It doesn't. After expenses/taxes deducted, they're making less than minimum wage. To me this just shows how much financially illiterate many Americans are; zero foresight beyond the amount in their bank account at any given moment.
One of my lyft drivers had their car in the shop for 6 months (some dispute with the kia dealership, they assured me that their lemon lawyer would recover the car soon) and the car they were driving for lyft was a rental from enterprise. Desperate people are taking these gig jobs and it's scary how far in over their head some of them are.
Not to mention that, as a contractor, they have to pay SS and Medicare payroll taxes, which total an additional 7.65%. So, that $20/hour, given the overall expenses, is probably not even equivalent to the new NYC minimum wage of $15/hour.
One year I made around minimum wage (paying myself just barely enough to live during the early stage of a startup) and paid I think around 25% effective just for federal.
I now make a lot more than that with a W2 job as my primary source of income and my effective federal tax rate was about half of what it was that year.
IMO FICA cap should be raised significantly and the rate should be reduced. There are entry-level FAANG employees who aren't paying their full salary into it. But that's an entirely different topic.
In a state/city with high income tax, you'll pay 13.5% social insurance tax, up to 10% state/local tax, and 10-25% Fed income tax, but you'll only hit the high end of those rates in total tax when you gross upwards of $300K/yr.