As Uber (UBER) gears up for its debut on the public markets on Friday, ride-hailing drivers’ grievances have come under heavy focus.
There are various estimates of how much money Uber drivers make per hour, ranging from over $21 an hour to just $9.21 — less than minimum wage in some states.
A report last year from the Economic Policy Institute (EPI) found Uber driver pay averages only $9.21 an hour after deductions for Uber fees, vehicle expenses, payroll taxes, and the cost of a “modest benefits package.” Although the report was published in 2018, the information is “relatively the same,” Lawrence Mishel, the author of the report and a distinguished fellow at EPI, told Yahoo Finance.
“Wages for most workers have actually risen relatnive to inflation over the last several years,” Mishel said. “I’m not sure that Uber driver wages have grown along with it, so I think Uber drivers are probably falling further behind.”
His report indicates that nearly one-third of fares goes to Uber, rather than the driver.
The $9.21 hourly wage is less than the $13.51 average hourly pay that service workers receive, according to the report. It’s also far less than the average hourly pay for private-sector workers, which was $27.77 in April 2019.
Higher estimates for driver pay
To be sure, there are higher estimates out there of how much Uber drivers earn. A May 2019 study from Stanford University indicated that the gross hourly earnings for U.S. drivers between January 2015 and May 2017 was $21.07. However, Mishel pointed out that these findings didn’t subtract costs like gas, car depreciation, and Uber’s service fee.
“This is far from a measure of wages we can compare to BLS data for other workers,” he said. “It actually is quite exaggerated and misleading.”
His study starts with data from the Stanford report, but then deducts the added-on costs, including extra payroll taxes and benefits packages.
Annette Ribero, left, of San Jose, and Jeff Terry, of Sacramento, hold signs during a demonstration outside of Uber headquarters Wednesday, May 8, 2019, in San Francisco. (AP Photo/Eric Risberg)
“The reality in this country is that there’s a lot of people working for very low wages, and that’s because there’s not many choices,” Mishel said. “The number of good jobs available to people — it’s not an overwhelming amount. So, yeah, it’s been harder. As the recovery has gone on, the growth of self-employment has been slowed down remarkably because a lot of people aren’t doing it, and are just sticking to their W-2 jobs.”
Nearly 833,000 people drive for Uber each year, which accounts for 0.56% of all employment, according the report. Turnover for Uber drivers is high, Mishel says. “One of the important points is that the average Uber driver lasts on the job for about three months,” Mishel said. “And, the vast majority work very part-time, less than 10 hours a week. A minority of other drivers work full-time and actually contribute roughly half the rides, even though they represent about one-third of the workforce.”
‘Uber faces the following conundrum’
After Lyft’s (LYFT) disappointing IPO, all eyes will be on the original ride-hailing giant that is Uber. On Thursday, Uber priced its initial public offering (IPO) at $45 per share. At that price, the company raised $8.1 billion at a valuation of $82.4 billion.
“Right now, I think Uber faces the following conundrum,” Mishel said. “It’s locked into a price competition with Lyft and other potential companies. It’s only the size that it is because venture capitalists happened, subsidizing passenger fares quite substantially.”
Last year, The New York Times reported that Uber would entice drivers by promising they would make $5,000 during their first month — that is, until, they reduced rates.
“They dropped the price so much,” Pedro Acosta told the Times. “We have to work so many hours.”