According to a recent study, Uber and Lyft drivers earn a median hourly profit of $ 8.55; study authors revised this figure on Monday from an earlier amount reported last week of $ 3.37 per hour.
The academic research, which was conducted at the Massachusetts Institute of Technology’s Center for Energy and Environmental Policy Research, determined that, after surveying more than 1,100 drivers, many drivers are, in fact, losing money. For at least 41 percent of drivers, hourly profit is below the minimum wage in their state.
It appears that some drivers may not be fully accounting for insurance, gas, maintenance, and other expenses that aren’t often immediately obvious to drivers when they first sign up.
The ride-hailing companies have fought tooth and nail to make sure that their drivers are categorized as independent contractors, rather than employees, which means that the drivers themselves are bearing those costs.
As a result, Uber and Lyft, which are venture-backed to the tune of tens of billions of dollars, have effectively made rides cheaper than they otherwise would be. (Uber reported losing $4.46 billion in 2017.)According to the Internal Revenue Service, anyone can deduct work-related mileage off their taxes at $0.535 per mile to account for fuel and maintenance, but it’s not clear how many Uber or Lyft drivers actually do.
“Right now, travel on Uber and Lyft is currently subsidized by venture capital money, and it’s subsidized by the drivers that are working for less wages than they expect, and it’s being subsidized by a legit tax deduction,” Stephen M. Zoepf, executive director of the Center for Automotive Research at Stanford and the paper’s lead author, told Ars last Friday. “Who is benefiting? The passengers are benefiting. We are taking travel at lower than its true cost. As a passenger, we are the ones that reap the benefits.”
Last Friday, an Uber spokesman said in a statement that the paper’s “methodology and findings are deeply flawed.”
“We’ve reached out to the paper’s authors to share our concerns and suggest ways we might work together to refine their approach,” Michael Amodeo emailed.The company pointed to three other studies on Uber drivers’ earnings, saying that these new findings were “substantially lower” than what others have found. However, all three of those papers seemingly did not take expenses into account, as this new MIT paper did.
Uber’s chief economist, Jonathan Hall, released a detailed and public critique of Zoepf’s analysis, and Zoepf then revised his own original figures.
Zoepf concluded:
Following Hall’s advice not to adjust income, Median profit rises to $8.55/hour from the $3.37 initially reported. For 54% of drivers, profit per hour is less than 2016 minimum wage in their state. 8% of drivers lose money. Using Method 2, median profit rises to $10/hour. For 41% of drivers, profit per hour is less than 2016 minimum wage in their state. 4% of drivers lose money. I’m happy to review these numbers with Hall and his team to address any remaining questions with the analysis as I release the next draft of the paper.”
Transparency and reproducibility are the foundation of any academic endeavor. What Hall and Khosrowshahi’s assessment laid bare was an assumption about revenue that I made in the absence of public ride-hailing data and a paucity of independent studies outside Uber’s own analyses.
In the spirit of collaboration, I ask the following from Uber, in keeping with the original objectives of this paper:
(1) Help make an open, honest and public assessment of the range of ride-hailing driver profit after the cost of acquiring, operating and maintaining a vehicle.
(2) Transparently present the difference between actual and tax-reportable vehicle expenses used in the business.
Last week, Lyft made similar general critiques, noting that its drivers were “integral.”
“An ever-growing number of individuals around the country are using Lyft as a flexible way to earn income, and we will continue to engage with our driver community to help them succeed,” Alexandra LaManna, a Lyft spokeswoman, emailed Ars in a statement. “We have not yet reviewed this study in detail, but an initial review shows some questionable assumptions.”
READ MORE: Ridester’s 2018 Independent Driver Earnings Survey
