[Update 3/6/2018 6:06AM: The main author of the study admitted to some large mistakes in methodology, throwing off all the results. Check this link for the corrected numbers.]
If you drive for Uber or Lyft, you probably make less than minimum wage. A newly released study from the MIT Center for Energy and Environmental Policy Research did detailed surveys with more than 1,100 drivers. The finding: median before-tax profits were a shocking $3.37 an hour. Minimum wage is $7.25 -- more than double. And 30 percent of drivers lost money after expenses.
Pay in the rideshare business has been a contentious issue. Last year, Uber settled an FTC lawsuit they day it was filed. Allegations included misleading claims the company made in recruiting drivers, including how much they might expect to make. Many rideshare drivers find themselves dissatisfied with the experience.
Disillusionment over pay is likely a big part. As Harry Campbell, founder of the Rideshare Guy website, told the Guardian, "The most common feedback we hear from drivers is they end up earning a lot less than they expected." Campbell worked with the MIT researchers on questions for the survey.
Vehicle costs for rideshare drivers are significant. Uber last fall shut down a vehicle leasing business targeting their drivers when the company found it lost $9000 per car rather than the $500 it has estimated.
It is those expenses, and others, that push down profits of the drivers, as the study noted:
Results show that per hour worked, median profit from driving is $3.37/hour before taxes, and 74 [percent] of drivers earn less than the minimum wage in their state. 30 [percent] 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.
At issue is the number of miles devoted to the rideshare business versus personal use. For the "vast majority" of drivers, the "bulk" of mileage -- and, from a financial perspective, the bulk of owning the car -- is for rideshare work.
There are five different types of expenses driving involves: insurance, maintenance, repairs, fuel, and depreciation. According to the researchers, the first three categories make up 40 percent of a driver's costs. Fuel is another 40 percent, leaving 20 percent to depreciation.
Monthly average profit is $661, while the median is $310, meaning a smaller group at the top end pulls in much higher profits, while most people don't.
It might well be that many drivers don't sit down and think through the numbers in great detail. Someone might tell themselves that they already pay for their car, so any money they make is pure profit.
But to understand the dynamics of a business, you have to consider all costs, including the business proportion of depreciation, car payments, insurance (which should mean commercial insurance), fuel, and maintenance. To overlook expenses is to juggle your internal books so you have a weak grasp on how the business is doing.
But then, given the incredibly high turnover that rideshare companies see, maybe more people are doing the math after all.