2017 was a rough year for Uber. The ride-sharing giant was embroiled in a sexual harassment scandal. Its CEO resigned. It admitted to underpaying its drivers in New York City, was fined $20 million for making false promises to its drivers, and was banned from one of its biggest overseas markets.
In response, the company has found itself in nearly full-time damage control mode and scrambling to win some positive publicity. Its latest community-orientated offering is the promising Uber Health, which allows medical facilities to book Uber rides for patients who don’t have access to reliable transportation. The program does not require the patient to have access to the Uber app or even a smartphone, according to TechCrunch.
Unfortunately, that hasn’t been enough to make up for a troubling new study out of MIT, which shows Uber and Lyft drivers often make very little money after expenses, and before taxes.
According to analysis by experts at MIT’s Center for Energy and Environmental Policy Research (CEEPR), Uber and Lyft drivers make a median profit of $8.55 an hour before taxes, once insurance, maintenance, repairs, and other costs are factored in. That means 54 percent of drivers earn less than their state’s minimum wage and nearly one in 10 actually lose money on the job.
“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, the paper’s lead author, told ArsTechnica. “Who is benefiting? The passengers are benefiting”
A first draft of MIT’s research earlier this month mistakenly set Uber and Lyft drivers’ median profit at $3.37, but that number was heavily criticized by both Uber executives and economists as “deeply flawed.” As a result, the figure was revised up by Zoepf, and he promised a “thorough revision” of the paper. The new analysis was released on Monday and included the median $8.55 per hour figure.
Due to Uber’s highly touted employment flexibility, there are several different ways to calculate drivers’ income. But while the exact number might go back and forth between MIT researchers and Uber executives, the very structure of Uber almost always means that drivers will come out with less money and fewer benefits then they would have expected.
“Regardless of the exact percentage, the fact that a significant portion of Uber and Lyft drivers are making less than minimum wage is a serious problem that needs to be addressed,” Moira Muntz, of the Independent Drivers Guild, which advocates for app-drivers in New York City, told ThinkProgress. “Even in New York City, where most drivers are full time, Uber and Lyft drivers are making less than minimum wage after expenses. As a result drivers are working longer and longer shifts and the economic desperation is palpable.”
It’s no accident that Uber has repeatedly fought against labour groups and workplace regulations both here and abroad; because drivers are classified as contractors, they are not subject to traditional worker benefits, like minimum wage or health insurance, and are only paid for the hours worked — which means they are the mercy of the algorithms that push fares lower for passengers’ convenience. Many drivers, seeking to become a coveted UberLUX driver, also invest heavily in their cars, leaving them severely in debt.
None of this, however, seems to bother former Uber CEO Travis Kalanick. A year ago, while riding in an Uber himself, a driver told Kalanick that the wage decline had left him bankrupt.
“Some people don’t like to take responsibility for their own shit,” Kalanick said in response. “They blame everything in their life on somebody else. Good luck!”
Kalanick later apologized for his actions in a company-wide email. “It’s clear this video is a reflection of me—and the criticism we’ve received is a stark reminder that I must fundamentally change as a leader and grow up”, he said. “I want to profoundly apologize to Fawzi, as well as the driver and rider community, and to the Uber team.”
Kalanick did not address any of the driver’s criticisms.
UPDATE: In a statement to ThinkProgress on Tuesday afternoon, the Independent Driver’s Guild said that the fact Uber and Lyft drivers were making less than minimum wage was a grave problem that needed to be addressed. “Regardless of the exact percentage, the fact that a significant portion of Uber and Lyft drivers are making less than minimum wage is a serious problem,” spokeswoman Moira Muntz said. “Even in New York City, where most drivers are full time, Uber and Lyft drivers are making less than minimum wage after expenses. As a result drivers are working longer and longer shifts and the economic desperation is palpable.”