“Deeply Flawed” Study Finds Uber & Lyft Drivers Net Only $3.37 An Hour
Hey, here’s a great idea. You own a car, right? Would you like to use your car to make money? Great. Contact Uber or Lyft and sign up to drive people around. What could be easier? No office, no secretary, no special training or licenses required. You can be your own boss and start making money tomorrow. What are you waiting for?
Like many things in life, the gap between theory and reality can be wide and deep. A new study by the MIT Center for Energy and Environmental Policy Research reveals that the median net profit on an hourly basis for Uber and Lyft drivers is $3.37. How can that be? There is a world of difference between being self employed and working for someone else. In the US, self employed people shoulder the full burden of the Social Security tax of 15%. When you work for someone else, that tax liability is split between you and your employer. So self employed people start off in 7.5% hole right off the bat.
Then factor in things like gasoline, maintenance, repairs, parking, property taxes, your car loan, and insurance and what’s left over for you at the end of the day is a paltry amount of money. Most folks would be better off flipping burgers or being a greeter at Walmart.
“This business model is not currently sustainable,” said Stephen Zoepf, executive director of the Center for Automotive Research at Stanford University and co-author of the paper. “The companies are losing money. The businesses are being subsidized by [venture capital] money … And the drivers are essentially subsidizing it by working for very low wages. Effectively what you’re doing as a driver is borrowing against the value of [your] car. It’s quite possible that drivers don’t realize quite how much they are spending.”
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The study finds the median revenue drivers receive is 59 cents per mile, while their median costs total 30 cents per mile. For a third of drivers, costs actually exceed revenue. Average profit per month is $661. Harry Campbell is the founder of The Rideshare Guy. He tells The Guardian the numbers in the MIT study seem on the low side but that lots of drivers are surprised to find how little they actually earn driving for Uber or Lyft.
“The most common feedback we hear from drivers is they end up earning a lot less than they expected,” said Campbell, who partnered with Zoepf on the surveys used in the paper. “There is a lot of turnover in the industry, and that’s the number one reason I hear from drivers why they are quitting — they are not making enough.”
Uber responded as you might expect them to. A spokesperson for the company said, “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.” Lyft declined to comment on the study or its findings.
None of this will matter in years to come. Both companies are moving as quickly as possible toward replacing human drivers with self driving cars. According to the MIT study, wages account for nearly 70% of all expenses for both companies. Getting rid of people behind the wheel will go a long way toward making ride sharing profitable, at least for the owners.
Waymo has already started a commercial ride-sharing service using specially modified Chrysler Pacifica minivans in the Phoenix, Arizona, area. It plans to expand that service to other US cities soon. The lessons for would-be ride share drivers are clear: A) keep your resume updated and B) don’t quit your day job.
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