Could Uber mean the end of poorly paid cabbies?

Uber's app connects its network of drivers with users making every street corner a virtual cab stand. Photo / Thinkstock

A major shift is underway on America's roadways. Driving strangers from A to B once collected a modest salary but with Uber's growth and capitalisation of technology, drivers can bag up to $90K a year.

Every day millions of Americans hop in their cars to get to work. But in light of the wages UberX drivers are making, the average American could probably make more money by staying in his or her car all day, and driving for the popular ride service.

A major shift is underway on America's roadways. For a long time, driving strangers from point A to point B paid terribly. Estimates of the typical cab driver's salary hover around $30,000.

According to Uber, the median wage for an UberX driver working at least 40 hours a week in New York City is $90,766 a year. In San Francisco, the median wage for an UberX driver working at least 40 hours a week is $74,191.

The gap in compensation for providing similar services is astounding, and illuminates the power of Uber, which is using its mastery of technology to steadily disrupt the traditional cab industry. Worldwide 20,000 new drivers a month have joined Uber's platform in 2014.

"New people are flocking to Uber in part due to the money that they can make and due to the flexibility you have, basically being able to decide when you want and where you want to work," said Rachel Holt, Uber's regional general manager for the East.

Unlike traditional cab companies, Uber capitalised on the rise of smartphones to better serve customers. It has created a more efficient marketplace for connecting those who want to get a ride, and those offering rides.

Uber drivers don't need to waste time circling blocks, hoping to be in the same place as someone who wants a ride. Less downtime means more fares and more money.

"When I talk to Washington, DC drivers they'd say, 'I never knew there were so many people who wanted a ride on 13th street,' " Holt said.

Uber has not revealed the median income for UberX drivers in Washington, or participating cities overall.

Uber's app connects its network of drivers with users who are in search of a ride. The company takes a 20 per cent cut of the fare.

In an Uber-enabled world, every street corner becomes a virtual cab stand. Since being founded in 2009, Uber has expanded to 60 cities in the United States and says it can deliver a ride to 43 per cent of Americans within five minutes. An ECONorthwest study Uber commissioned found that the company has a $2.8 billion a year impact on the US economy, through direct, indirect and induced means.

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To grow so significantly, the company has brought hundreds of thousands of drivers on board. According to the San Francisco Cab Drivers Association, one third of its drivers ditched their registered cabs in a 12-month span to drive for services such as Uber, Lyft and Sidecar.

As drivers and riders gravitate to Uber, the regulation of traditional cab companies looks like a middleman that adds insufficient value for drivers and customers. Uber's algorithm can automatically connect drivers with customers in just seconds, eliminating the need for traditional dispatchers, who would take a cut of a driver's earnings.

Cab drivers also have their earnings limited by paying for expensive permits that give them the right to operate a cab. In New York City these are called medallions, and they've sold for about $1 million this year.

Medallions began in New York the 1930s as a way to insure quality, safety and cleanliness, but Uber's popularity has shown they may not be needed in modern times.

Uber has its own methods of insuring quality, including crowdsourcing. Instead of relying on a small group of paid regulators to monitor cars, Uber riders do this with every trip. By letting riders and drivers rate each other, everyone in the system has an idea of the quality of the other person they're working with.

Between that crowdsourced quality assurance - in addition to its own background and insurance checks - Uber's system is clearly working. The company has been valued at $17 billion, and some suggest it'll be the next $100 billion company as it creates a "digital mesh," to fill the logistical needs of every city resident. But first, expect them to pop the bubble on medallions.

- Washington Post