Uber Drivers Often Make Below Minimum Wage, Report Finds

 The ride-sharing app business model ‘is not currently sustainable’, says an author of the paper. Photograph: Seth Wenig/AP
The ride-sharing app business model ‘is not currently sustainable’, says an author of the paper. Photograph: Seth Wenig/AP

Some drivers end up losing money after insurance, maintenance and other costs, according to study raising concerns over labor standards


Powered by Guardian.co.ukThis article titled “Uber drivers often make below minimum wage, report finds” was written by Sam Levin in San Francisco, for theguardian.com on Tuesday 6th March 2018 00.28 UTC

Uber and Lyft drivers in the US make a median profit of as little as $8.55 per hour before taxes, according to a new report that suggests a majority of ride-share workers make below minimum wage and that some actually lose money.

Researchers did an analysis of vehicle cost data and a survey of more than 1,100 drivers for the ride-hailing companies for the paper, published by the Massachusetts Institute of Technology’s Center for Energy and Environmental Policy Research. The first draft of the paper, released last month, said the median profit was $3.37 an hour, but the author released a new analysis on Monday following criticism from Uber.

In the new analysis, the researcher reported the higher median profit of $8.55 an hour. The study, which factored in insurance, maintenance, repairs, fuel and other costs, also said that for 54% of drivers, the profit is less than the minimum wage in their states and that 8% of drivers are losing money on the job.

 

The findings have raised fresh concerns about labor standards in the booming sharing economy as companies such as Uber and Lyft continue to face scrutiny over their treatment of drivers, who are classified as independent contractors and have few rights or protections.

“This business model is not currently sustainable,” said Stephen Zoepf, executive director of the Center for Automotive Research at Stanford University and co-author of the paper. “The companies are losing money. The businesses are being subsidized by [venture capital] money … And the drivers are essentially subsidizing it by working for very low wages.”

 

While most drivers employ vehicles for personal use and ride-hailing services, the bulk of the miles they drive are for work, which can lead to significant short-term and long-term costs, the paper said.

Given inevitable costs of maintenance, repair and depreciation, “effectively what you’re doing as a driver is borrowing against the value of your car,” Zoepf said, adding: “It’s quite possible that drivers don’t realize quite how much they are spending.”

After the Guardian first published a story on the research last week, Uber’s CEO slammed the paper and published a rebuttal from the company’s chief economist alleging a “major error” in Zoepf’s study. Echoing some criticisms from other academics, Uber’s response argued that survey respondents probably misunderstood key questions, leading to “deeply flawed” conclusions and “eye-poppingly low earnings numbers”.

On Monday, Zoepf issued a response, saying the criticism was “valid” and that the questions “should have been worded more clearly”. He said he subsequently used two additional methods to analyze the data, leading to new figures. One methodology found $8.55 per hour, and another relying on different metrics found a median hourly profit of $10 per hour, with 41% making below minimum wage and 4% losing money.

Other studies and surveys have found higher hourly earnings for Uber drivers, in part because there are numerous ways to report income and to calculate costs and time and miles spent on the job.

Zoepf, who said he would conduct a “thorough revision” of the paper in the coming weeks, has not responded to requests for comment about his latest analysis.

Other academics and commentators who expressed skepticism about the initial finding said the new numbers seemed more appropriate.

Harry Campbell, founder of the Rideshare Guy, a website that conducts surveys of drivers and had partnered with Zoepf on this research, told the Guardian last week that he thought the $3.37 figure seemed too low. On Monday, he said the new numbers “definitely seem in the right ballpark”.

“The most common feedback we hear from drivers is they end up earning a lot less than they expected,” Campbell added. “There is a lot of turnover in the industry, and that’s the No 1 reason I hear from drivers why they are quitting – they are not making enough.”

Campbell pointed out that Uber itself had struggled to properly consider vehicle costs. Last year, the company shut down its US auto-leasing business after discovering it was losing 18 times more money per vehicle than it had previously understood. Some drivers claimed that the leasing program trapped them in debt.

Judith Chevalier, a Yale professor who has studied Uber wage data and criticized the initial report as “way off”, said of the revised analysis: “It’s definitely closer to the zone.” She urged Zoepf to publish a more detailed explanation of his calculations.

Alex Tabarrok, a George Mason University professor who called the paper’s findings “dubious” last week, said he still had concerns about the researcher’s reliance on questionable survey data and that he believed the average hourly profit of Uber drivers was closer to $13 an hour (similar to figures the company has cited).

 

In an email to the Guardian on Monday, an Uber spokesperson did not address the new numbers but said: “We thank Professor Zoepf for acknowledging a major shortcoming of his methodology and support his decision to conduct a thorough revision of the paper over the coming weeks.”

A Lyft spokesperson said in an email last week: “We have not yet reviewed this study in detail, but an initial review shows some questionable assumptions.”

  • This article was amended on 5 March 2018 to reflect a new analysis Stephen Zoepf released in response to criticisms from Uber about his methodology. A previous version of this article and headline included his original findings that drivers make a median profit of $3.37 per hour, that 30% of drivers lose money and that 74% earn below the minimum wage. The story has been updated to include Uber’s rebuttal and the new numbers released by the researcher, along with comments from other academics.

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