New MIT study shows Uber/Lyft drivers are making less than $4 per hour

UBER by San Deep via CC 2.0

The rideshare economy has brought us the ability to catch a ride wherever we need for a reasonable price. While consumers are getting a good deal, the drivers behind the wheel are making considerably less than minimum wage after factoring in expenses. In a new report published by MIT’s Center for Energy and Environmental Policy Research, it details the shockingly low median profit per hour worked for Uber and Lyft drivers. Researchers surveyed more than 1,100 Uber and Lyft drivers, taking down detailed information regarding vehicle cost and other factoring in other costs including fuel, insurance, maintenance, and repairs.

Researchers found that rideshare drivers made an extremely low profit, with the median profit being only $3.37 per hour. Over 74 percent of drivers are earning less than minimum wage in the state they drive in. Other findings include drivers are only generating $0.59 per mile of driving, and their costs account for almost 50 percent of their per mile earnings. In addition, a little less than 30 percent of drivers were found to incur expenses that exceeded their earnings, causing them to be driving at a loss.

This new research points to the inherent flaws of the rideshare model and the struggles it presents to those who use it as a source of income. Mark Tluszcz, co-founder and CEO of Mangrove Capital said, “It tells you that it’s a great place if you’re a company. It’s really a poor place to be an employee or be a worker.” His venture capital firm has the made the conscious choice to not in any gig economy companies, as he believes they are the equivalent to a modern day sweatshop.

Driving for a ride-sharing company can have a sense of appeal to many, as it gives people the chance to work on their own time, allowing for a great deal of flexibility. However, new drivers who begin working for companies like Uber and Lyft are often surprised at the amount of money they are pulling in.

Harry Campbell, founder of the Rideshare Guy, a company that surveys drivers, said “The most common feedback we hear from drivers is they end up earning a lot less than they expected. 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.”

Stephen Zoepf, a co-author of the paper, told The Guardian “it’s quite possible that drivers don’t realize quite how much they are spending.” Zoepf says that many drivers are resorting to borrowing money in order to work for these rideshare companies, effectively subsidizing them by working for low wages. He warns that “this business model is not currently sustainable.”

When asked about the findings of the study, an Uber spokesperson sent the Guardian a statement saying, “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.” Many, however, are confused by the statement, as MIT is no second-rate institution, and the findings are corroborated with thousands of drivers who can confirm these findings.