Majority of drivers make less than minimum wage and many end up losing money, according to study published by MIT
Uber and Lyft drivers in the US make a median earning of $3.37 per hour before taxes, according to a new report that suggests a majority of ride-share employees make below minimum wage and that many actually lose money.
Researchers did an analysis of vehicle expense data and a survey of over 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 report- which factored in insurance, maintenance, mends, gasoline and other costs- found that 30% of drivers are losing money on the job and that 74% earn less than the minimum wage in their states.
The findings have raised fresh concerns about labor standards in the booming sharing economy as companies like 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 industries are being subsidized by[ venture capital] fund … And the drivers are essentially subsidizing it by working for very low wages .”
Drivers earn a median of 59 pennies per mile while incurring a median cost of 30 pennies per mile, the report said, adding that for nearly a one-third of drivers, the costs are ultimately higher than the revenue. The paper reported the average driver gain to be $661 per month.
While most drivers use 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 auto ,” Zoepf said, adding:” It’s quite possible that drivers don’t realize quite how much they are spending .”
Harry Campbell, founder of the Rideshare Guy, a website that has conducted surveys of drivers, said the finding of a $3.37 median hourly profit seemed a little bit low, but noted that new drivers were often surprised by the wages.
” The most common feedback we hear from drivers is they end up earning a lot less than they expected ,” said Campbell, who partnered with Zoepf on the surveys used in the paper.” There is a lot of turnover in the industry, and that’s the number 1 reason I hear from drivers why they are quitting- they are not attaining enough .”
Campbell pointed out that Uber itself had struggled to properly consider vehicle expenses. Last year, the company shut down its US auto-leasing business after detecting 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.
An Uber spokesperson broadly blamed the research in a statement:” While the paper is surely attention grabbing, its methodology and findings are deep flawed. We’ve reached out to the paper’s writers to share our concerns and suggest routes we might work together to refine their approach .”
Lyft did not respond to a request for comment.
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