Amid More Competition, Gig Drivers Are In The Driver’s Seat

Data and market evidence suggests competition for labor is helping drivers

A number of recent academic studies focused on “gig” work like rideshare and delivery driving have suggested that independent contractor drivers are at the mercy of platforms regarding wages and working standards.

But increasingly, amidst a competitive labor environment, drivers are in the driver’s seat when choosing the gig work platforms and conditions that suit them best.

We see this in four ways:

1. The increased competition for drivers is prompting platforms to respond to driver demands;
2. The rise of driver “multi-apping,” where drivers choose the best driving offers available rather than committing to a single app;
3. Data show that most drivers treat gig income as supplemental income rather than primary income;
4. Unhappy drivers have and will seek out alternative work if gig work terms become unattractive.

Let’s take a closer look at each of these.

1. Driver competition is driving platforms to respond to driver demands

In June of 2021, Uber’s head of driver operations, Carrol Chang, urged company executives to try out the platform as drivers to better understand drivers’ concerns. The following weekend, Uber CEO Dara Khosrowshahi began delivering food in San Francisco.

The Wall Street Journal reported that after his experience working as a driver, Uber tested several changes to address concerns raised by drivers for years, including:

• Queuing new orders after existing orders
• Better labeling for trips involving more than one delivery
• Tip baiting practices where customers offer large tips initially that decrease after delivery
• Inability to see drop-off locations and estimated pay before accepting trips
• Compensating drivers for taking trips to secluded neighborhoods
• Improvements to the platform that enhance driver safety

These improvements sparked other platforms to make improvements of their own to attract and retain drivers.

Competing with other apps and other sectors (trucking, for example) incentivizes companies to respond to driver concerns to maintain the employment level needed to offer their services.

Of course, platforms also compete through wages.

Drivers can expand on their baseline earnings by using promotions and getting tips.

In February 2022, Reuters journalist Tina Bellon published an article titled “Uber revamps driver pay algorithm in large U.S. pilot to attract drivers.” The goal of the algorithm change was to attract more drivers. Dennis Cinelli, Uber’s Head of Mobility in the U.S. and Canada at the time indicated that the changes will remain only if the changes improve driver retention — evidence that driver behavior influences Uber’s policies.

2. The rise of “multi-apping” in gig work

Gig workers often maximize their earnings by taking jobs on multiple platforms. For example, a gig worker driving for Doordash may also drive for Lyft, taking advantage of both apps — a practice known as multi-apping.

Platforms operating two-sided markets in the app economy bring app workers and users together to facilitate transactions. Switching costs are low for workers so platforms must compete to attract labor, especially amongst each app’s closest competitors.

For example, suppose a DoorDash driver decides to multi-app. GrubHub, Uber Eats, and Instacart are the most similar apps to DoorDash in terms of the worker experience. All of these involve delivery but do not require the driver to have another person in their car. It is reasonable to assume that these platforms compete in the labor market to attract workers.

Now consider a Lyft driver — the closest substitute to driving for Lyft is likely a similar rideshare platform, most likely Uber. The skills and risks are transferable across platforms, and the switching costs are low.

Drivers can utilize multiple apps, often varying which apps to use depending on the time of day. For example, a driver could drive for Uber during rush hour, grocery shop for Instacart during slow afternoon hours, and food delivery with DoorDash during dinner time.

Overall, platforms compete for workers, and the level of competition depends on the proximity of other substitutes and driver preferences.

How often do drivers multi-app?

Recent survey evidence from the Flex Association suggests that workers in the gig economy switching between apps face relatively low costs to multi-apping. The results indicate that 95% of workers find it easy to switch between different platforms offering gig work. Given that switching costs are low, how many workers use this option? And why do they do so?

Gig drivers reported in the same survey that 53% of app-based workers use more than one app at least monthly.

In March 2022, Professors Oksana Loginova, X. Henry Wang, and Qihong Liu published a paper titled “The impact of multi-homing in a ride-sharing market” in The Annals of Regional Science. The authors model multi-homing for drivers and riders in rideshare markets and find that driver multi-homing maximizes driver welfare:

Their research suggests that the market operates most efficiently when all drivers engage in multi-homing.

There are even multi-apping apps, like Para — that help drivers decide which jobs to take on which apps to maximize earnings.

3. Gig work as supplemental income

Survey evidence suggests that most workers in the app economy choose gig work to supplement their personal income.

Since gig workers are using this income as supplemental, the risk of transferring between platforms is low. As such, workers can move between apps easily in order to maximize their earnings and optimize their driver experience.

In the Flex survey above, 47% of gig workers report that gig work contributes up to 24% of their personal income. 70% of gig workers use gig work to make up 49% or less of their personal income.

In short, workers use gig work to supplement income rather than rely on it as the primary source of income for workers. Only 8% of survey respondents indicated that gig work makes up the entirety of their personal income. Workers using gig work as supplemental income have greater flexibility for leaving platforms that do not provide wages and conditions that workers value.

4. Unhappy drivers have and will seek out alternative arrangements

In addition to influencing changes within existing companies in the app economy, driver and customer concerns over the current status quo in the industry are leading to new entrants. These entrants often aim to address existing market gaps that improve driver conditions. As these alternatives gain popularity, existing app-based platforms will continue to compete to attract drivers.

In New York City, a driver’s co-op opened in 2021 to offer drivers, and consumers, alternatives to traditional rideshare apps.

Alto, a rideshare company founded in 2018, offers drivers more stability and use of a company-owned car.

Additionally, a working paper from University of Pennsylvania’s Wharton School Professors Allon, Chen, and Moon titled “Measuring Strategic Behavior by Gig Economy Workers: Multihoming and Repositioning” found that when workers can freely multi-home, their hourly earnings increase as do service levels on platform.

Through driver feedback, customer concerns, legislative proposals, and competition forces, drivers have shown the ability to influence outcomes across apps. Driver multi-apping provides drivers with the ability to take their services to platforms that offer better terms.

Unhappy drivers will leave for alternative apps or sectors, which continues to incentivize platform responsiveness to dynamic labor markets.

Or, as analyst Ben Thompson recently wrote in a Stratechery blog post — platforms are competing over drivers, not customers:

“… it is encouraging that product improvements [for the driver experience] actually make a difference. Indeed, perhaps the best way to think about Uber is that it has an abundant number of riders, and its true customers are drivers, and that there are ways to win those true customers beyond simply throwing money at them.”

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