Uber and Lyft drivers earn less than minimum wage, a recent MIT study claims
According to a new study released by the MIT’s Center for Energy and Environmental Policy Research, 74 percent of Uber and Lyft drivers earn less that their state’s minimum wage. The researchers found out that the median profit before taxes for rideshare drivers is only $3.37 per hour.
The authors of the paper published this week surveyed 1,000 drivers and studied detailed vehicle cost information. The researchers came to a conclusion that after earning a median profit of $.0.59 per mile and incurring $0.29 vehicle expenses per mile, about 30 percent of drivers are actually losing money.
In addition, after calculating how much rideshare drivers earn and write off using a Standard Mileage Deduction, the authors of the paper found out that about 74 percent of driver profit remains untaxed, which translates into billions of untaxed income.
“While the paper is certainly attention grabbing, its 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,” Uber spokesperson sain in a statement when asked to comment on the paper findings.
“Drivers are an integral part of Lyft’s success. 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. We have not yet reviewed this study in detail, but an initial review shows some questionable assumptions,” Lyft spokesperson said.
Last year, Uber devoted 6 months to making driving for the rideshare service more convenient and profitable for drivers. In particular, Uber allowed passengers to tip drivers in the app and introduced 24-hour live support. However, quite a lot of rideshare drivers are still dissatisfied with low rates in their cities. According to the study, drivers’ turnover is between 50 and 96 percent. A report published in 2017 claimed that only 4 percent of drivers stay with Uber for more than a year.
UPD: Uber CEO Dara Khosrowshahi reacted to the study with the following tweet:
MIT = Mathematically Incompetent Theories (at least as it pertains to ride-sharing). @techreview report differs markedly from other academic studies and @TheRideshareGuy recent survey. Our analysis: https://t.co/S2aAqCuDR0
— dara khosrowshahi (@dkhos) 3 марта 2018 г.
Uber’s Chief Economist Jonathan Hall published a post on the company’s blog on Medium claiming that numbers in the study were incorrect. He cites a few other studies and a survey conducted by The Rideshare Guy that showed significantly higher earnings. For example, in The Rideshare Guy’s blog average hourly earnings were reported to be $15.68. The authors of the paper agreed with the questions to the methodology used in the survey and promised to review the figures and publish updated results this week.
UPD2: Lead author of the study Stephen Zoepf agreed with Jonathan Hall and admitted that the questions in the survey could have been interpreted in different ways.
Here is my statement regarding the recent CEEPR working paper “The Economics of Ride Hailing.” pic.twitter.com/lHJkaB0frX
— Stephen Zoepf (@StephenZoepf) 5 марта 2018 г.
“Uber’s Chief Economist Jonathan Hall wrote a thoughtful response expressing his concern with one aspect of our paper,” Zoepf wrote. “Hall’s specific criticism is valid; in retrospect the survey questions could and should have been worded more clearly.”
After using a different method of calculation, Zoepf found out that the median profit of rideshare drivers was $8.55 per hour, not $3.37, and only 8 percent of drivers were losing money while driving for Uber and Lyft. Using another method, Zoepf came to a conclusion that the median profit was $10, and only 4 percent of drivers were losing money. He also asked Uber to provide more data to conduct a thorough research.
“In the spirit of collaboration, I ask the following from Uber, in keeping with the original objectives of this paper,”Zoepf wrote. “(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. In support of these goals I am happy to share existing cost data from this working paper with Uber or Lyft, or to incorporate full and accurate revenue data from Uber in this analysis should they decide to share such data.”
Uber has not yet commented on the statement.