Many Uber, Lyft Drivers Make Under Minimum Wage: MIT Study
Over the years, many critics have cast doubt over claims of high earning potential related to driving for ride-sharing services. Some critics have called out earning potential claims made by certain ride-sharing companies, pointing out that they fail to factor in things like vehicle costs and self-employment taxes. In what is the first big look at this issue, MIT researchers have analyzed the real-world costs and earnings of being a gig economy driver.
Because drivers for services like Uber and Lyft aren't employees, they're paid as contractors and as such must cover their own costs, including things like gas, vehicle maintenance, and self-employment taxes. Those costs add up quickly and many critics have put in effort to estimate a more realistic picture of ride-sharing drivers' actual earnings.
A new study out of MIT is the most extensive one to date. In it, researchers gathered data from more than 1,100 drivers who could provide detailed vehicle cost info. Using that data, the team crunched the numbers and found that in the worst cases, some ride-sharing drivers actually lose money by driving for one of these services.
How is that possible? Because vehicle costs are high, including things like car insurance that covers ride-sharing services, and it drives the total hourly wages down. In 74-percent of cases, ride-sharing drivers were found to earn less than their state's minimum wage. The median profit per hour before taxes worked out to $3.37/hour.
The study shows that despite a driver's median gross revenue being $0.59/mile, accounting for vehicle expenses brings that figure down to $0.29/mile. It's no surprise, then, that turnover rates in gig economy driving are estimated to fall between 50-percent and 96-percent.
The research paper detailing the survey results explains that vehicle costs included estimated insurance, gas, depreciation, and fuel expenses. Overall, 30-percent of ride-sharing drivers have total expenses that exceed their income, meaning they're paying money in the long run to be a driver instead of earning it.
SOURCE: MIT