Uber drivers definitely aren’t in it for the money.
A new working paper from researchers at Stanford University and the Massachusetts Institute of Technology reports that drivers for the ride-hailing company earn a pretax profit of only $3.37 an hour (or $661 a month) after expenses. Lyft drivers took home similarly paltry sums.
As a result of this meager payout, 74 percent of drivers earn less than their state’s minimum wage. And 30 percent of drivers actually lose money once vehicle expenses are taken into account.
Drivers earning the median amount of revenue make $0.59 per mile driven, but since average expenses work out to $0.30 per mile, the driver’s overall profit is only $0.29 for each mile.
The conclusions are based on a survey of over 1,100 Uber drivers. Researchers analyzed drivers’ revenue, how many miles they drove and what type of car they used. They then compared that information with car insurance and maintenance costs from Edmunds and Kelly Blue Book and data on gas prices from the Environmental Protection Agency.
The study’s caveat about “pretax earnings” is especially interesting because most driver profits are untaxed. The Internal Revenue Service offers a standard mileage rate deduction to any worker who uses a car for business. In 2017, that rate was 53.5 cents.
That may seem like a small amount, but it adds up: the study found that 73.5 percent of ride-hailing driver profit is untaxed. Thus, the average driver would only have to pay taxes on $175 of monthly income instead of the full $661.
Uber has serious problems with these findings.
“While the paper is certainly attention grabbing, its methodology and findings are deeply flawed,” a company spokesperson told Observer.
One reason for this may be the MIT report’s somewhat confusing wording. One question reads “How much money do you make in the average month? Combine the income from all your on-demand activities.”
The Uber spokesperson pointed out that this question could be interpreted as a request simply for “on-demand” income, not total income.
Stephen Zoepf, executive director of Stanford’s Center for Automotive Research and one of the study authors, acknowledged that confusion was possible.
But he also noted the study points out that 80 percent of Uber drivers work fewer than 40 hours per week, implying that at least some of them derive income from other sources.
“I don’t think we ever claimed that people were only doing this and only taking home that wage,” Zoepf said.
Indeed, according to CNBC only four percent of Uber drivers remain with the company for more than a year. So the amount of drivers who count on Uber profit and tips as their main source of income for a prolonged period is likely very small.
Part of this likely has to do with the fact that Uber considers its drivers contractors and not full employees. The company charges a commission of between 20 and 30 percent to its drivers, and it doesn’t offer benefits like sick days or vacation time (though it recently implemented initiatives to help drivers stay safe).
Zoepf said he would be meeting with Uber and Lyft executives in the coming days to talk through their issues with the study.