

Expansion will depend on drivers. “If we’re not seeing it attract and retain drivers we wouldn’t roll it out further,” Cinelli said.