- Ints Kalnins/Reuters
- Uber improved margins by cutting driver pay, writes an industry expert in American Affairs.
- Drivers for ride-sharing services have reportedly required food stamps and slept in their cars.
- One study found average monthly pay from ride-sharing apps declined by half between 2013 and 2018.
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A lengthy article by transportation industry consultant Hubert Horan in the journal American Affairs outlines a series of perceived flaws in Uber’s business model.
One of the most startling findings is that most of Uber’s margin improvements since 2015 can be explained by cuts in driver take-home pay – not by increased efficiency.
Horan writes that 20% of New York City app-based drivers required public-income supplements such as food stamps in 2016, citing data from The Center for New York City Affairs. That’s double the share of the overall New York City population that relies on public income supplements.
Ride-share drivers have taken drastic measures to save time and money: There have been multiple reports of workers sleeping in their cars to avoid commuting home.
Since the report was published in 2018, New York City passed a law that required ride-share companies pay drivers a minimum of $17 an hour. An Uber spokesperson told Business Insider that the data cited in American Affairs “is not current and doesn’t include info on wages since the City Council’s new minimum wage law, which we supported, went into effect.”
Horan includes data that illustrates how ride-sharing services like Uber have made it harder for drivers to earn a livable wage. According to the Economic Policy Institute, Uber reduced US driver pay to between $9 and $11 per hour in 2018. But before Uber entered the market, taxi drivers in big cities made between $12 and $17 an hour.
The American Affairs article isn’t the first to call out the pay practices at ride-sharing companies like Uber and Lyft.
Even in San Francisco, where drivers earn the most, average pay is $1,508 a month. In Dallas, it’s just $543 a month.
Frustration with low wages and minimal job security came to a head in May 2019, around the time of Lyft and Uber’s initial public offerings, when ride-share drivers planned strikes across the US. The strikes only highlighted the disparity between underpaid drivers and employees growing wealthy from the IPOs.
In American Affairs, Horan explains how Uber “deceived” drivers, for example by misrepresenting take-home pay (not deducting vehicle costs) during recruitment. Horan writes that cuts in driver compensation since 2015 cost drivers over $3 billion at Uber. At Lyft, similar cuts cost drivers $1 billion.