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Uber Drivers Earn the Equivalent of $9.21 in Hourly Wages

Uber and other gig platforms account for far less of the economy than many estimates suggest.

WASHINGTON - In a new paper, EPI Distinguished Fellow Lawrence Mishel uses newly available administrative data to calculate the hourly pay earned by Uber drivers, as well as the scale of Uber relative to the overall economy. Mishel’s estimates show that driving for Uber is very low paying, and that the scale of Uber’s driving—measured by either work hours or compensation—amounts to a very small share of the economy’s total work hours or compensation, less than 0.1 percent.

“The low pay and small economic weight of Uber and the gig economy overall, coupled with the fact that Uber drivers and other gig workers are mostly working on a part-time basis as a way to earn supplementary income, argue for a change in perspective,” said Mishel. “There is a lot of hype around Uber and the gig economy. But in any conference on the future of work, Uber and the gig economy deserve at most a workshop, not a plenary.”

Mishel calculates that, after accounting for Uber’s commissions and fees and vehicle expenses, and taking into account the cost of a modest package of health insurance and other benefits equivalent to those earned by W-2 workers, Uber drivers earn the equivalent of $9.21 in hourly wages—less than what is earned by 90 percent of all other wage and salary earners, and below the minimum wage in 13 of the 20 major urban markets where Uber operates.

Mishel estimates Uber drivers’ overall hourly compensation—comparable to the total wages and benefits earned by regular W-2 workers—to be $11.77. Such low hourly compensation is substantially less than the $32.06 average hourly compensation of private-sector workers, and less than the $14.99 hourly compensation of workers in the lowest-paid major occupation (service occupation workers).

“Uber and other gig economy platforms engage many participants, but most do so for supplementary income on a very part-time basis and frequently for a limited time. At the same time, these platforms have a core group of full-time, year-round workers who provide a large share of the services provided,” said Mishel. “When assessing the scale of the gig economy and Uber driving it is necessary to account for this duality: the raw number of participants indicates a far greater size than their actual economic weight.”

Mishel provides several estimates of the size of Uber relative to the overall economy. Approximately 833,000 people drive for Uber in a year, accounting for 0.56 percent of all employment. But such an estimate ignores that Uber drivers have high turnover, working an average of three months and average only 17 hours per week. Adjusting for the part-year and part-time character of the work means that Uber drivers equate to 133,000 full-time, full-year workers, or just 0.07 percent of overall national full-time, full-year equivalent employment. Given that Uber is roughly two-thirds of the gig economy, this means that gig work accounts for 0.1 percent of national employment.

Mishel uses Uber’s administrative data on fares generated per hour worked to calculate the Uber driver “wage”—comparable to the wages reported for W-2 employees—by deducting Uber’s fees, such as booking fees and commissions, vehicle expenses, the taxes paid by self-employed drivers, and the cost of a modest benefits package. Uber drivers generate passenger fares of $24.77 each hour, but Uber receives $8.33 an hour in commissions and fees, about a third of passenger fares. Vehicle expenses, after taking into account their tax deductibility, cost drivers $4.78 each hour. This leaves drivers with a compensation of $11.77, on which they must pay $0.90 for the extra Social Security and Medicare taxes paid by the self-employed. The maximum drivers can direct towards their own living expenses, therefore, is $10.87—but only if they do not secure any health and retirement plans for themselves, or replace the unemployment insurance and workers compensation they would enjoy as payroll employees. If drivers provide themselves a very basic benefits package then their income, equivalent to the wages earned by regular employees, is just $9.21.

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The Economic Policy Institute, a nonprofit Washington D.C. think tank, was created in 1986 to broaden the discussion about economic policy to include the interests of low- and middle-income workers. Today, with global competition expanding, wage inequality rising, and the methods and nature of work changing in fundamental ways, it is as crucial as ever that people who work for a living have a voice in the economic discourse.

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