Jul 6, 2020 3:18 PM

Seattle's Uber and Lyft Drivers Make $23.25 an Hour—or $9.73

Two studies reach very different conclusions about ride-hail earnings, as city officials consider setting a minimum wage.

Since Uber and Lyft transformed urban transportation with ride-hail services, there’s been a big outstanding question: How much do drivers make?

Dueling papers released Monday—one from Cornell University commissioned by the ride-hail companies, and one by researchers from The New School and UC Berkeley commissioned by the city of Seattle—will do little to resolve the question. One says the average Seattle driver makes $23.25 an hour. The other says $9.73.

Why the big disparity? Driver pay is complicated. One of ride-hail’s sharpest innovations—off-loading many costs associated with a car service, including car payments, some insurance, and fuel—makes it even more so.

Seattle officials commissioned the New School–Berkeley study to help them set a minimum wage for ride-hail drivers there. The study proposes a wage of $28.19 per hour, which the authors say would allow drivers to earn the city’s minimum wage of $16.39 after accounting for their expenses. Minimum-wage laws for drivers, and driver pay in general, is crucial to the ride-hail companies’ finances as they seek to prove out the basic economics of the business.

The Cornell paper examines the pay and expenses of more than 14,100 Seattle Uber and Lyft drivers during one week in October 2019, using data from the ride-hail companies. The researchers say that their access to real (and anonymized) driver data allowed them to make more-precise calculations about how much drivers earn per hour. Their conclusion—$23.25 an hour, even after accounting for expenses—is well above most other researchers’.

“I was very surprised,” says Louis Hyman, an economic historian at Cornell’s School of Industrial & Labor Relations who worked on the paper. “That’s pretty good money, especially if you compare it against service economy jobs.” In Seattle, the paper estimates, a full-time driver would make a median annual income of $47,400, close to the city’s median income for all occupations, $52,945.

But the devil is in the details, and Hyman and his team made what he acknowledges are some controversial decisions when building their model. For example, they excluded many costs associated with owning a car, such as insurance. Their reasoning: 96 percent of the drivers on the apps drove less than 40 hours a week for work, so they would have faced these costs anyway. The researchers did account for depreciation, some maintenance costs, and fuel.

Uber and Lyft commissioned the Cornell study; Hyman and the companies say the money helped offset some research expenses. The companies also provided feedback on initial drafts. The paper has not been peer-reviewed, though the authors say they intend to eventually publish it in an academic journal.

Drivers who spoke to WIRED were skeptical. “$23.25 an hour is BS. There’s no way,” says Sergio Avedian, who drives part-time in Los Angeles and coaches other ride-hail drivers on how to make the most of their gig. “If people were making that money, everyone and their uncle would be driving for Uber.”

Avedian says wages are higher in Seattle than Los Angeles, where he lives, in part because the market is smaller. But he takes issue with the Cornell researchers’ decision to dismiss some repair and insurance costs. Avedian advises drivers to buy insurance specifically designed for ride-hail drivers, which can cost more than $100 a month. He estimates he takes home about $20 an hour, but only by obsessing over details like which rides to accept and decline. He thinks most drivers make minimum wage or less.

“To make more than $23 an hour, you not only have to be good. You have to be lucky,” says Jay Morran, who drove for both companies in the Los Angeles area until early this year.

The second paper, commissioned by Seattle and written by economists James Parrott and Michael Reich, calculated driver pay very differently. It’s based on an online survey completed by more than 6,500 licensed Seattle ride-hail drivers and reflects one week in December 2019. Whereas the Cornell work calculates driver expenses at 19 cents a mile, the Parrott and Reich one pins it closer to 52 cents a mile, including insurance, a cell phone, and vehicle cleaning. “This is the biggest source for how [the Cornell researchers] came up with net pay being so huge: They’re just not accounting for business costs,” says Reich, an economics professor at Berkeley’s Institute for Research on Labor and Employment.

The Parrott–Reich study also counts all of the time drivers spend logged on to the app as “working time,” even if a driver is waiting for a ride. By contrast, the Cornell paper counts waiting time only if it leads to a ride; that reduces the total working time—and increases the per-hour estimated pay—for each driver. The Parrott–Reich paper was reviewed by University of Washington transportation experts and the city of Seattle. The authors did similar research in New York City, which helped that city’s Taxi and Limousine Commission set a driver minimum wage last year.

In a statement, Seattle Mayor Jenny Durkan said the city would use the Parrott-Reich study to set a minimum wage for drivers equivalent to at least the city's "minimum wage plus reasonable expenses." The statement said the study "comes at a time when protecting workers without a safety net is even more critical."

Other studies, based on research from driver survey data, suggest that drivers make between $5.72 and $14.17 an hour after expenses, depending on the regional market and which costs are included in the calculation.

It is very rare for ride-hail companies to share data with outside researchers. The companies have even sued some cities to block rules that would require them to share data, in part, they say, to protect driver and rider privacy. Most academic work about driver wages comes about in two ways: Either an economist who works for Uber or Lyft is a coauthor, or an academic collects data on their own, either through surveys or—in the case of Stanford University and the University of Colorado teams—by actually driving for the apps themselves and mining the data for revelations.

An Uber spokesperson called the Cornell study “an independent, data-driven picture of the full earnings experience of ride-share drivers” and said, “We hope policymakers will take a fact-based approach as they consider new policy proposals by using the insights” from the work. Uber said the Parrott-Reich study "is based on incomplete data and flawed assumptions about drivers’ experiences that are unsupported by facts, evidence or reality."

In a statement on the Cornell study, a Lyft spokesperson said, “We are hopeful the city [of Seattle] will use this objective data to establish a meaningful guaranteed earnings floor.” Neither company immediately responded to questions about the Parrott–Reich analysis. Now the city will decide how much its drivers ought to be paid.

Updated, 7-6-20, 4:35pm ET: This article has been updated with comments from Seattle Mayor Jenny Durkan and from Uber on the Parrott-Reich study.