Recently, a blockbuster story hit the headlines: an MIT study said that Uber and Lyft drivers were averaging, pretax, less than $3.37 per hour once vehicle expenses were taken into account. The study seemed to validate what many employment law experts had predicted — when low-wage service workers are independent contractors, they not only lose many job-based legal protections but also wouldn’t make enough to live on.
The lead researcher has now backed down somewhat from the $3.37 calculation after Uber criticized the story, pointing to errors in the study’s methodology. Using an alternate method to calculate drivers’ hourly wage, the average driver’s earnings rose to $8.55 per hour pretax. A second alternate method calculated their earnings at $10 pretax. Ultimately, the researcher agreed that Uber’s criticism was valid.
Even under revised estimates, 41 to 54 percent of rideshare drivers don’t make minimum wage
Nevertheless, the news remains grim for these drivers. Even accepting the two alternative estimates, a substantial portion of Uber and Lyft drivers aren’t earning their state’s minimum wage. Using the $8.55 estimate translates to about 54 percent being paid less than their state’s minimum wage. That number falls to 41 percent if the $10 figure is used.
Moreover, even under the alternative figures, between 4 and 8 percent of drivers are losing money after taking vehicle expenses into account. Plus, taxes aren’t even considered in the equation.
Uber still isn’t satisfied with the MIT study. It points to research by Stanford University researchers and by the website The Rideshare Guy as more accurate. Those studies pin gross hourly pay for the average U.S. rideshare driver at $15.68 and $17.50 per hour.
Those figures, however, don’t take into account taxes, vehicle maintenance costs or even gas. Stanford’s $15.68 number also doesn’t include Uber’s service fee. The numbers are not cataloged by region, so the average doesn’t differentiate between drivers in costly, high-demand cities and those in lower-wage, low-demand areas.
The MIT study, by contrast, took expenses and regional differences into account, attempting to calculate the median income among drivers and not the absolute or mean average. The MIT study’s lead researcher points out that his team was trying to get at the realistic earnings a driver might expect after expenses like gas and vehicle costs — costs which can be deducted as business expenses.
Gas and vehicle expenses are not the only costs for Uber and Lyft drivers – as well as other members of the “gig economy.” Uber, Lyft and other companies participating in the “gig economy” have classified drivers as independent contractors. This is good for those companies’ bottom line, but the downsides of that classification are substantial — and they are borne almost entirely by the worker. As independent contractors, the drivers are not entitled, for example, to the minimum wage or overtime premium, sick days, unemployment insurance, worker’s compensation or other employer-sponsored benefits.
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