- Uber and Lyft struggled to attract enough drivers to meet rider demand earlier this year.
- The companies say more drivers are signing up now, especially where unemployment support is ending.
- Uber and Lyft still face long-term challenges to retain drivers while keeping ride prices low.
Has extra government support during the pandemic stopped people going back to work, or are other factors at play? Uber and Lyft executives just waded into this debate, saying the end of unemployment insurance in some US states has spurred more drivers to sign up to their ride-hailing platforms.
More than 20 US states are ending $300 weekly federal unemployment benefits this summer. Mostly Republican politicians have argued that the payments have been an incentive for people to avoid returning to work. But experts say other factors are to blame, such as a lack of child care and fear of COVID-19 infection.
Uber and Lyft were plagued earlier this year by a shortage of drivers to meet recovering demand for rides. During earnings calls this week, the companies said this imbalance is improving — especially in states that are halting COVID-related unemployment insurance, or UI.
“We expect supply tailwinds from the expiration of federal unemployment benefits,” Lyft President John Zimmer said. “In Q2, we saw an uplift in driver applicant growth in states that opted out of the federal program early, ahead of their participation ending.”
Uber CEO Dara Khosrowshahi highlighted similar trends during his company’s earnings call. “In states that have ended UI, our marketplace balance in general is in a much healthier condition than states that have not ended UI,” he said.
Still, Uber and Lyft face long-term challenges as they try to attract and retain drivers, while keeping prices low for riders. The companies have spent millions of dollars on extra driver incentives this year, although executives said this week that they will reduce some of those incentives going forward.
“While management guided towards decreasing incentives and increasing take-rate, much of these drivers are reactivations vs. net-new, and it remains to be seen what happens if and when new drivers are required to meet growing demand,” Mark Shmulik, an analyst at Bernstein Research, wrote in an Uber research note after the results.
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