Gig economy: Uber drivers’ earnings low after costs

“The expenses piece of the report seemed right on. But I think the earnings part is too low.” Harry Campbell, who runs the RideShare Guy blog

Uber and Lyft drivers’ actual earnings after deducting expenses are shockingly low, according to a research report. But both of the San Francisco ride-hailing companies said the study’s methodology is flawed and disputed its conclusions, while its author said he planned to rerun the analysis with a different approach.

Drivers’ median profit is $3.37 an hour after expenses, according to the report from MIT’s Center for Energy and Environmental Policy Research. That means half of drivers earn more than that — and half earn less.

Almost three quarters of drivers (74 percent) earn less than their state’s minimum wage and 30 percent actually lose money after expenses, the report said. Drivers’ monthly profit averaged $661, with a median of $310, it said.

“We were surprised by the numbers; they seemed pretty low,” said Stephen Zoepf, executive director of Stanford’s Center for Automotive Research, one of four co-authors, who said he would tackle the analysis again with a different approach.

The report also showed a huge turnover rate among drivers, with half to 90 percent quitting after a short time. It’s possible that the drivers who persist “can make a profitable goal of it,” he said. Those who only eked out a living and dropped out may have dragged down the results.

The report paired vehicle cost information with drivers’ earnings data from a survey released this week by the RideShare Guy website.

Fuel accounted for 40 per-

cent of costs; insurance, maintenance and repairs added up to another 40 percent; and depreciation was 20 percent of costs, it said. All told, expenses were a bit more than $3 an hour, Zoepf said. The report did not subtract for the cost of car payments or leases, which obviously would reduce profit even more.

Looking at earnings per mile, the median earnings were 59 cents a mile, with costs of 30 cents a mile, for a profit of 29 cents, the study said.

But the RideShare Guy survey said drivers averaged $17 an hour before expenses — a huge differential from the number the study claimed for after-expense earnings.

Harry Campbell, who runs the RideShare Guy blog, said he thinks the report used an inaccurate assumption for driver earnings. Rather than the $17, which derived from a question about hourly earnings, it combined two questions about monthly earnings that Campbell said were worded ambiguously and could have resulted in an inaccurately low number. The paper appeared to use $7 an hour as drivers’ base pay before expenses, he said.

“The expenses piece of the report seemed right on,” he said. “But I think the earnings part is too low.”

Zoepf said he agrees that there are potentially different interpretations of what drivers earn and said he will rerun the analysis, still relying on the monthly figures, but using a different way to interpret them.

“While the paper is certainly attention grabbing, its methodology and findings are deeply flawed,” Uber said. “We’ve reached out to the paper’s authors to share our concerns and suggest ways we might work together to refine their approach.”

Lyft said: “We have not reviewed this study in depth, but an initial review shows some questionable assumptions.”