- Uber and Lyft are trying to lure drivers back on the road with the promise of high earnings.
- But both have struggled to back up past claims about earnings, leaving many drivers skeptical.
- Experts told Insider Uber and Lyft’s refusal to share pay data is largely to blame.
- See more stories on Insider’s business page.
In 2014, as Uber was on its way to becoming the world’s most valuable startup. It boasted that drivers in New York City working at least 40 hours per week earned a median income of more than $90,000 per year, while San Francisco drivers earned more than $74,000.
For drivers working 52 weeks per year, that would average out to more than $44 and $35 per hour, respectively.
At the time, Uber’s reputation was untainted by the litany of scandals that would eventually roil the company, including alleged efforts to circumvent regulators, claims of rampant sexual harassment and assault impacting drivers and corporate employees, and years of unprofitability. News media initially took Uber’s claims about driver pay at face value.
“Uber’s remarkable growth could end the era of poorly paid cab drivers,” read a 2014 headline from The Washington Post. Insider first reported Uber’s claims in a similarly unskeptical fashion. But those claims soon began to fall apart, with drivers telling Insider they were actually making between $5 and $20 per hour.
The Federal Trade Commission eventually accused Uber of misleading drivers by exaggerating their earnings potential by as much as 50%, alleging the median income was just $61,000 ($29 per hour) in New York and $53,000 ($25 per hour) in San Francisco. Uber agreed to pay $20 million, and not make false or misleading claims about driver pay, in order to settle the charges, the FTC announced in 2017.
Since then, Uber and Lyft have both been dogged by the question of how much they pay drivers, and despite the efforts of independent researchers, regulators, and reporters, the answer has remained elusive.
That’s because Uber and Lyft rarely share detailed data about driver earnings, and when they do, it’s usually presented in ways that overestimate what drivers are actually pocketing, according to some researchers who spoke to Insider.
As the companies try to get wary drivers back on the road, Uber told Insider drivers’ median earnings are nearly $42 per hour in San Diego and Austin, and more than $35 in other major cities. Lyft cofounder and president John Zimmer said last month drivers in the company’s top 25 markets are making $30 per hour.
Lyft did not respond to multiple requests for comment on this story. Uber provided median earnings for six US cities.
“We believe this is the best and most straightforward way to communicate earnings on Uber, which vary by when, how, and where drivers choose to drive. To suggest that the figures we have provided aren’t accurate is both unfounded and unfair,” Uber spokesperson Kayla Whaling told Insider.
But researchers told Insider it’s the numbers Uber and Lyft haven’t provided that make it difficult to verify what drivers actually make.
“If Uber is touting a certain hourly pay, they need to make clear what that’s based on,” James Parrott, director of economic and fiscal policies at The New School’s Center for New York City Affairs, told Insider
“If the data really would show that the drivers are earning a pretty decent pay per hour, you would think that they would make that data available because it would certainly help their case, their pitch to drivers to come back to the platform,” he added.
Pay raise or temporary pandemic surge?
From a strictly economic perspective, it makes sense that hourly earnings would go up during a driver shortage, Michael Reich, an economics professor at the University of California, Berkeley’s Institute for Research on Labor and Employment, told Insider.
“Drivers get more trips per hour, there’s less waiting time,” Reich said.
Uber and Lyft don’t pay drivers for the time they spend waiting for the companies to find them a ride, or 33% of the hours that drivers are active on the platform before the pandemic, according Reich’s research. That waiting time skyrocketed when the pandemic hit, as drivers competed for fewer passengers, and has likely dropped again as passengers return.
In other words, a driver in Austin making $42 per hour by Uber’s calculation may just be benefiting from less unpaid time between rides.
But Uber explicitly said these higher earnings will likely be temporary and will drop again if, and when, more drivers return.
The bigger question is “whether the companies are paying [drivers] more per trip,” Reich said, adding: “They’re not giving the answer and there’s really no way to come up with independent data to let us know.”
Even though Uber and Lyft have been charging passengers more, The Washington Post reported drivers don’t necessarily get a larger cut. That’s because they’re paid based on the time and distance of the trip, not what the customer pays.
Uber spokesperson Matt Wing told The Post Uber’s cut of each fare has stayed the same, but CEO Dara Khosrowshahi argued that decoupling driver pay from fares actually led to drivers taking home a larger share, implying Uber took less. Industry blogger Harry Campbell called Uber’s responses a contradiction that highlighted the company’s “lack of transparency” about pay rates. (Lyft also told The Post its cut has stayed the same).
“It’s very hard to take what the companies say at face value”
Khosrowshahi’s claim that drivers are getting more of the pie follows years of Uber and Lyft cutting rates as they’ve experimented with different pay structures.
Uber dropped rates from $2.15 to $1.75 per mile in 2017, and in 2019 from 80 cents to 60 cents per mile for California drivers (per-mile rates vary by location). Lyft followed with rate cuts of its own, and recently cut veteran drivers’ rates, with The Rideshare Guy reporting a Boston driver got their rates cut to as low as 66 cents per mile.
When making these cuts, Uber and Lyft have often claimed other changes in their pay structures offset drivers’ losses. Because of the multiple levers the companies can pull when adjusting pay, researchers need data beyond per-mile or per-minute rates or cherry-picked median earnings.
Last year, Reich and Parrott hoped to get that data when conducting a study on behalf of the city of Seattle to determine whether Uber and Lyft were paying drivers the minimum wage. Both researchers told Insider that, for such a study, they’d at a minimum want company data showing: how long drivers logged onto the apps, their total earnings, how many miles they drove (to determine drivers’ vehicle expenses), and what percentage of each fare the companies and drivers are pocketing.
But when Seattle asked the companies for that and other data, Lyft refused and Uber provided only limited summary data. Reich and Parrott had to rely on their own survey of 6,500 drivers, and concluded they made $9.63 per hour after earnings.
Meanwhile, the companies gave data to Louis Hyman, a Cornell University researcher, who concluded in a separate study that drivers made $23.25 per hour after expenses. (Uber had quietly paid Cornell $120,000 for that work, prompting backlash from gig economy researchers).
Parrott called Hyman’s study a “sleight of hand” that used Uber and Lyft’s preferred methodology of not counting the time drivers spend waiting and estimating vehicle costs at 30 cents per mile, even though the IRS estimates such costs at 57.5 cents per mile. Hyman declined to comment.
“It’s very hard to take what the companies say at face value, given that they have been very insistent all along that drivers only get paid when they have a passenger in the car” or on their way to pick up a passenger, Parrott said.
“Every labor economist I know who looks at this says that the drivers should be paid for their working time,” he added.
Uber and Lyft have argued they shouldn’t have to pay for waiting time because drivers could have multiple companies’ apps open in those times. But Parrott said agreements with local regulators, like the minimum pay law that went into effect in New York City in 2019, could allow companies to avoid this.
“Regulators really need to know”
Ultimately, regulators are the only ones with the ability to force Uber and Lyft to hand over driver pay data. But they are also hamstrung by the companies’ decision to classify drivers as contractors.
Unlike contractors, if an employee claims they’re being underpaid, labor regulators can demand data from the employer about that employee, and in some cases, all employees, Reich said.
“Regulators really need to know what the implications are,” he said, not just for driver pay, but also for congestion in cities
“I wish the regulatory agencies would demand that they be given the data, and so far, they don’t have a way to compel the data and that’s the problem,” Reich said.