MIT Study: Median Uber and Lyft Profits Less Than Half Minimum Wage; 30% of Drivers Lose Money

We’ve said for some time that Uber and Lyft are exploiting the fact that their drivers don’t understand their own economics and don’t factor in the wear and tear on their vehicles. One former Uber driver did a back of the envelope work up and argued that you’d make more than minimum wage only if your car was more than six years old. The fact that only 4% of Uber drivers continue for more than a year suggests that working for these ride-sharing companies is an unattractive proposition.

A large-scale study confirms these doubts about driver pay, and then some. A team from Stanford, Stephen M. Zoepf, Stella Chen, Paa Adu and Gonzalo Pozo, under the auspices of MIT’s Center for Energy and Environmental Policy Research obtained information from 1100 Uber and Lyft drivers using questionnaires and information about vehicle-specific operating costs, such as insurance, maintenance, repairs, fuel and depreciation.

Their main finding:

Results show that per hour worked, median profit from driving is $3.37/hour before taxes, and 74% of drivers earn less than the minimum wage in their state. 30% of drivers are actually losing money once vehicle expenses are included. On a per-mile basis, median gross driver revenue is $0.59/mile but vehicle operating expenses reduce real driver profit to a median of $0.29/mile.

If you gross up the median hourly profit to gross revenue, using the same ratio for gross revenue versus net profit per mile, median gross revenue is only $6.86 an hour, still below minimum wage. These drivers would be better off doing almost anything else. Consider the safety risks. From Wired:

Because the ridesharing industry is so new, and laws regulating it so patchwork, official figures are tough to come by, and the big companies don’t share specifics about incidents their drivers report. Still, online forums for drivers brim with descriptions of attacks on drivers by passengers, both verbal and physical, such as a driver posted a video of being spit on and punched.

You might think ridesharing companies would be doing everything they can to ensure driver safety. But it turns out what they can do is limited by the kind of businesses they are. Because drivers operate as independent contractors instead of employees, the companies can’t offer true safety training. Under federal law, training is a signifier that someone is an employee, and both Uber and Lyft have fought bitterly against re-classifying drivers as employees. By the very nature of how on-demand businesses operate today, drivers in many ways have to go it alone…

Still, if ridesharing companies don’t make their figures public, federal regulators do. “Taxi drivers are over 20 times more likely to be murdered on the job than other workers,” the US Occupational Safety and Health Administration said in 2010. In a 2014 report, the Bureau of Labor Statistics found that of 3,200 3,200 taxi drivers who were hurt or killed on the job, 180 sustained injuries caused by a violent person—about 5.6 percent.

As if oh so charitable Uber would actually want to spend money on driver safety training….but you get the point.

The CEEPR study also points out that the fact that so many drivers lose money also means governments lose out on tax revenues:

For tax purposes the $0.54/mile standard mileage deduction in 2016 means that nearly half of drivers can declare a loss on their taxes. If drivers are fully able to capitalize on these losses for tax purposes, 73.5% of an estimated U.S. market $4.8B in annual ride-hailing driver profit is untaxed.

More than 80% of the drivers work less than full time. That means most are doing badly despite presumably focusing on peak hours when they can benefit from surge pricing. It’s hard to see how anyone makes anything approaching a living or even an adequate supplemental income: “On a monthly basis, mean profit is $661/month (median $310).”

As Lambert pointed out, this looks an awful lot like Marx’s immiseration of the proletariat. From Das Kapital:

Within the capitalist system all methods for raising the social productivity of labour are put into effect at the cost of the individual worker […] All means for the development of production undergo a dialectical inversion so that they become a means of domination and exploitation of the producers; they distort the worker into a fragment of a man, they degrade him to the level of an appendage of a machine, they destroy the actual content of his labour by turning it into a torment, they alienate from him the intellectual potentialities of the labour process […], they transform his life into working-time…

If you are using either Uber or Lyft, stop. Now. You are contributing directly to the growth of the precariat and the debasement of work. The fact that you use an app to distance yourself from the exploitation of desperate and not very savvy drivers doesn’t change the nature of what you are doing. Old fashioned cabs have embraced apps without Uber-esque spying on you even its app is off and trying to get you to turn over your contact list to them.

But as one colleague pointed out, the people who seem keenest about Uber are the affluenza and high-end professionals who can easily afford to pay more for car service. Her take was that this was another manifestation that they now see it as a matter of right to have a servant class at their beck and call. And not even a well treated servant class.

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  1. pretzelattack

    just came over to post a link to this, got to get up earlier. the gig economy in all its glory.

  2. The Rev Kev

    “…they now see it as a matter of right to have a servant class at their beck and call. And not even a well treated servant class.”

    Mistreating servants is how you demonstrate how much power you have over them – and how much power you yourself have. Anybody remember this section from the novel “1984”?

    ‘How does one man assert his power over another, Winston?’

    Winston thought. ‘By making him suffer,’ he said.

    ‘Exactly. By making him suffer. Obedience is not enough. Unless he is suffering, how can you be sure that he is obeying your will and not his own? Power is in inflicting pain and humiliation.

    1. Lambert Strether

      Me, hapless prole: We can’t live on $3.37/hour before taxes!

      You, galaxy-brained economics professor: You say “working class immiseration” like it’s a bad thing!

  3. HideNwatch

    China is the model for us serfs. The frogs don’t jump out if you turn the heat up slowly enough

  4. Henry

    Interesting that when the cab drivers were getting their financial throat cut by these uber drivers, they were fine with the situation. Now that they are becoming the low payed servants, crying is their feature. BooHoo……

    1. Marco

      Cab drivers were ALWAYS getting their throats cut. The medallion owners were making bank. The only good thing to come from Uber/Lyft is the collapse in medallion values. And can we please stop JUST using Uber. It’s Uber and Lyft! Lyft has capitalized on the brand destruction of Uber and my friend who (unfortunately) drives for Lyft says they are just as evil. And I have minor quibble with Yves description that affluent professionals are the most defensive of the Uber/Lyft model. Many low income urban workers are ditching public transit and opting for door-to-door service that is only marginally more expensive. My friend says they are invariably the most difficult low fare passengers who never tip and are being conditioned and VERY dependent on the whole cheap fare industry model. I’m beginning to wonder if autonomous vehicles are really the goal or is ride-sharing targeting municipal budgets for public transit.

      1. DJG

        Marco: Sounds from your description that ride-sharing has replaced jitney cabs in under-served neighborhoods. The poor keeping the poor poor, although it is hard to blame people of limited means. (And I am not.) Most people under the age of, oooohhh, 50, have never even heard of jitney cabs. So Uber and Lyft seem like “disruption,” when as the post points out, they are impoverishment.

      2. Erika

        What’s the most frustrating to me are my lower-middle-class friends who complain about the cost of taking an Uber across town. A traditional cab would cost $40, because that’s at minimum the cost of a half hour of the driver’s time, payroll taxes, cost of maintaining the cab, cost of gas, and the cut the cab company takes. Uber costs $20, and that’s “too expensive” even though that cheaper price comes out of the driver’s hide.

        1. Yves Smith Post author

          That is bad, but worse is that my buddy (opera buff, so she hangs with very well off people) reports many friends who are worth way over a million who take an Uber for $7 cross town all the time rather than pay $15 or $20 for a cab. And people like that are more the core of Uber’s business than your friends selling out their class.

      3. Yves Smith Post author

        The point is that cab companies can do something about it and Uber doesn’t.

        Ever been in a NYC cab? Nearly all have super heavy plastic barriers between the driver and the passenger seats. The driver can slide it partly open. Most don’t. Won’t keep you from being shot but will keep you from being knifed, bludgeoned, or strangled.

        That is a basic protection for the driver. You don’t see that with Uber or Lyft. Not allowed.

        1. Elizabeth Burton

          Won’t keep you from being shot but will keep you from being knifed, bludgeoned, or strangled.

          Very few people are aware that every year driving a cab is listed as the second most dangerous way of making a living; first place is being a lumberjack.

          So, cabbies are risking their health and lives on a daily basis with no benefits while often barely making enough to meet living expenses. I know this because my husband is one, and has been for almost 35 years. In other words, he is a professional by any definition of the term; but thanks to Uber/Lyft he is now being maligned on a daily basis in the name of tricking people into joining the gig economy by a company that, as far as I’m concerned, bribed the Texas legislature into passing a law that undercut the ability of municipalities to regulate ride-sharing.

          Nor is it the cab industry that’s the only victim. Those people who switched from using public transport may have done so because the Uberization of municipal transportation has also undercut mass transit funding. There is no question in my mind the ultimate goal is that Uber and Lyft will, as cities become less and less able to support public transit, swoop in and offer to privatize those systems.

      4. WindyGirl

        “I’m beginning to wonder if autonomous vehicles are really the goal or is ride-sharing targeting municipal budgets for public transit.”

        Uber is shooting for both. Lyft isn’t even really a player, Uber only tolerates it because it makes Uber look less like a monopoly. Why do you think cities look the other way with this venture, other than they will finally be rid of at least one well-paid union bus driver class? Dumb cities don’t realize they’ll end up paying when Uber sues for subsidies because they can’t make a profit at all without them.

  5. lyman alpha blob

    My buddy drives for Lyft and knows it’s a losing proposition. He got laid off and started driving when his unemployment was running out – he basically does it to get out of the house because fortunately he has a well paid wife. As you mention, the people he typically drives are well paid Amazon or other tech company office employees who are too good to take the bus and wind up with personal door to door service sometimes for less than the bus ticket costs. The only way that is possible is by completely screwing the driver.

    Prediction: If the neoliberals get their way, driving for Uber and Lyft will replace traditional government unemployment benefits. Get out there and make Travis rich or starve.

    1. Notorious P.A.T.

      Does your friend even make enough to cover the operating costs of his vehicle? He might be better off without that “job.”

    2. Louis Fyne

      uber’s business model is information arbitrage. (which isn’t necessarily evil or good).

      Uber knows with near certainty the near-term aggregate demand and supply for your trip to the airport.

      Passengers don’t know the actual number of cars around them, drivers don’t know the number of people who need rides.

      Uber used to take a straight cut of 20% and their ‘safe rider fee.” Uber no longer takes its 20%/25% + fees cut.

      Now Uber is running a two-sided auction—bidding for passengers (via Surge pricing) and bidding for drivers via (an equivalent Surge for drivers).

      So what happens, depending on supply-demand, is that a passenger may be paying a 1.5x Surge price for their trip, but the driver is receiving revenue equivalent to a 1.0x or 1.1x ride.

      So in essence some/many trips Uber is grabbing 30% to 50%+ of a passenger’s payment.

      1. lyman alpha blob

        uber’s business model seems to be theft and the forbearance of law enforcement.

        What I wonder is if they actually had information arbitrage as a business model when they started of if they decided on that system when it became clear they couldn’t make money any other way. From what I’ve read in recent years, they seem to be making it up as they go along and hoping the VC doesn’t run out before those at the top can cash out.

      2. Yves Smith Post author

        That is bullshit. Honestly. You have a point in there but you’ve really overstated how much Uber knows.

        Uber has only a rough idea of what demand will be like (like more demand around commuting times). It can price in real time but has no ability to anticipate, contrary to your claim.

        Moreover, Uber is still subsidizing rides heavily.

        And Uber has not solve the “backhaul from airport” problem, or backhaul from commutes. Hubert has written about this at length.

    3. Arizona Slim

      Too good to take the bus. Oh, I can relate to that one. Gather ’round the campfire while Slim tells you a little story …

      After returning from a Back East vacation at my mom’s place, I found my house ransacked. Happy New Year 2018, Slim.

      Among other things, the [family blogging] thieves stole my bicycle, which is my main form of transportation. And, since I am short of stature, I can’t just walk into a bike shop and buy a new ride. I had to special-order one via a local shop.

      So, what to do about getting from here to there? Well, I could have taken Uber or Lyft, but those fares would have added up in a hurry. My friends, kind as they were to this burglary and identity theft victim, had lives of their own. I couldn’t be asking them for rides all the time.

      Slim, meet SunTran, Tucson’s public bus system. A friend loaned me his SunGo fare card for a few days, then I got my own.

      Very quickly, I discovered the delights of Tucson bus culture. Whenever you get on the bus and swipe your SunGo, you greet the driver if he or she doesn’t greet you first. Then, when you arrive at your destination, you say “Thank you!” as you exit the bus.

      Who else was on the bus? All sorts of people! Students, working people, the homeless, tourists, retirees, saints, sinners, you name it.

      In early February, my new bike arrived in town. Guess how I got to the bike shop. Via the bus, of course!

      1. lyman alpha blob

        Maybe you can combine the two! In our town the buses all have bike racks on the front.

        I really love our local bus system. Recently our town was asked by the larger neighboring city if we’d like to combine bus services – basically they would absorb ours with of course the obligatory promise of some likely illusory cost savings for our town. Our town’s transportation director pointed out that our bus drivers know the regular riders and will stop and wait for a minute or two if they don’t see someone they expect, or radio the next driver on the route to be on the lookout. It’s really a very nice personalized service which would have disappeared if we were rolled into the larger metro project. Plus the fare is only $1.50 and they still accept cash.

        Our city councilors told them that we’re just fine as we are, thank you very much, and we don’t mind paying the extra cost to continue our good service.

  6. Partyless Poster

    So much of Uber’s popularity is just trendiness, there are so many who just jump on any new internet or app technology no matter how stupid or pointless because its seen as the new trendy thing. If you ask why not take a cab they look at you like your just some old Luddite who hates technology, there is a huge fear I think of people being behind the curve with tech. A form of old technology user shaming.
    You see a lot of that with social media as well.
    Not to mention the mainstream media pretending cabs don’t exist anymore.

  7. shinola

    Not mentioned is the fact that if you’re classified as an “independent contractor” (aka 1099er) this means you pay the full social security/FICA tax amount yourself (regular employees pay 1/2 & their employers pay 1/2).


    Old fashioned cabs have embraced apps

    I find that the Arro app gets me a taxi as fast, if not faster, than Uber/Lyft and without the noxious surge pricing.

  9. lakecabs

    Found this posted on Uberpeople a forum for Uber and Lift drivers.

    Drive on your terms. Often times, I only take DF rides to and from my regular job. Hardly any extra miles and helps pay the gas. Also tracking the miles for the tax deduction even if I don’t get a pick up. I drive a little over 20 miles each way so every little bit helps.

    How many drivers are just dodging taxes?

  10. Knifecatcher

    A friend of mine tried driving for Lyft a while back … let’s just say it didn’t go so well. He’s very much of the precariat and thought making a bit of extra money in his spare time would help ease the strain and get him into a better car to replace his ancient, gas guzzling Ford Explorer.

    He got a small inheritance, $5k or so, and used that to buy a late model hybrid for Lyft work. The first few months things went pretty well. He was able to cover the car note plus a bit more and it looked like he was going to be OK.

    Then he got rear ended. Not his fault, but of course the at-fault driver had zero insurance. His own insurance (bottom of the barrel, of course) paid off the car – which was totalled – but didn’t even give him quite enough to pay off the loan, let alone recover his $5k down payment. So now he was without a car (he had gotten rid of the Explorer) and without that $5k in cash there’s no way he can buy another car nice enough for Lyft – he’s in the buy-here-pay-here demographic.

    His few months of Lyft work left him $5k poorer, without a car, and at risk of losing his other job(s). I loaned him my old pickup for a couple of months so that didn’t happen until he could pick up a new / old beater.

    I live on the other side of the economy. My colleagues at work, by and large, have never even thought of the flip side of that super cheap ride to the airport or whatnot. I’ve been sharing my friend’s story and at least it seems to be making people consider the other side of the arrangement.

  11. Anonymous

    In the virtue signaling world it is perfectly ethical to have a servant class as long as it is truly diverse. Along the same lines that there is no ethical problem with a small hyper-elite owning everything, as long as they correctly diverse.

    Virtue signaling is a new form of indulgences. It redefines objective good and evil into a symbolic system where ‘goodness’ can be purchased by creating proper diversity in various silos. Oftentimes that diversity is created using people who are much less diverse than they appear on paper (e.g. Obama).

    There is a reason that virtue signaling is so popular among elites. It is a convenient stand in for true ethics.

  12. Rates

    “If you are using either Uber or Lyft, stop. Now. You are contributing directly to the growth of the precariat and the debasement of work.”

    This has to be true for Amazon as well among other companies.

    It’s too late. In order to get rich and/or get cheaper prices, Americans would have no qualms in throwing their neighbors under the bus. How did we get here in the first place?

    1. Yves Smith Post author

      You can do you bit by not using these services and taking people who do to task. If using Lyft and Uber (and Amazon, I steer pretty much all of my purchase anywhere else) become a negative status item, it will change the dynamic.

    2. WindyGirl

      When the first big chain supermarket moved into the quaint little town with cheaper prices, did the masses send their small neighborhood markets packing without nary a qualm. Money talks, bull$hit walks!

  13. Marco

    There ARE unscrupulous ways drivers can stick it to Lyft (really Medicaid and or insurance companies) As many insurance companies order rides for older folks who can’t drive. Usually a “Scheduled Ride”. As is often the case the appointment runs over and the passenger isn’t ready. So my friend logs the passenger anyway and goes on a 50-100 mile joy ride with his very quiet and polite phantom “passenger”. Always making sure to drop them off eventually at the specified destination. It’s an easy $100+

  14. DavesNotHere

    Uber did really revolutionize the taxi industry. I lived in SF pre-Uber, and it was a shitshow to get a cab, and waiting 45 minutes to an hour for a cab, and cash only pressure, was the norm.

    The cheap fares were always a fake, as Uber undercuts from both sides. The solution then, would be to pressure Uber into paying their drivers more, and accepting paying the real cost of the ride. Of course this would impact Ubers valuation, but this should be a desireable thing if they expect to make it in the ‘real world.’

    1. Yves Smith Post author

      *Sigh* San Francisco is not the US. From what I can see, it has not had any effect on cab or car service in the other cities I visit, save they now have apps.

    2. LyonNightroad

      Right, and that was only possible through unsustainable multi-billion dollar investments in uber, what you see now, can NOT be the final product. Uber can’t keep providing this service at its current cost without losing billions every year. Maybe what you saw before, was in fact all the market could provide…

  15. Ook

    Exactly. Local governments have had more than enough time to get over the “internet” thing and start to insist on a level playing field for taxis and Uber/Lyft.

    1. Elizabeth Burton

      As I noted in an earlier reply, when Austin TX tried to compel Uber and Lyft to do the same level of background checks on their drivers, including the fingerprinting required of cab drivers, they first withdrew entirely and then got the state legislature to override the local municipalities. It will happen in any state where the Republicans own the government.

      And note that requiring those background checks was approved by the voters via ballot, despite Uber and Lyft spending a whopping slew of money trying to brainwash us. Doesn’t matter.

  16. Larry

    The driver turn over is interesting to hear about. I have a preference when considering transportation options while travelling for work. Public transit > taxi > Uber/Lyft. Public transit in many Northeastern cities is still much faster than getting in a car to go anywhere. Gridlock has always been bad, but it’s out of control in New York thanks to the advent of “ride sharing”. The subway has it’s issue, but remains the fastest way for me to go from Penn Station to just about anywhere in the city, and NJ Transit ain’t half bad for getting to Newark and a few other nearby cities.

    Taxis have the built in advantage of being available at my major points of drop off etc. Airports, hotels, major business districts. Just grab a cab with no app required.

    Lyft/Uber have the advantage of being able to be hailed in any location. I have needed this feature when I had a broken foot and couldn’t get to a cab access point easily or was at a business located in some suburban or other out of the way spot.

    I actually used Lyft yesterday to go about 6 miles from my home to an automotive service center. I’m in suburban Massachusetts and the nearest cab company is 20 miles away from me. They weren’t thrilled with picking me up and only driving me a few miles. Lyft gave me a ride quickly.

    The one thing I do when I take cabs or Lyft is TIP. This money goes directly to the driver. My preference is to tip the driver directly in cash, which I did prior to Uber allowing you to tip through the app. Drivers appreciate the tip and keep 100% of it (well, especially if it’s cash).

    So I minimize my “ride sharing” usage, but don’t think it’s unreasonable to use it when I don’t really have any other options.

  17. Nonna B

    There is a horrifying commercial running right now in some Chicago radio stations. In it, our friend is excited the drive his Uber car around all weekend after working all week. Then he gets to go out on the weekend instead of watching a movie in his living room. And maybe he’ll go to that trendy new place he’s heard about. And here’s the worst: maybe he’ll even be able TO HIRE A SITTER! WAIT. He’s got a kid? So he works all week, drives a car all weekend and then goes out in the evening? Oh, yeah, that’s right, maybe he’ll make enough to hire a sitter. Well, what else would you expect from that company.

  18. Ape

    The ethics come down to alignment of risk and reward. Uber, mlm, most capitalist abuse is risk falling at the bottom but reward at the top. Have to include the full distribution and the cut offs at the bottom where the risk is homelessness, the marginal loss.

    A lot of political systems fail on this one since the smart thing is to always unload risk. Taleb makes me laugh on his skin in the game. When your marginal risk is just accounting you have no skin in the game – real skin is actual skin.

  19. Renee

    I never use Lyft or Uber, despite all my friends saying how wonderful it is. Nope, never gonna. Their eyes glaze over when I talk about the exploitation and failed business model.

  20. Elizabeth

    I’ve never used Uber/Lyft nor do I plan to. I read the other day that they’re rolling out a new service – driving people to their Dr. appointments! The patients won’t have to pay, but the physician’s office will be billed for the ride. My physician told me about a year ago she ditched her car and now takes Uber everywhere! I made some snarky comment to her, and she had a shocked look on her face.

    Living in SF, there are thousands of Uber/Lyft cars in the city every day – I think this is the main reason why traffic is a nightmare here, which is ironic, because the city wants people to get out of their cars and take public transit. The wear and tear on the roads is worsened by these evil companies.

    Boycott Amazon, Uber/Lyft and any enterprise that exploits its workers – I guess that’s quite a lot these days.

  21. RMO

    “One former Uber driver did a back of the envelope work up and argued that you’d make more than minimum wage only if your car was more than six years old” And Uber doesn’t let you use a car which is more than ten years old… kind of a narrow window of (crappy) opportunity there.

    I’ve always been puzzled about one aspect of Uber/Lyft which is the people who like it saying how much better it is than trying to hail a taxi. Haven’t you always been able to just call a taxi company and have them dispatch a cab? The few times I’ve needed a cab here in the Vancouver area that’s what I’ve done – I don’t think I’ve ever seen anyone hail a cab in this city the way I see it done in films and television shows.

  22. mrtmbrnmn

    I know a guy. 75 years old. Drives for Uber 12 hours/day. Hurt his back helping a passenger with luggage. Uber told him: You shouldn’t have helped the guy! Is this a wonderful country, or wot?

  23. Michael

    It appears that the initial numbers were in error.

    Drivers are getting shafted, $8.55 an hour is nowhere near enough for a living wage especially if you aren’t even driving 40 hours a week (and it’s less than half the $19-$21 an hour Uber claims) but the $3.37 an hour figure was the result of misunderstanding how one of the survey questions could be interpreted.

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