Discussing a rideshare worker's take-home pay as "profit" really accepts the framing of the company. Yes it's technically true that each driver is an independent contractor ("Small Business Owner"), but this designation is a farce without the ability to set pricing. The take-home pay isn't profit in practice, it's wages less unreimbursed expenses.
Let’s say I’m a dry wall contractor. A general contractor comes along and offers me $20k for a job. I say “$25k?” and he says, “No, $20k.”
If I take the job I am not magically transformed into an employee of his, simply because I lacked the bargaining power to negotiate the rate.
The reason I am still a contractor is that I have absolute control over whether to agree to do that job at that price.
There are obviously lots of factors that are considered in the employee/contractor analysis. I just don’t feel that “ability to negotiate rate” is a particularly important one when “absolute ability to refuse fare” is in the picture.
I don't know about the
U.S. but in Australia there are strict rules about 'sham contracting'. To be treated as an independent contractor you can't get more than 80% of your income from any one source. If you 'contract' to just one employer you're an employee for both tax purposes and protections.
This is a great question and a pretty common misconception.
No, because the revenue test is one of the criteria the judge/IRS looks at. There are other criteria like where and how the "contractor" wants the job done and the relationship between the parties.
Youtube does not tell these Youtubers how to present their videos
Youtube does not tell these Youtubers how long their videos should be
Youtube does not tell these Youtubers when they should release the video
Youtube does not tell these Youtubers what target audience they should be making videos for
Youtube does not tell these Youtubers what income they will get per video made regardless of how popular the video is (surge pricing anyone?)
This is a good overview in the US legal landscape, though it's worth pointing out that the IRS and DOL have differing standards on what does or does not constitute and employment relationship. But I'm actually interested in the European legal landscape here, where contracting relationships generally require the contractor to acquire a certain percentage of their revenue from a separate source. If someone was earning their entire living on Youtube, it would seem to me that these EU laws would consider that person an employee of Youtube. That's obviously not something Youtube would appreciate, and I'm not sure if it's actually the case -- hence the question.
> If you 'contract' to just one employer you're an employee for both tax purposes and protections.
That's not the case in the US. Our laws bar the contractor from having set hours, a set place of work, and a myriad of other rules. So if a contractor comes in 9 to 5 and has his own desk, he'll be classified as an employee. Honestly, I would prefer a similar % rule, that seems simpler and I think would accomplish the intent far better than what we have now.
US law doesn't ban any of those things. Those are simply factors in determining whether a person is an employee or contractor, which in the US is not a bright-line test but is more of a circumstances-based finding. The US also employs the % rule as a factor in that determination.
The problem with the percent rule is that people could easily fall in and out of it. If we imagine someone who is an Uber driver but also works part time as an employee at another business, depending on how many hours they get in a given week as a part time employee they could go above or below the 80% figure. From Uber's standpoint you could also have two people who each drive for 10 hours a week earning the same pay, one of whom that is the only source of income, the other it's only 20% of their income.
Exactly -- and companies would not want to hire contractors because it's impossible for them to know if someone is going to be treated as an employee all of a sudden (say they hired them part-time but their other p/t gig ended). I don't know how Australia deals with this.
A subcontractor who consistently turned down construction work would also be deprioritized by a general contractor.
Because Uber, Lyft, and others periodically offer different incentives in the market, I could make a case that by deciding to sign up on a specific day or respond to a specific offer, you had a chance to accept or decline the company's offer. There's nothing stopping you from reaching out to Uber or Lyft corporate and trying to negotiate your rate. I predict you won't succeed, anymore than the drywall contractor example upthread.
Devil's advocate: Maybe it's not each fare that's a job, but each driving session. Uber offering you a particular job is them giving you the "start driving" button, and you are free to not click it.
“Uber Driver” isn’t a job (in the USA; some other countries disagree); you’re a contractor, and you’re free to find customers via other means (e.g. via Lyft, paying their margins, via word-of-mouth, via your own web site, etc.)
Yes, that may be hard or effectively impossible, but a bad dry wall contractor will not be able to hold his business afloat, either.
Either Uber runs a legal business, in which case I would expect others can start similar businesses, or they don’t, in which case this is like complaining that you can’t start a local mob legally after the one you worked for kicked you out.
Yes, that may be difficult, but Uber has shown it to be possible; ‘just’ find some investor with a few billion to spare, and you can do it, too.
Returning to the original argument: even if Uber drivers were employees, the argument “Uber can’t kick me out because I can’t get a job as an Uber driver elsewhere” doesn’t hold water, and replacing “Uber driver” by “driver” doesn’t change that.
Devil's advocate: Taking the drywall job is akin to clicking the "start driving" button. Once you do either of those things (which you are entirely free to not do on a particular day with no penalty), at that point there is an agreement to try and not skip a wall here and there.
"Dry wall contractor" is a pretty generic job title. "Uber driver" is very specific including the "location" where the driver is working. To make the analogy fair you'd have to do have a "Dry wall contractor for Boeing" or similar.
Unless there are non-competes in place, the analogy is fine. You have the freedom to use the platform or to not use it, and often you have the freedom to use other platforms simultaneously.
No. An individual who is the sole director, sole shareholder, and provides all of the services in an S-Corp will have any distributions classified as compensation subject to payroll taxes. There is a lot of established law on this subject.
This is false. Any income in an S-corp that isn't paid via wages is not subject to FICA and Medicare, regardless of number of shareholders. That's a big reason why so many LLCs choose to classify themselves as S-corps. There are (or were, at least, before the latest tax bill) significant tax benefits to doing so.
It doesn't matter how many shareholders there are, since an S-corp is not a disregarded entity, like a single-member LLC.
> As is the case for any other corporation, the FICA tax is imposed only with respect to employee wages and not on distributive shares of shareholders. Although FICA tax is not owed on distributive shares, the IRS and equivalent state revenue agencies may recategorize distributions paid to shareholder-employees as wages if shareholder-employees are not paid a reasonable wage for the services they perform in their positions within the company.
If you have data to support the contrary, please post your sources.
Yes. It's not "profit" because they aren't paying themselves a wage for working. I own a business that I work at, so personal profit only counts after expenses, including at less minimum wage for hours worked.
It's important to not use the IRS Mileage Rate to calculate real cost. (The linked study does not.) The IRS rate is designed for the worst case scenario for the purpose of tax filing (coz you don't want to penalize someone who has to drive a F-150 in a high-gas-price state in a year where gas price spikes to $5/gallon). Even if we don't consider the fact that the cost of vehicle depreciation, maintenance and insurance is an "almost-fixed" or marginal cost because you are going to own the vehicle and pay for the insurance any way, and let's be generous about estimating the cost here:
At IRS rate of $0.54 a mile, let's say we buy a Prius (which is the most popular car used for ridesharing), for $23,000, and drive it for 100,000 miles and throw it away.
At IRS rate, that's a cost of $54,000.
Gas cost is about $8,000 (50MPG [1], $4/gallon). Insurance $1500 x 5 years ($1200 base insurance + $300 extra for rideshare add-on [2]). That still leaves us $15,500 (28.7% of estimated cost) to cover repair deductible etc. That's almost enough to buy another Prius.
Edits: I mistakenly said the study used IRS Mileage Rate. It does not.
The paper actually uses a $0.30/mile figure. "A Median driver generates $0.59 per mile of driving, and incurs costs of $0.30 per mile."
The paper actually seems to be trying to make the point that Uber drivers are gaming the tax system because their actual costs are lower than the IRS allowance.
$0.30 seems like a fairly reasonable number and it also matches up well with renting a car that's intended to be driven for a week like this and just buying gas for it. (There's also some cost associated with deadheading to the next pickup.)
The $0.59/mile revenue does seem a bit low. UberX or Lyft would seem to typically have pricing in the neighborhood of $1.00 to $1.50 per mile of which about 75% goes to the driver. So $1/mile would seem likely to be a better revenue number in which case the net is more like $0.70/mile and I would have to believe most drivers, even in a larger city, are driving 10 miles or more in a typical hour.
I doubt driving for these services is a huge win once all costs are taken into account but it seems closer to being a minimum wage job than a total bust.
Thanks for pointing out my mistake. You are right. I edited my comment.
To be fair, if the point is to compare profit, then we also need to consider that a traditional worker making minimum wage also needs to commute to work. The average commute of a worker is 30 miles round trip [1]. The cost of that will eat into their earning as well and cannot be deducted from their taxes.
It's sort of a weird point which, if it belongs anywhere at all, probably belongs in a different paper. It's a reasonable question to ask whether IRS guidelines that were mostly designed in the context of standard business deductions are really appropriate for driving services where most drivers are buying cars that are optimized for the role.
But it's also pretty much a totally orthogonal point to one about how little Uber drivers make.
Disagree. First, time value of money. The Prius costs $24k that you don't get to invest over the time you're driving. Let's call that $1-2k.
Plus, most drivers will pay interest on financing the car. ($1-5k depending on credit rating).
Then add:
Car washing/cleaning (and/or time spent doing so).
Repair (as you noted).
Maintenance: oil changes, wiper replacement, tire changes.
(In the opposite direction, depreciation is overestimated because you're throwing the car away after 5 years).
That gets your $15.5k down much closer to zero.
The article's bottom line is that Uber/Lyft drivers are getting paid way, way below minimum wage when all expenses are taken into account. That's left intact by the above calulcations, even if the numbers vary by 20% high or low.
> First, time value of money. The Prius costs $24k that you don't get to invest over the time you're driving. Let's call that $1-2k. Plus, most drivers will pay interest on financing the car. ($1-5k depending on credit rating)
You can't assume that the owner has paid cash for the car (forgoing investing the $24K) AND assume they finance the $24K and ding their P&L with finance charges. (It's double counting.)
> Even if we don't consider the fact that the cost of vehicle depreciation, maintenance and insurance is an "almost-fixed" or marginal cost because you are going to own the vehicle and pay for the insurance any way,
But all of these costs go up if you drive more miles. Your vehicle depreciates more if you put more miles on it (but not if it's parked in your garage), you need more frequent oil and tire changes, and your insurance rates go up because you're more likely to make a claim the more miles you drive annually. And rideshare insurance is more expensive.
The problem isn't the profit, but that there are a number of people using this as one of their primary income sources. I'm not sure how Uber et. al was originally promoted to drivers, but I've originally seen it as something like "I'm heading home from work, let me turn on my uber app and see if anyone around me needs a ride going in that direction".
Or, "I feel like riding around tonight, no particular place to go, may as well see if I can make a couple bucks by giving others a lift". I know that back when I was around 18 - 22 or so, I would often spend a saturday night just cruising with the radio playing, windows down, and enjoying the ride.
> I'm not sure how Uber et. al was originally promoted to drivers, but I've originally seen it as something like "I'm heading home from work, let me turn on my uber app and see if anyone around me needs a ride going in that direction".
That's not how Uber was originally promoted to drivers at all. Uber was originally promoted to high-end professional car drivers.
They eventually pivoted to make UberX their primary offering, but for over a year their _only_ offering, at least here in LA, was black car rides through established, professional car service drivers. I remember thinking of calling an Uber rather than hailing a cab as a luxury / splurge.
> I know that back when I was around 18 - 22 or so, I would often spend a saturday night just cruising with the radio playing, windows down, and enjoying the ride.
Fairly sure that the parameters of driving for Uber/Lyft preclude every single aspect of what makes that activity enjoyable for an 18-22 year old.
That could have been the original intent, and they may still use that argument, but if so it needs to be squared up with the fact that they relentlessly try and entice drivers to keep driving longer and farther. See: https://www.nytimes.com/interactive/2017/04/02/technology/ub...
Is that realistic given the extra insurance costs associated with using your vehicle as a private hire car? You'd have to do a lot of this just to recoup that cost.
> see if anyone around me needs a ride going in that direction
Do they allow you to set a destination area so that your fares are limited to this, or do you just get to review and accept fares so you can choose ones in the right direction? I wasn't aware it could be used to just pick up someone going the same direction.
I can see something like that doing very well, but I can also see how Uber might want to brand it slightly differently, as those drivers may be slightly less invested in driving for Uber and might be more likely to flake or not be as accommodating to passengers.
> Do they allow you to set a destination area so that your fares are limited to this, or do you just get to review and accept fares so you can choose ones in the right direction?
Ostensibly this is for use at the beginning & end of your shift to help with the “commute”. But you’ll probably be find yourself out in the sticks with a choice of waiting long periods for each local ride request (~$2-$3 keep per ride), or using the destination geofence in the middle of the shift to avoid double-digits is deadheading.
It's also great for literally carpooling on your real-job commute. You'll be online at peak times and with the destination set in the most popular directions.
With heavy investments in self-driving cars, I doubt if Uber would really want to improve drivers' income. It'll all become irrelevant when self-driving taxis become available. It may not happen soon, but it's quite worrisome if people are using as one of their primary income sources.
I've never heard it be offered as that, and I've never heard anyone use it like that. For one, Uber doesn't know where you're going, so how would they know that the person who just hailed an Uber is going in that direction?
No they wanted full time people, that is why they were giving bonuses if you did 30 rides or something your first week (I dont remember the exact number) but they wanted people on the road a lot.
They say more than 80% of Uber drivers work less than 40 hours per week so that "median profit of $3/hr" is probably for someone working 10 hours per week.
1. The cost is absorbed by another entity, usually the parents. It is the parents' car, or your parents bought you a car. You need some quick cash, so you basically "eat out" of that car to generate that "cash".
2. You are trapped in a situation where you need quick cash. So you "eat out" of your vehicle to generate that cash. This also happens when you have a low "realization" consciousness. (ie: You are bad at math and economics and you think you are making money while you are losing money).
By driving Uber you are exposing yourself to greater risks: Accidents, Lawsuits and Lost opportunities have you been doing something else. But most people either have low realizations or are trapped. Usually both of them.
I have seen countless of people getting into this kind of business. One of them and probably the biggest is real-estate renting when the economics says NO! The argument is usually: well, it is sitting there anyway so any cash is a profit. It is not and it usually led to worse financial situations and then worse decisions.
> a low "realization" consciousness. (ie: You are bad at math and economics and you think you are making money while you are losing money)
I've not heard that phrase before. It brilliantly captures exactly how such a clearly predatory business model was blindly accepted by drivers and passengers alike. My ethics won't let me use either as a passenger, regardless of the "good deal"; I never could, and this is an issue with my work as management insists any business travel uses Uber. I flat out refuse. Our CEO's mouth dropped when I explained why, replying in a tiny voice "I'd never considered it that way".
There was an interesting observation on the road a few years back.
I saw a Dominos delivery driver in a high end Jaguar. I can only presume it was a young person borrowing their parents' car to do deliveries as their summer job or whatnot. It was amusing to me (having an economics background), because I couldn't figure out what the lesson was being taught here.
Doing some back of napkin math, there was absolutely no way for this kid to generate enough money to make up for the cost of operating this car in a suburban neighborhood. Between the high maintenance cost and the low gas mileage of a luxury car, he was losing money every minute that the jag was being operated (barring, of course, some insane tips for big orders).
As far as real estate: yes, it doesn't take a financial genius to realize that renting income after all expenses is far lower than most people estimate and net profit hovers around $0-100 in vast majority of even profitable cases. Besides, you aren't the first person to think about investing in RE, so all the economic profit is generally already priced into the value of land, so you won't be able to get a bargain.
> I couldn't figure out what the lesson was being taught here.
I can easily see myself setting my kids up with something like that to teach them the value of time, structure, and work. It's no different to me than buying them a chemistry set, an Arduino, or making baking soda/vinegar volcanoes with them. I can even work through the math with them to show them that what they did was more expensive than me just handing them $5000 and telling them to watch TV all summer to save wear and tear on the car.
> I can even work through the math with them to show them that what they did was more expensive than me just handing them $5000 and telling them to watch TV all summer to save wear and tear on the car.
Who are you to say they wouldn't have found a better use of $5000 than blow it on video games and drugs during a summer? Presumably, if they already have good work ethic, they may come up with a business or a venture with that money that they wouldn't have otherwise, because they were delivering pizza for Dominos.
I would ask them to do the math of driving for Dominos BEFORE handing them a Jaguar, not after the summer has been spent.
Uber has deals with car rental agencies in several places that doesn't "allow" you to "eat out" your vehicle equity (I've seen Enterprise in CA and, I think, one other place, and Otto in London). The viability of such deals suggests that the numbers work out even without spending your equity.
Uber was more expensive than a Taxi for me in Paris. Uber gave me a 10-14 euros quote. And for the same distance the taxi took only 7 euros. I'm pretty sure the math might be working on some places. I'm only suggesting that it is possibly not working on other places and users are not aware of that.
I've been using Uber and similar apps for years mostly in Europe and Asia and 80+% of the time the price would be substantially cheaper than taxis (often 50% cheaper in places like London). They use dynamic pricing though based on supply/demand so it is very possible to have higher price than taxi based on parameters (i.e. if you booked a ride in central Paris during rush hour the price would spike up). But from my experience you cannot use those anecdotes because if you use Uber a lot (like hundreds of rides) you will statistically see they they are cheaper in big majority of cases.
Was this before UberX? Checking just now Uber quotes about the same as a taxi for UberX in Paris. The premium Uber (called "Berline" in Paris) is 60% more, so matches your experience.
Uber does minute-to-minute dynamic pricing, so any one ride isn't indicative of the actual cost. It may well be more expensive, but one or two ride anecdotes would not prove it.
I've seen dynamic prices to be 200% base, I've heard it can be even higher, like 300%. With regular taxis during rush hour, or a concert, or during a snowstorm, or during drivers' dinnertime, the price stays the same but availability disappears. With Uber, availability stays but prices go up, manyfold sometimes.
This paper has actual data on earnings from all Uber drivers in all cities in the US. They find that the average earnings are $20 per hour with a standard deviation of $5 (there is substantial variation across cities and especially across time, with late nights on weekends being especially high earning). http://www.nber.org/papers/w23296
The authors are very well respected economists from UCLA and Yale, though it should be noted that one author was a former Uber employee.
This is substantially higher than the estimates in this newer study unless you think that the per hour operating costs of a car are $16 per hour. The new study bases it's numbers on self reported values from a relatively small sample, which is much less accurate than calculating an average using Uber's actual full database.
Another interesting finding from the study I linked is that a majority of Uber drivers work 20 or fewer hours per week and place a substantial value on the flexibility that they get from being able to choose their own hours.
> This is substantially higher than the estimates in this newer study unless you think that the per hour operating costs of a car are $16 per hour.
Fuel costs per hour could easily be a quarter or so of that, and fuel costs seem to be around 1/7 of total operating costs [0], so, yeah, $16+/hr isn't unreasonably high.
I can't read the paper you link but in the abstract-ish thing you've given here, $20 is a mean. The MIT paper says $3.37 is a median. Both could simultaneously be true!
I agree that the mean and median could in principal be this far apart, but it would require a lot of skew in the data (small number of very high value trips -- seems possible).
What is the incentive to drive for one of these services at that price point? Couldn't these people make more money (and not have to replace their car in five years) flipping burgers or the like?
Are drivers misled into believing they will make more? Is the cost per mile intentionally hidden from them?
Initially the lease looks very attractive, because you get a swanky new car, combined with bonuses and stuff that you get as a new driver.
Few months in, the incentive turns into a shackle. You start realizing that incentives are dwindling and the monthly payments are eating into most of your Uber earnings, which was masked by higher new driver incentives initially.
At this point, loss aversion kicks in, and forces the driver to drive crazy number of hours every day, just to make a decent profit over operating costs and the monthly due for the car.
With more such drivers in the market, and an ever dipping price for rides, $/Mile reduces.
That's the incentive.
update: If you think Uber/Lyft in the US is bad, talk to Uber/Ola drivers in India. Many of them are sleep deprived and driving, to make ends meet. And often barely earn enough to justify the costs.
I've started seeing "buy here pay here" auto dealerships use "Uber-ready" as a marketing message on their most expensive cars (and subsequently most insane leasing arrangements).
It's a smart selling point, because you're overcoming peoples' general aversion to spending $$$ on luxuries for themselves by allowing them to justify the nice-car purchase as a business investment. Sure man, you really NEED that F150 to ferry drunk kids around a five block radius from Duke.
If you’re going to do this, I recommend renting weekly through the Lyft/Hertz or Uber/Enterprise route. It costs more per week, but both networks have a quota where free rent kicks in. But you’ll have to drive superhuman hours and only for the one network to hit the quota.
Its for that reason that, unless you really, really need a car, I would suggest not doing that. If you want to have any kind of a life outside of driving, then you're likely not going to make the high quotas.
One of the strangest experiences I had in an India Uber was the driver getting pulled over and borrowing 100₹ from me so he could pay the bribe. "If you don't do this, things will be very bad for me"
The last time I was in Las Vegas, we used Lyft to get around and the one driver we talked to quite a bit told us the car he was driving belonged to Lyft. I think that makes a lot more sense than using a car you own.
Definitely being misled, read the marketing uber puts out for drivers. Also desperation, the way uber pushes for driver sign ups reminds me of MLM schemes about "running your own company!! Setting your own hours!!!"
The few people I know who drive like it because if they have no plans on a Thursday - Sunday night or specific windows of time throughout the week they can turn on the app, drive and make some cash. This adds a lot of flexibility and it's less about the money and more about doing something productive and meeting people. I don't know anyone that career drives for a ride service though.
Being able to begin work whenever they want, and more importantly not work whenever they want. Friend calls and want's to meet at 8? Even if you have a rider you can go off the clock in ~15 minutes.
Presumably for a lot of people the thing they need to work around is not so much friends calling and wanting to meet as their primary jobs with irregular hours.
Or they have pre-existing appointments at certain times of the day (drop-off/pick-up kids at school or spouse at work if there's one car, etc). I wouldn't be so quick to assume what the flexible hours are often being used for, since it might be very different based on age group and location.
Work flexibility helps a lot of people in lots of different ways, which is why it's such a bit deal.
My sister had the great fortune to work at Wendy's when she was a teenager, and I remember picking her up from work and her absolutely reeking of raw onions, from having to place them on all the burgers. The smell would not dissipate for hours even with intense hand washing.
"Are drivers misled into believing they will make more? Is the cost per mile intentionally hidden from them?"
They absolutely are. I know someone who ended up signing one of those rental car leases with Lyft to become a driver. The numbers the company provided made it seem like it would be quite easy to pay off each week. As it turns out, it was just like the old "company store".
When you flip burgers you have to show up at predetermined times, no matter if you're having a bad day or something inconvenient comes up, have to wear a cheesy uniform and put on a smile, tolerate whatever coworkers you get thrown in with, and of course you are about as far from your own boss as it's humanly possible to be. It's totally plausible to me that the sum of avoiding these costs is equal to five bucks per hour.
>It's totally plausible to me that the sum of avoiding these costs is equal to five bucks per hour.
It's only a choice when viewed from an ivory tower. If you have to make ends meet on fast food wages you're not gonna take a massive pay cut in exchange for slightly more autonomy.
Also, the customer interaction side of things is about the same in both jobs and in fast food you'll have to do less bending over backward for customers.
The flaw in these studies are the assumption that the person would not have a car unless they were an Uber/Lyft driver. This has a huge impact on the final per hour calculations.
If the vehicle is a fixed cost for the person regardless of whether or not they are a driver, then factoring in the cost and depreciation of the vehicle isn't really a fair measure.
> If the vehicle is a fixed cost for the person regardless of whether or not they are a driver
What? Vehicles are clearly not fixed cost, they are assets that deprecate in value from use. There is some deprecation from age, but by far the determinant of value is miles driven and damage from use.
Every mile you drive for Uber is costing you money in lower resale value of your vehicle, both from the miles you add to it and from the probability of damaging the vehicle in an accident.
Registration and excise taxes are a fixed cost. Insurance may be a fixed cost. (Although you may need a different policy and some policies have discounts/surcharges based on miles driven.) But most costs of car ownership are primarily related to the number of miles driven.
BTW Uber has a car buying program. I met a driver in Vegas who claimed to have to work long hours in order to cover the car note and have a livable wage. Felt sorry for the guy because his attitude was very optimistic when it was clear to me he was being taken advantage of.
3. This also implies that even getting to driverless cars, Uber will only save 3.37 per hour, not making the business model viable, I would think.
Should be higher. Insurance, energy and maintenance will be cheaper at the scale of Uber's fleet. Driving style might be optimized for MPG. Cars will be available 24/7 with no downtime.
They'll be registering/insuring the vehicles in a state where it's cheap to do so.
Uber's geographic distribution results in the average uber driving paying significantly more baseline cost just to legally field the vehicle. Being able to choose your jurisdiction is probably a ~$1k per year savings over the current Uber driver average.
TBH one of the things I'm looking forward to about self driving cars is that states will be forced to actually compete with each other on registration/insurance/tax.
>Driving style might be optimized for MPG
If (NumSecondsLightHasBeenRed()) > 3 && NobodyInFrontOfMe){keepgoing()}
Not quite what you had in mind, was it? Remember, this is Uber, we're talking about.
Every state in the union requires you to register your vehicles in the state they're in. You're not going to be able to register the cars in Deleware or South Dakota and have them driving in California.
The third point is definitely wrong. Once you have a fleet of driverless cars, you can optimize their routes to perfection, have almost zero down time, so you would need fewer cars in general. And less liability.
I dont think thats correct. I dont think you could optimize routes, meaningfully more, that would require, some kind of prediction, of upcomming drives. Its not impossible, but not something that will save heaps of money. And there will be downtime, because rides will follow some kind of pattern during the day. When people are at work, there will be way less demand, when people are going to work, there will be way more demand etc. right now thats kind of offset, by Uber not owning the cars, and not paying for idle drivers.
While you are right in principle, I'm not sure if the downtime argument holds: Breaks of the driver are not paid currently. The car lifetime is probably not set by age, but total miles driven.
Self-driving cars might be more expensive, too, in maintenance (more things that can break) and initial cost. So I'm not sure how much they can gain.
I've felt Uber was a scan from day one. About a year after they expanded out of San Francisco, I had the opportunity to socially meet Travis Kalanick. That ended any speculation I had that Uber was NOT a fraud. All he ever wanted to do was run up a valuation and cash out, any way possible. Then it grew like wild, and he became an Uber Corrupt Asshole. That is the person I met socially.
Uber, Lyft, and Juno only exist because the Taxi apps are bad or non-existent. If there was a Taxi app that worked exactly like these 3 apps, and not just for hailing taxis, then there would be no need for this.
That is entirely dependent on where you live and the quality of the Taxis. For example, in the London and Singapore, Taxis are awesome. In California, (particularly in the Bay area) - Taxis are horrible beyond belief. The cars are unsafe and uncomfortable, the drivers are terrible and lack knowledge. It's often the case that I will come out of a peninsula hotel (Say, San Mateo) and see a queue of taxis waiting to pick up passengers, and at the same time, a queue of people (myself included) waiting 5-10 minutes for an Uber to arrive. And that's just Uber X. Can you imagine executives used to Uber Black ever getting in a Taxi again?
I've taken thousands of taxi rides and over a thousand uber rides. No comparison between the two in certain regions.
They are almost all business travelers, so multiple possibilities - A big one is Uber travel is trivial to expense, a lot of companies just send it directly into the expense system, and you don't even need to do anything. Another one is (for some reason) a lot of business travelers shy away from Uber X and only ride Uber Black - I have no idea why, after a thousand+ rides in UberX, I really don't see the additional value of Uber Black, unless maybe you are giving a customer a ride? Price is, within reason, irrelevant to business travels - company is paying for it anyways. Speaking for myself, personally - I will do almost anything to avoid having to get into a Cab in San Francisco or the Peninsula, from a experience/comfort perspective.
In speaking with various drivers I've had I either hear that driving for [Lyft|Uber] is great, or terrible. There's rarely any in between.
I've had drivers who had worked with them for years, and seemed to be really happy, also new ones who were happy. Perhaps they have lower living expenses, or this is more pay than they made at other ventures, or uniquely fits their lives.
And I've had others who are really frustrated with the app, the GPS, traffic, the company, their compensation, the Pooling services, riders, etc.
Of note these are generally in the same geographic areas roughly (Boston and SF is where I ride most and flip between services as needed), so in theory it's sampling from a similar population.
One thing in particular I've asked drivers is if pool-services work ok for them. About half say yes and seem to love it, and the other half grumble that it never makes them any money.
I really wish I knew the other factors that go into this to understand the root causes better.
I wonder how much airbnb hosts are making. In Lisbon most airbnb hosts are amateurs who spend a few hours every week cleaning and greeting, and get the bejeezus taxed out of their parallel activity. I wonder if they’re doing any better than “transportation entrepreneurs” working for ridesharing companies.
In Los Angeles, my sister was AirBnB'ing a very nice 2 bdrm condo in an architecturally famous French Castle moved from France to the Hollywood Hills. The condo itself is the former home of a young Frank Sinatra, and the Castle currently has Slash from G&R using a unit as a local get-away. You'd think a place such as this could get a decent rate, right? It goes for under $100 a night right now. The market is so saturated, there is no market.
“Of the five sources of cost estimated per mile (Insurance, Maintenance, Repairs, Fuel and Depreciation), approximately 40% of costs are attributable to Insurance, Maintenance and Repairs, 40% to fuel expenses, and 20% to depreciation.”
I don’t understand how insurance is a relevant cost. Insurance is required to legally operate a vehicle - this is something that they must have for their personal vehicle regardless of whether or not they are driving for Uber or Lyft. The only way this is a relevant cost is if they own their vehicle for the sole purpose of Uber or Lyft driving. I have to imagine that this is usually not the case.
Insurance for driving an Uber/Lyft is much more expensive than regular insurance, because it's considered commercial. In previous years, people could get away with not having it, but today every insurance company asks specifically if this vehicle was ever used in a driving service and will deny claims if it was found to be.
It's more likely that if you are trying to claim on your insurance, they will ask you "have you driven for a ride-share service at any point since the start of your policy" and deny your claim if you have. And presumably it's fraud if you lie on the claim.
Yes, this. I was involved in an accident a few months back and adjuster for both companies asked if I ever used this car to drive for a ride sharing service. I don't recall it being limited to the duration of the policy though.
No, that's not what was meant. By "was ever used" they mean "if you, the policyholder, ever used this vehicle for ride sharing while insured by the company"
If you buy a vehicle used for Uber/Lyft but you don't drive for Uber/Lyft then there won't be a problem.
The relevant quote that applies to me: "When Uber drivers are using their vehicle for personal use, Intact Insurance, Novex, Jevco and belairdirect customers are protected as usual under their personal auto insurance policy at no additional cost."
And yes, the policies are the same price or cheaper than the competitors that don't have ridesharing included. They make up the money by attracting customers like me and by getting paid premiums by Uber for the commerical portion of the coverage.
They talk about two distinct policies here, a personal policy (which still has to permit ridesharing, according to the illustration), which applies at any moment the driver is using the car for personal use (i.e. not logged into the Uber app to accept trips), then another policy, provided by Intact, which covers the Uber trips.
This page seems to be more about a kind of interface between the two policies, not that Uber coverage is provided for free.
Yes there are two distinct policies, both offered by Intact or their subsidiaries:
1. A commercial policy paid for by Uber which covers all Uber drivers while online.
2. A personal policy paid for by the driver which covers them while offline and explicitly permits ridesharing at no extra cost. This personal policy is the same price as the competitors without ridesharing, so it is not an added expense.
Is there any insurance company that offers on-demand insurance add-on policies? What would be great is if it could be integrated into Uber/Lyft's app and automatically kick in a per mile insurance rate only while you have a passenger.
My experience in a big metro area has been that almost every Uber driver does this full-time, and their vehicle is for the sole purpose of Uber. I guess it depends on where you are.
I think the economics of driving marginally for Uber/Lyft (when you already own a car and pay insurance) are much better than driving exclusively for Uber/Lyft (when you have the bear the full cost of the auto purchase and insurance against your Uber/Lyft earnings).
This was my problem with the article. It assumes that people own vehicles for the sole purpose of driving for Uber/Lyft. Costs like maintenance, insurance, and repairs are arguably costs that every car owner has to pay for.
Maintenance and repairs are much more mileage-based than time-based though. If I drive 2X the number of miles in a year because I'm driving for Uber/Lyft, my maintenance/repairs on average are going to be about 2X what they would have been otherwise.
It's hard to tease apart fixed and variable costs in car ownership and it varies based on factors like climate. But, overall, car costs are significantly more about the number of miles than the number of years given relatively typical driving patterns.
Ways in which this headline is potentially misleading:
1) Driving for Uber/Lyft/etc is not a full time job, and was not intended to be a full time job. It's a piecemeal work side job. The flexibility of working when you want, and not working when you don't want, is valuable and you don't get it for free.
2) "Profit" is not income. This is profit net of expenses. Expenses that, among other things, you can write off against your income. And to pre-empt the "Uber drivers can't afford tax accountants" criticism, Turbotax costs $50
3) The profitability of Uber driving can vary dramatically place to place. I often ask Uber drivers in SF how they like their jobs, what they make, etc. They consistently report to me that they make between $40k and $55k/yr. This is significantly higher than "below minimum wage". OTOH, I imagine that driving Ubers in a low density place, where cabs are less financially viable (say, Fargo) is a shitty job. Averaging across the San Franciscos and the Fargos of the country to say "Uber is a terrible job" is not an accurate representation of the facts.
> Driving for Uber/Lyft/etc is not a full time job [...] They consistently report to me that they make between $40k and $55k/yr.
Is this 55k from part-time Ubering, or is this 55k in total, most of which comes from their "real" full-time job and a small fraction from Ubering, or is it 55k from full-time Ubering in direct contradiction of what you said, or what?
Assuming this is comparable to the above figures of 40k to 55k per year, and assuming 50 weeks worked per year, that comes out to 27 to 37 hours driving per week. Maybe not full time, but hard to argue that it's just a small side thing.
> I often ask Uber drivers in SF how they like their jobs, what they make, etc.
When I query drivers, I often get the same sentiment that they are with Uber by choice. Unhappy uber drivers leave, either because the platform penalizes them by way of bad ratings, the economics don't work, or some other reason.
While the numbers from the study seem abysmal when distilled down to the per-hour profit, it hasn't dissuaded drivers from stick with the platform as a viable mean of income.
It sounds like the 1100 drivers surveyed displayed different characteristics. I'd be more interested in more granular data, such as the per-hour rate based on the number of miles driven, length of tenure, location, star rating.
Saying “rideshare is supposed to be a part time job”, in addition to spreading baseless anti-driver rhetoric, indicates a fundamental lack of understanding of the scale Lyft and Uber operate at. If every driver worked part time, everyone would pay big surge pricing for every ride.
Edit, adding: In Lyft’s ExpressDrive program, the quota to get free rental is 105 rides per week. They apparently think it should be a full time job. You might get 3 rides per hour during peak periods, if nobody barfs in your car after closing the bar, but mostly you’ll average about 2 rides per hour over a week.
Because they have literally no other choice? When your choice is to lose money driving for Uber, or starve, you kinda lose the ability to stop if you don't find it "useful".
I'm not defending Uber/Lift here, I completely agree that there is a mismatch between the perception of being an Uber driver and reality, but I don't fully understand this argument. If they have "literally no other choice" were they starving before Uber/Lift existed? These companies haven't existed that long, and the majority of Uber/Lift drivers are not former/current taxi driver that now need to use these apps because the market has shifted. These are people who <5-10 years ago would not have been Uber or Taxi drivers. For these people this market opened up where it had not existed before, an income source that did not exist.
Is it better for a space like this to not exist if it can't supply the 7/10/15$/hour that would be deemed acceptable? I genuinely don't know.
With respect to your original comment about drivers being forced to drive or else they will starve, where is the fraud?
If I put up a sign that says "Sit on my lawn and get 3$/hour", and people see that sign and choose to sit on my lawn, am I committing fraud for not paying them more? I still don't understand the argument.
So driving for uber is better than the alternatives. What's the problem? Uber is paying them and to them it's better than anything else ... isn't this a good thing?
Ah makes sense. They could have been Uber Black drivers who decided to take a regular Uber fare. That happens sometimes when there are no Uber Black requests active.
I think I'll start asking those with dingy cars how long they've been driving. And I'll ask those with nice cars if they are also Uber Black drivers.
Perhaps these companies should charge at least that rate, not to mention the drivers should be setting their own rates on top of that.
With an average speed of about 20mph (EPA urban drive cycle) you would need to "profit" about $0.50 per mile to make $10 per hour. I'm not gonna look up minimum wage and it varies per state, but anyone charging less than $1 per mile to give you a ride would seem to be screwing themselves over and would be better off flipping burgers.
Questionable statistics.
I know several people who driver rideshares for a secondary income and do quite well. They're not irrationally wasting their time. They're using vehicles that they're _already_ paying insurance on, et cetera. From their POV, they either drive rideshares and make money (couple hundred bucks maybe), or stay at home and relax. They've explained to me that they do it because their bored or have free time.
That doesn't seem inconsistent with a 30 cents per mile figure. If someone drives 1,000 miles over the course of a week (which is the minimum rental), that's about 20 cents a mile for the car and about 10 cents a mile for gas. You can quibble with the details but would seem to be in the right ballpark.
I'd be interested to see what the median profit would look like after adjusting for COL.
My guess would be that most high earning drivers are in areas with high population density (thus also likely to be more expensive) so I'm not sure if the increased hourly rate necessarily implies that they are doing better.
Anecdata: I talked with an Uber driver the other day in London who said his weekly target was to make £1000 gross per week and would adjust hours (ie less or more) accordingly. On the side he was trying to bootstrap a business.
What? Hardly. The people who drive for Uber and Lyft are able-bodied adults who could be doing other unskilled labor positions for much more than zero. There's a real opportunity cost here.
Hopefully studies like this help the drivers recognize their value and they can negotiate better (leave until their rates increase).
This study says they're earning $3.37/hr in profit. Most of the rides in my city are $10 and take less than 20 minutes of time for the driver. So, if I paid $12.25 instead of $10 for rides, and the extra money went to the driver, they would earn $10.11/hr profit instead of $3.37/hr. That's 3x the profit for the driver, and only a 22.5% increase in the cost of rides. I would continue to use the service just as often.
Are you implying that if they were not earning $3/hr, they would use those hours to sit around and mope? The point is that $3/hr is a very small reward for your time when compared to pretty much any other use of that hour(i.e. flipping burgers, bagging groceries, making coffee is 3x as lucrative)
Yes. I drove part-time for Uber and the vast majority of Uber drivers are part-time. I had a real job paying 7x more during the day. If Uber didn't exist I just would have earned less.
I assure you I wasn't earning $3/h though, that was just what it ended up saying on my taxes because they let me deduct part of my fixed expenses that I was paying anyways like insurance, finance interest, license, registration, etc. It was closer to minimum wage, and tax-free at that (which suited me because my marginal tax rate was high from my day job).
Before Uber I just drove for free by myself in random directions for fun. That was way more expensive.
Edit: I also have an expensive car that guzzles premium fuel, or it would have been significantly more than minimum wage.
'If drivers are fully able to capitalize on these losses for tax purposes, 73.5% of an estimated U.S. market $4.8B in annual ride-hailing driver profit is untaxed," they add.'
So they might be making money, but only by avoiding taxes. Great. /s
Deducting business expenses from revenue is not 'avoiding taxes', it's what all businesses do. Businesses are taxed on net profit, not on revenue. This is a feature, not a bug.
They sound confused about profit vs revenue, that $4.8B figure is not really 'profit' if it doesn't account for operating costs and depreciation of the car.
Very few businesses would be profitable if they were taxed on revenue rather than net profit.
It does seem that there are glaring flaws in the methodology:
1) They use average numbers for vehicle expenses which are going to be much higher than what professional drivers with strong profit incentives are going to pay
2) They report on a sampled average of all Uber drivers while acknowledging that the vast majority of these are part time and temporary employees who are not really optimizing their profits. If they looked only that those who do Uber full time or for more than temporary work they would get a completely different story.
I’m not sure what I would do differently - what would you have done to address those two problems? Using averages and talking to a representative sample of all drivers seems like a standard approach.
1) Using one methodology for costs and a different one for revenue is a huge red flag. If you are going to use a driver survey to revenue then you should use the same methodology for costs.
2) The researchers acknowledge that the population distribution is highly skewed (more than 80% of drivers are less than 40 hours per week) with a large group of low-mile drivers on one side and a small group of high-mile drivers on the other side.
When the distribution is extremely skewed like this the median does not provide a very meaningful picture of the population.
The person in the middle who makes $3/hr might still only be driving 10 hours per week.
Professional taxi drivers typically work 12 hours per day, 6 days a week or more. NYC actually just recently passed laws to set 12 hour days and 72 hour weeks as a maximum because people were working over that resulting in safety issues. (http://abc7ny.com/traffic/nyc-putting-limits-on-cab-driver-h...)
If over 80% of Uber drivers are working less than 40 hours per week then less than 20% are working anywhere close to professional taxi driver hours but that group is probably providing the majority of ride miles and getting an even bigger majority of revenue and profit because they optimize their revenue.
For instance, part time drivers will drive in their spare time, while professional drivers will drive at peak hours, which makes a huge difference in revenue.
I'm with you, this study isn't worth a damn. I have friends that make $200-300 per night (in maybe 8 hours) driving for Uber (after Uber's cut). They'll use, what, $20-30 worth of gas in that time? And the rest of the costs (insurance and vehicle cost/wear namely) are negligible (tax deduction does not indicate real cost). Driving revenue in cities is way off the right of their chart. Seems like just another contribution to bunk "science".
Usage costs for cars are usually tagged at around $0.50-$0.60 per mile [1]. Looking around, seems like the average 8 hour uber driver is putting on about 100-200 miles per shift [2].
So assuming 150 miles per 8 hours, the average uber driver is paying about $11/hr in fuel and depreciation costs.
So the net income after that would probably be more like $9/hr.
The analysis I linked above calculated the net earnings after all expenses as being ~$13/hr on average (and included all registration and insurance costs as well as the AAA figure in expenses). That would mean higher hourly earnings for part-time drivers in big cities (who often only work Friday/Saturday nights).
While it's relatively easy to believe that the income from driving for Uber and Lyft is lower than most people imagine and it is relatively easy to believe that a small fraction of drivers are actually losing money by driving, it is difficult to believe that that fully 1/3 of drivers are continuing to impoverish themselves.
I'm not saying it's not true, but without supporting details it seems clickbaity.
Most people aren't math savvy and the long-term costs of riding for Uber are more 'invisible' than the short-term cash that you'll be getting from driving. Uber/Lyft functions by letting car owners get a quick buck in exchange for the long-term value of the car.
People use payday loans even though they're fairly scammy and financially irresponsible, why would Lyft/Uber be any different?
https://news.ycombinator.com/item?id=16498551