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Can Uber lower fares and have its drivers make more money?



For the first time, Uber will guarantee drivers an hourly wage of $20 an hour in Los Angeles, or $26 during peak times.
For the first time, Uber will guarantee drivers an hourly wage of $20 an hour in Los Angeles, or $26 during peak times.
David Ramos/Getty Images

To keep demand high during the slower winter months, the ridesharing service, Uber, has cut fares by 20 percent in 48 markets – including Los Angeles and Orange County.

The company says a trip from West Hollywood to downtown will now be around nine dollars, instead of $11.

When Uber lowered prices in the past to muscle out competitors like Lyft and taxi services, passengers loved it but drivers have complained it puts an unfair squeeze on them, complaining their already low take went even lower.

Uber stresses the fact cutting fares actually helps drivers because they get more business. In a blog post, the company points to data from Chicago where fares dropped 23 percent last month compared to December 2013 while drivers' income increased by 12 percent.

But drivers have been skeptical whether volume can make up for the price drop. The company's claim that New York city drivers earn a median of $90,766 a year has been refuted. Slate talked to New York UberX driver Jesus Garay in October:

“They say it doesn’t hurt the pocket of the drivers,” Garay says of the 20 percent fare cuts. “It does. Because it’s impossible with those numbers to be in business.”

The way drivers see it, ride volume can only increase so much in response to lower prices. Garay says that on average, a ride takes him 20 minutes from start to finish: five minutes to reach the pickup location, five to wait for the customer, and 10 to drive to the destination. For a trip of that length, Garay says he’ll make $10 or $11. “So if you’re busy, you’re going to make three rides in an hour,” he explains. 

Newly flush with a $40 billion valuation, Uber is now willing to put its money where its mouth is; For the first time, Uber will guarantee its partners – as it calls them -  an hourly wage of $20 an hour in Los Angeles, or $26 during peak times. (The guarantee comes with a few conditions: Drivers have to accept 90% of trips, average at least one trip per hour, and be online for 50 minutes of every hour worked)