An Uber driver picks up a fare, in front of Union station, in Toronto, on Aug. 24.Christopher Katsarov/The Globe and Mail
Uber UBER-N drivers in Ontario will now have their wages determined entirely by an algorithm, a change that is fuelling the debate over AI’s creeping role in worker compensation and its impact on pay equality.
The compensation change, which Uber is calling “upfront pricing” and takes effect this week, is a sharp deviation from the existing wage structure for drivers, which paid them a fairly predictable rate based on time taken to complete a trip and distance travelled. Critics say it removes the predictability of drivers’ pay and potentially drives it lower.
Upfront fares will allow drivers to see their expected earnings in advance of the trip commencing. Those fares are determined by a complex algorithm using inputs formulated by Uber.
Uber says upfront fares offer drivers a new level of transparency that they previously did not have, because they will be able to know their take-home rate for a ride and the drop-off location before they decide whether to accept a ride. But drivers will no longer be able to estimate their daily earnings based simply on time and distance, creating a new level of opaqueness to gig-worker compensation.
Provincial legislators, workers’ rights groups and app-based companies have been deliberating over details of Ontario’s Digital Platform Workers’ Rights Act that was drafted in 2022 to enhance labour standards for gig workers.
The Act takes effect next July and one of its clauses states that digital platforms must be transparent with their workers over how their pay is calculated.
According to Uber, an upfront price for a ride will be calculated based on a myriad of factors such as time of day and day of the week, demand and supply, the efficiency of the route a driver chooses to take and historical data from similar routes.
In a statement to The Globe and Mail, Uber spokesperson Keerthana Rang said that upfront pricing was introduced to “better balance the marketplace” and “help make sure there are enough drivers accepting trips for the number of trips being requested by riders at any given time.”
But critics argue the company’s latest fare model – which has been in effect across most major American cities over the past two years – punishes drivers by removing the predictability of their earnings.
“Rideshare drivers already experience immense volatility in their work and this new fare model enhances that volatility. There is no transparency to how their wages are calculated,” said Vass Bednar, the executive director of McMaster University’s Public Policy in Digital Society program. Ms. Bednar, who hosts a Globe and Mail technology podcast, argues that it is disorienting and exploitative for a worker to perform the same task daily, but not be paid the same amount.
App-based rideshare and food delivery platforms such as Uber, Lyft and DoorDash, depend heavily on algorithms to govern how quickly a customer can find a ride or receive a food order. But algorithms are increasingly being used by these companies to dictate the wages of gig workers, a concept that has become widely known as algorithmic wage discrimination.
University of California law professor Veena Dubal argued in a 2023 paper that rideshare apps promote algorithmic wage discrimination by personalizing wages for each driver based on data they gather from them. There is no logic to algorithmic pay, she says in her paper, which effectively means that the person who works the longest and hardest might be paid the least, but there is no way of knowing.
In September, the labour advocacy organization More Perfect Union conducted an experiment where it asked seven Uber and Lyft drivers in Los Angeles to take passengers on the same trip route at the same time. Both apps use the upfront pricing model in L.A. – they found that drivers got paid different wages for the same trip.
On its website, Uber explains that driver take-home rates change according to location, promotions that they may be offering riders at the time, and “tests of new features and models” – but it is ultimately unclear how these factors come together to influence the final wage a driver gets.
In a statement, RideFair Toronto, an organization advocating for better wages for gig workers, said Uber’s upfront pricing puts both workers and consumers “at the risk of price-gouging” because of Uber’s monopoly in the rideshare space in Ontario.
The social media site Reddit – a popular spot for gig workers discussing pay issues – is rife with anecdotes of Uber drivers earning less after upfront pricing was introduced in their respective markets. Most of the posts display frustration with the opacity and lack of predictability around compensation. Indeed, an analysis of Uber driver pay across the U.S. by Len Sherman, a professor of entrepreneurship at Columbia Business School, showed that average pay a trip declined by roughly 12 per cent in the first quarter of 2023, shortly after Uber introduced upfront pricing across the U.S.
In Ontario, while the Digital Platform Workers’ Rights Act appears to address issues around algorithmic wage discrimination by legislating that app-based companies be more transparent in their pay calculations, it is unclear how these rules will be enforced. The Act also mandates that gig workers be paid a minimum wage “per assignment,” but it is also unclear what an assignment constitutes.
The Ontario Ministry of Labour did not respond to questions about Uber’s upfront pricing and how it squared with new digital platform regulations.
When asked, Ms. Rang said Uber intends to be in compliance with legislation when it takes effect next July.
Editor’s note: (Oct. 8, 2024): This article has been updated to correct Uber spokesperson Keerthana Rang's statement that upfront pricing was introduced to "better balance the marketplace."