Estimating Uber Driver Pay, Net of Expenses: $12.76 in Boston

[Note: there is now an updated version of the study, with slightly different hourly wage reported in Table 6. I’ve updated my post to reflect that, and attached a new version of the spreadsheet. 2/5/15]

Uber just put out a study by economists Jonathan Hall and Alan Krueger with average hourly pay rates for its drivers. They neglected to subtract all the expenses (gas, wear and tear, insurance, etc.).

As a consumer, I’m a big fan of Uber. Much of the organized resistance to Uber comes from the taxi/limo industry, which generally provides worse service, at a higher price, while exploiting its workers more than Uber does.

Even so, I am curious about whether Uber drivers make decent money. The drivers I’ve talked to seem to be aware of their gas expenses but only vaguely account for the capital costs of the wear and tear on their vehicles. So, I did a little back-of-the-envelope (er, spreadsheet) calculation to get a rough estimate, using Uber’s Boston data and a few assumptions that I document below.

Basically, I’ve tried to back out from their data an estimate of the number of hourly miles per driver. Then we can multiply that by a standard per-mile allowance that’s supposed to estimate total costs of operating a vehicle.

  • Reported mean hourly earnings for Boston: $20.29/hour
  • Since Uber keeps 20% of fares, that means customers paid $25.36/hour
  • Reported median trips/hour = 1.67, with $2/trip charge = $3.34
  • Estimated 30 minutes per hour on the meter, with $0.21/minute charge = $6.30
  • That leaves $15.72 in mileage charges, at $1.20/mile = 13.1 miles hourly
  • The Federal goverment lets you deduct expenses for operating a vehicle for business purposes at 57.5 cents per mile. That would come to $7.53/hour.
  • Net pay is then $20.29-$7.53 = $12.76/hour

The report promises that Uber will provide some more detailed analysis of expenses in the future. I look forward to it. It mistakenly suggests that these expenses should be considered “net of taxes”. That’s a mistake because you only get to deduct them from income if you treat the whole revenue of $20.29 as your income. It may be that 57.5 cents per mile is an overestimate. In that case, the actual expenses would be lower, and net income higher, plus the driver would get a little tax windfall of paying taxes on the lower income calculated after subtracting 57.5 cents/mile rather than the actual somewhat higher income.

How you view $12.76/hour net of expenses depends on your perspective. It would be tough to live on that hourly wage in the Boston area, especially with no fringe benefits. On the other hand, it’s more than the minimum wage, and much better working conditions (set your own hours, partially control your surroundings).

BTW, I did the same calculations for the other cities they mention in their report. (spreadsheet). Not surprisingly, I get an estimate of more miles per hour (17.76) in LA, where things are more spread out, and fewer (9.47) in DC. Estimated net hourly wages range from $6.90 in LA to $24.29 in NY. NY may be misleading because I think they have some different arrangement in NY.

Advertisements

About Paul Resnick

Professor, University of Michigan School of Information Personal home page
This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s