A new MIT CEEPR study has looked at the profitability of Uber and Lyft drivers, finding that wages for employees are “very low,” with an hourly average income of $3.37.
While this particular study focuses on Uber and Lyft, it’s more representative of a general examination of the gig economy, which has come under fire as it becomes more prominent in America.
Regardless, the MIT study, titled The Economics of Ride-Hailing: Driver Revenue, Expenses and Taxes, broke down the financial conditions of Uber and Lyft drivers. The results are… pretty bad:
“Results show that per hour worked, median profit from driving is $3.37/hour before taxes, and 74% of drivers earn less than the minimum wage in their state. 30% of drivers are actually losing money once vehicle expenses are included. On a per-mile basis, median gross driver revenue is $0.59/mile but vehicle operating expenses reduce real driver profit to a median of $0.29/mile. For tax purposes the $0.54/mile standard mileage deduction in 2016 means that nearly half of drivers can declare a loss on their taxes.”
Not only are 74% making LESS THAN MINIMUM WAGE, but a large section of Lyft and Uber drivers are losing money:
“Results indicate that profit from ride-hail driving are very low. A Median driver generates $0.59 per mile of driving, and incurs costs of $0.30 per mile. 30% of drivers incur expenses exceeding their revenue, or lose money for every mile they drive.”
Further, mean profit for these drivers is $661/month with a median of $310. Yikes.
The study explained how they aggregated the financial data from over 1,000 drivers:
“We combine the selfreported revenue, mileage and vehicle choices from over 1,100 Uber and Lyft drivers with detailed vehicle operational cost parameters for insurance, maintenance, repairs, fuel and depreciation, using a combination of estimates from Edmunds and data from the U.S. EPA and Kelly Blue Book.”
Tech Crunch spoke to Mark Tluszcz, co-founder and CEO of Mangrove Capital Partners, about what we can take away from the study. Tluszcz told Tech Crunch the study “tells us that [Uber and Lyft are] a shitty place to work.”
Tluszcz went on to say that for Uber and Lyft, this model is clearly very attractive and profitable, for their employees, however, not so much.
The VC firm head addressed conditions for ride-hailing drivers:
“These people have to spend so much time to cover their costs when you break it down to an hourly revenue, it’s a pitiful amount. And by the way you have no social coverage because you’ve got to take care of that yourself.”
Uber and Lyft have advertised themselves as attractive options for anyone looking to make some extra income. This is the template of the gig economy, where independent contractors work short-term jobs with massive turnover.
An Intuit study forecasted that 40% of American workers would work gig economy jobs by 2020. If the most recent MIT CEEPR report is any indication, this might not be a great thing.
If you’re looking to make some quick bread, ride-hailing doesn’t seem like the best move.