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gig economy
Don’t Take Rideshare Companies at Their Word When It Comes to Worker Pay
A new study found that after the industry-backed Prop 22, rideshare drivers take home $7.12 per hour in median net hourly earnings before tips—a fraction of California’s $16 minimum wage.
Sep 02, 2024
The rise of Uber and Lyft to ubiquity over the last decade has been astonishing—over 3 billion trips were taken using the platforms in 2023. Throughout that meteoric expansion to nearly every inch of the globe, the companies have waved away concerns that the drivers keeping the platforms going are being underpaid for their labor.
Anecdotal cases of drivers working grueling hours for a pittance abound, but Uber and Lyft have been able to shrug them off through a combination of industry-funded studies and wage secrecy. However, a few independent analyses have managed to puncture the narrative that the gig economy pays well.
A new study from the U.C. Berkeley Labor Center is one of the strongest examples of that so far. Researchers analyzed 52,370 trips by 1,088 drivers on six rideshare and delivery apps across five major metro areas and found that they earned well below the minimum wage in all five.
The gig companies are promoting Proposition 22-like policies in other states. Our research demonstrates clearly that such policies can be expected to leave drivers with sub-minimum earnings.
The study is particularly notable for the results it extracted about California, where in 2020 gig companies poured tens of millions into Proposition 22, legislation which allowed the industry to continue to classify their workers as independent contractors rather than employees.
The companies promised that exempting drivers and delivery workers would preserve the “flexibility” of gig work while ensuring that they would make over the minimum wage.
Four years later, that promise seems broken. Rideshare passenger drivers, the study found, take home $7.12 per hour in median net hourly earnings before tips—a fraction of California’s $16 minimum wage. When you account for the employee benefits and taxes that drivers have to pay for themselves, the number is even lower.
The lesson for other states and cities considering similar exceptions to labor law for gig companies? Don’t take rideshare companies at their word when it comes to worker pay.
I discussed this report with one of its authors, Ken Jacobs, co-chair of the UC Berkeley Labor Center.
This conversation has been edited for length and clarity.
First of all, congratulations on this major report! Can you tell me a little about how you collected this trip data? What kind of roadblocks do rideshare companies put up to knowing how much workers get paid?
The data comes from a third party app called Gridwise. Drivers use it to track mileage and earnings. We analyzed data for over 1,000 drivers and more than 50,000 trips over a two week period in January 2022 in five metro areas: Los Angeles, San Francisco, Seattle, Chicago, and Boston.
The data allowed us to analyze how much drivers earned per hour and shift across the main passenger and delivery services. I have looked at lots of screenshots from the company apps. The companies don’t make it easy for drivers to calculate their net earnings.
This study split apart passenger and delivery drivers—were there any notable differences in the pay for those distinct groups?
The biggest difference was the share of income that comes through tips. Tips account for a little more than half of the gross income of delivery drivers, but only 10% for passenger drivers. Overall we found that the typical passenger driver earned the equivalent of a $5.97 an hour wage before tips in California, and $7.63 an hour after tips.
Delivery drivers earned about $5 an hour in California without tips and $11.43 an hour with tips. In the three metro’s outside of California, non-tip income—base pay, incentives and bonuses—barely covered expenses. Drivers were essentially working for tips.
Can you explain a little more about how gig companies and this study calculate pay differently, especially when it comes to time between trips and expenses?
When the gig companies talk about how much drivers earn they usually put out figures for gross pay per hour and they don’t include the time a driver is waiting for a request or returning after dropping off a passenger or delivery. That is work time! It is an essential part of the job.
A recent study looked at data from 5.3 million San Francisco rideshare trips to see what drivers did between trips—they found that drivers were mostly heading back to hub areas where they had a greater chance to find a passenger or were cruising while waiting to get the next ride. They were working. When the companies talk about expenses, they don’t include costs associated with any of those miles.
The Gridwise date allows us to account for drivers’ full time and miles for each shift. For expenses, we use the IRS mileage rate for the time period under study of 58.5 cents a mile. This reflects the full cost of owning and operating a vehicle.
Proposition 22, the initiative put on the California ballot by the gig companies, set an initial mileage rate of only 30 cents a mile. The companies justify this by saying that most drivers work very few hours. What they don’t tell you is that most trips are done by drivers who work 20 hours a week or more and for whom gig driving accounts for the greatest use of their vehicle.
We also account for the fact that gig companies do not pay the employer side of payroll taxes or provide other mandatory benefits to drivers.
Your report mentions that concentration in the rideshare and delivery industries may be contributing to low pay, could you tease that out for me?
There are two major gig passenger companies, and four for food and grocery delivery. That gives them significant power to set pay in the industry. They are also able employ what UC Irvine law professor Veena Dubal calls “algorithmic discrimination.” They can see what trips or deliveries drivers have been willing to take for how much money in the past, and can individualize what they offer each driver for the same ride. They do the same in setting what they charge passengers.
How did pay in California compare to the other metro areas you analyzed?
The typical passenger driver earned around $3 less an hour in California than in the other three metros before tips. If we include tips it was around $3.50 less.
For delivery drivers it was the other way around. The typical delivery driver earned $4.50 more an hour in California than the other three metros before tips; $3 more with tips.
What does that say about the ways that Prop 22 affected the industry?
Proposition 22 was sold to voters as setting a higher minimum wage for drivers. In the case of passenger drivers, it had very little effect. Delivery drivers were much more likely to receive Proposition 22 payments and did have higher earnings than their counterparts outside of California. In both cases driver earnings were still well below the state minimum wage. The gig companies are promoting Proposition 22-like policies in other states. Our research demonstrates clearly that such policies can be expected to leave drivers with sub-minimum earnings.
The California Supreme Court recently upheld Prop 22 against a constitutional challenge—how should we expect that situation to evolve?
With the court’s recent decision upholding Proposition 22, we can expect gig companies to continue to pay subminimum wage in the state. The courts did leave open the possibility for the legislature to grant collective bargaining rights to gig workers. Massachusetts will be voting on a gig worker collective bargaining initiative this November. The results of that vote may shape what happens next in California.
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The Gig Economy Is a Working-Class Nightmare
As the “gig” model has taken hold, many traditional, stable jobs have been put in jeopardy, and many of the hard-fought rights associated with them are being dismantled or watered down.
Aug 05, 2024
In his 1930 essay “ Economic Possibilities for Our Grandchildren”, the economist John Maynard Keynes predicted that future generations would someday work 15 hours a week. The theory was based on anticipated advances in technology and productivity. Keynes’ theory has a strange kind of prescience today (though not quite in the way he expected). What’s called the “gig economy”—a labor market that relies heavily on part-time, temporary, or freelance work—resembles his prediction in a backward sort of way, as numerous industries and occupations have moved away from fixed, stable employment toward short-term flexibility.
Conclusive data on the current size of the independent contractor workforce in the U.S. is difficult to find. Different sources disagree on the scale. In 2017, according to data from the Bureau of Labor Statistics, about 6.9% of workers in America were classified as independent contractors (lower than in 2005). However, the Covid-19 pandemic increased demand for delivery services and rideshare apps (Uber, Doordash, Instacart). A study published last year by the National Bureau of Economic Research found that independent contractors may be around 15% of all workers.
Gig workers are not a particularly large slice of our labor force, but they represent a microcosm of a larger trend—the effects of post-Fordism (post-industrialism). In the 1970s, America transitioned away from the Fordist model of labor, where people worked on assembly lines in the mass production of goods. As this was happening, wages began to stagnate, union membership declined, and the U.S. lost its domestic manufacturing base. The New Deal coalition was dissolved, and the working class became less and less associated with the Democratic Party.
Keeping people stuck in low-wage, part-time jobs in the service sector without security or benefits is a poor substitute for fair compensation, and companies cannot rely on it forever.
A major change has taken place in the economic organization of our society. As social safety nets and union membership have been eroded, job precarity has become a permanent state for many Americans. In the gig economy, your position and status are constantly in flux. Maybe you do your job online in a hybrid or work-from-home format. Maybe you move around between periods of unemployment and temporary or part-time employment. Under the Fordist model, a person could expect to work at the same place for their entire lives with rising standards of living. The gig economy, by contrast, is a fractured labor market where work is increasingly isolated, casualized, and digitized, and limited compensation and benefits are the norm. Gig work is particularly common among younger generations. Nearly 45% of millennial professionals do freelance work (many in addition to other jobs).
In 1997, Alan Greenspan, the then-Chairman of the Federal Reserve, testified before Congress, and he attributed the success of the economy to growing “worker insecurity.” Essentially, workers were too worried about keeping their jobs to ask for higher wages or benefits. They no longer had the same kind of job security, which meant they were in a weaker bargaining position. If you’re an employer, this kind of relationship is ideal. You keep labor costs low, and profits high.
Nowhere is this basic lack of fairness more evident than in gig positions. If you’re classified as an independent contractor, there are a whole host of legal rights that don’t apply to you. It varies by state, but in Massachusetts, for example, you don’t have a right to a minimum wage, overtime, or sick pay. You’re not eligible for unemployment benefits. You’ll almost certainly have a harder time finding health, dental, or vision insurance. Benefits such as retirement, worker’s compensation, and family leave are also generally not offered. You most likely won’t get paid time off for public holidays. Anti-discrimination laws don’t protect you, and you can’t legally sue your employer for wrongful termination (although there are exceptions if the employer has violated a written contract). Independent contractor status also severely limits the possibilities of labor organizing.
There are some benefits to independent contract work (it’s easier to set your own hours, work remotely), but in an ideal labor market, people would have a choice between flexibility and stability. They wouldn’t be forced into either category. For many people, this doesn’t seem to be the case.
In 2020, rideshare drivers in California fought a bitter fight to avoid being classified as independent contractors. The state had previously passed Assembly Bill 5, which required rideshare drivers to be classified as employees. Uber, Lyft, and other companies drafted and campaigned for Prop. 22 to exclude drivers from being classified as employees and spent more than $200 million supporting the measure, according to OpenSecrets. The U.S. Department of Labor and the National Labor Relations Board also supported the bill. In 2020, the measure passed.
As gig positions become more and more common, we can expect to see similar fights in other industries, with similar results. Companies can essentially rewrite labor laws in their favor, and poor and working people bear the brunt of this.
Alternatives to Uber have also suffered. A significant share of the market has been taken away from traditional cab companies. New York City’s taxi medallion system, for instance, has faced a collapse. The medallions (which are required to operate a yellow cab) once sold for up to $1 million, but have plummeted in value, now going for as little as $90,000. Many cab drivers have worked for years to earn these medallions, planning to lease them to new drivers to finance their retirement. These people have essentially had their savings wiped out.
In 2018, New York drivers experienced a string of suicides related to the increased difficulties of earning a living in these positions. In February, 2018, a livery driver named Doug Schifter committed suicide in front of City Hall. He had previously been the writer of a column in a trade publication about how app-based services were flooding his market. Later that year, a cab driver named Nicanor Ochisor hanged himself in his garage. His family publicly stated that ridesharing companies like Uber and Lyft had made it impossible for him to earn a living.
In other industries, such as academia, gig workers are being similarly squeezed. Adjunct or contract-renewable professors may make less than half what tenured professors make, and often have to string together work across multiple universities, sometimes supported with tutoring, test proctoring, and other side jobs. According to survey data released in 2022 by the American Federation of Teachers, “a quarter of adjunct faculty have an annual salary below the federal poverty line.” These professors often have limited or no benefits, and no guarantee of work past the current semester.
These are just a few examples. As the “gig” model has taken hold, many traditional, stable jobs have been put in jeopardy, and many of the hard-fought rights associated with them are being dismantled or watered down. We’ve entered the age of casualized work, but for the opposite reason Keynes predicted—not because we’re basking in leisure, but because we’re trapped in a state of precarity. Productivity has increased, but these gains have not been evenly distributed.
Aside from being unfair, this model is also unsustainable. Keeping people stuck in low-wage, part-time jobs in the service sector without security or benefits is a poor substitute for fair compensation, and companies cannot rely on it forever. The essential hollowness of this model is in plain view, and the subordination of workers to these demands will, sooner or later, collapse. It’s impossible to predict when exactly this will happen, or on what scale, but it can be predicted that it will happen eventually.
How can this be overcome? A sharp reversal of course is needed. Working conditions are unlikely to improve unless we can rebuild the popular institutions which guarantee our rights. Labor unions in particular can establish paths to long-term job security and multi-year contracts as industry standards. Additionally, peer countries have addressed the shortcomings of gig work by offering things like paid family leave, sick leave and universal healthcare to the population. The U.S. needs to encourage broad, expansive change to address these growing concerns, and re-write the terms of our social contract to create routes to economic security. If there is to be any kind of positive development in this area of the labor market, it will depend on these efforts.
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Wall Street Greed, Not Worker Pay, Is Making Your Uber Ride More Expensive
Falsely claiming that wage protections will drive up fares seems to be a tactic rideshare corporations use to pit drivers against passengers and obscure a massive transfer of wealth.
Mar 31, 2024
If you’ve taken an Uber ride recently, you’ve probably noticed it cost a lot more than a few years ago. Why is that? We conducted the largest-ever study of rideshare fares to find out, and discovered a story of gaslighting and corporate greed that squeezes rideshare drivers and riders alike, while funneling our money to banks and billionaires.
This month, Minneapolis passed an ordinance requiring rideshare corporations to pay drivers at least $1.40 per mile and 51 cents per minute. In a desperate attempt to block the pay floor, Uber and Lyft are threatening to leave the city, claiming that such a requirement would make rides too expensive for residents. This argument—that higher driver pay would force big fare hikes—is one of Uber and Lyft’s favorite scare tactics. As drivers across the country have protested poverty wages and organized for better pay, the rideshare giants have trotted out this line again and again—in Connecticut, Chicago, New York, and Seattle, to name just a few.
We decided to test that claim. Our team analyzed over a billion rideshare trips, comparing four years of data in Chicago and New York. These are two of the biggest rideshare markets in the U.S. and the only two American cities that make rideshare corporations report detailed trip data. In New York City, drivers overcame Uber’s fearmongering and won a minimum pay standard that took effect in February 2019. In Chicago, drivers are organizing but haven’t yet won pay protections.
Letting rideshare corporations bully and bamboozle to get their way harms all of us.
If Uber’s argument was true, fares should have gone up more in New York after the pay standard took effect. In fact, the opposite happened. Over the four years we studied, Uber and Lyft raised fares by 54% in Chicago, where drivers have no pay protections. In New York, they only increased fares by 36%. The reality just doesn’t match Uber’s scare tactics.
So if fares went up more in the city without a pay floor, what’s causing these big price hikes? We looked at many possible explanations, but only one fits the data: pressure from Wall Street.
For years, Uber used money from the likes of Goldman Sachs, BlackRock, and Jeff Bezos to subsidize cheap rides and decent pay. Now that Uber dominates the market, its investors are demanding their cut. As the corporation has faced increasing calls to turn a profit, it has jacked up fares and cut driver pay.
The strategy is working: just last month, Uber reported an annual profit for the first time ever—and promptly announced plans to give $7 billion to shareholders.
Letting rideshare corporations bully and bamboozle to get their way harms all of us. Riders are forced to pay more to get around, while drivers have to work long hours and still struggle to cover the bills. Falsely claiming that wage protections will drive up fares seems to be a tactic to pit drivers against passengers and obscure this massive transfer of wealth to Wall Street.
The good news is that communities are no longer falling for Uber’s scare tactics. In Minneapolis, the city council stood with the city’s mostly Black and immigrant drivers instead of giving in to Uber’s bullying. And in Chicago, drivers are organizing for an ordinance setting a living wage and protections against unfair deactivations—and have the support of a majority of the city council.
These fights are far from over (already Uber and Lyft are turning to the Minnesota state legislature, which could pass a law banning the Minneapolis ordinance from going into effect). But when drivers and communities stand together, these cities are showing we can say no to Uber’s bullying, ensure drivers are paid enough to provide for their families, and shape a transportation system that serves us instead of Wall Street.
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