If you need drivers to stay on the platform, and acquiring drivers is extremely expensive, paying them less won't help with driver retention (unless you're making them so rich they retire). If you engage in a race to the bottom on rates with your competition, you'll end up having to spend more on driver acquisition and retention.

If you take care of your drivers, they will want to drive for you more frequently, and your rides will have more drivers available. Sure, the price of rides will be a bit higher, maybe a lot higher, but it'll be sustainable.

And here's me speculating... there's only one case where lowering driver pay makes sense, and that's lowering your prices to drive someone else out of business. If Uber is facing so much competition from Lyft & others, they won't be around once people get sick of giving them money. And by pissing off their drivers, they're creating a spot in the market for a higher end competitor to come in. Once a socially responsible, fair trade competitor gets established, it'll be hard for Uber to raise their rates again, because they have a bottom of the barrel reputation.

Of course I'm not in charge of running a ride sharing company, and there are plenty of people who have good intentions at suck at business. Maybe I'm one of the people that naturally walks the path of good intentions that leads straight to hell. Who knows.