Lion of the Blogosphere

Uber drivers earn $3.37/hour in profit

MIT study shows how much driving for Uber or Lyft sucks

That’s pretty crappy. The study is probably not assigning value to the benefit that drivers get to have a car available to them at no additional marginal cost then they are not driving for Uber. That additional benefit, plus the fact that drivers have a low tax rate (explained in the article), probably explains why driving for Uber is competitive with seemingly higher-paying jobs like working at McDonalds. Nevertheless, it’s still a crappy income.

This demonstrates the principle that perfect competition means that no one makes any money. Uber has set up a system where each driver is running his own small business and there’s nearly perfect competition between drivers. You can’t make any money when there’s perfect competition!

Written by Lion of the Blogosphere

March 2, 2018 at 11:54 AM

Posted in Economics

65 Responses

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  1. Those Uber drivers should have just went to Ivy League schools, majored in value transference fields, and obtained self-actualizing careers.

    Oswald Spengler

    March 2, 2018 at 12:12 PM

    • “Those Uber drivers should have just went to Ivy League schools, majored in value transference fields, and obtained self-actualizing careers.”

      Exactly right!

      • Don’t make me laugh now. You have no idea what you are talking about. Didn’t I tell you to drive for Uber when you were unemployed? You should have done. Would have done tons of good for you.

        I know an illegal Tajik who drives for Uber 12 hours a day 7 days a week and made $75,000 last year.

        Yakov

        March 2, 2018 at 12:34 PM

      • Less than $15/hour compared to a job that pays 1.5x overtime.

        Plus maybe he doesn’t accurately account for maintenance costs and depreciation on his car.

        NYC minimum wage is now $13/hour and rising to $15 hour next year.

      • If the guy drove a new consumer grade (not fleet) car constantly for a year then you safely assume he just about destroyed it. It will need *major* repairs very soon, or be scrap. I didn’t watch the video but I seriously doubt he’s doing the accounting right. He blew $35K just on depreciation, and probably needs new tires and and other parts.

        bobbybobbob

        March 2, 2018 at 12:58 PM

      • Yes, but an Uber driver is his own boss and that is worth money. $3.37 an hour is simply not true and way off the mark.

        Yakov

        March 2, 2018 at 1:54 PM

      • SMR accounts for both depreciation and maintenance expenses. Like they said, it’s a good deal.

        At least drivers get 1099’d so they don’t fall off the tax grid. They’re forced to be businesslike about it.

        Mrs Stitch

        March 2, 2018 at 2:19 PM

      • Bob, that’s bullshit. Assuming he drove 7 days per week, 52 weeks per year means he made approximately $17.17 per hour. This implies a driving distance of about 6 miles in New York City or any other major metro (which lets face it, is what Uber is for… no one in the suburbs is commuting with Uber).

        Let’s assume he actually had to drive 4 miles to get that 6 mile fare. He drove approximately 44,000 miles that year (conservatively). $35.000 of depreciation is 2 brand new vehicles, which makes no sense because a decent car can go to at least 100,000 miles with medium level repairs (engine or transmission, etc). Ie $3-5k per year in repairs.

        Assuming gasoline costs $3 per gallon and he gets 20 miles to the gallon (i.e. He is an idiot driving an escalade for Uber). That’s about $6.5k in gas costs. Assume car payment and insurance are $600 per month so $7200 per year. Tack on $3k for registration and various other fees and you are talking about $20-22k per year in expenses. These were very conservative assumptions to.

        Tajik is pulling down about $55k net of expenses (slightly above median US household income EXCEPT his car payment is already covered), which if he is doing his taxes right should net him 35-45k after tax.

        Not bad for a livery cab driver with zero education. That’s about $12/hour net which is approximately New York minimum wage before tax.

        Paul Ryan's Sickly Old Lap Dog

        March 2, 2018 at 2:31 PM

      • Most Harvard grads end up in Wall St and “Consulting”. That’s not what you call a self actualization career, but it pays better than most high paying careers.

        JS

        March 2, 2018 at 7:15 PM

    • Which begs the question, why do so many people drive for Uber? And why are so many rich SWPLs doing studies about how driving for Uber is a guarranteed way to lose money, make less than the minimum wage, etc.? What is it about the poor that the rich do not understand? What are they missing?

      As Yakov has pointed out, our YouTube friend seems to be making money at it.

      My understanding is that you can make money driving for Uber if you purchase a used late model Prius, and are sure to hit the peak hours, when the fares are much higher. I think you could also make money if you had a normal job, say teaching, and then drove for Uber during the peak hours a few days per week, plus worked sporting events, etc, on the weekends.

      Yes, depreciation is real, but cars are built much better today than they were in the ’80s.

      And, there is the quality of life advantage of being your own boss, instead of dealing with “the Man” all day.

      All of this assumes you are able to avoid costly accidents, which is certainly a matter of skill and luck.

      Sorry, just some random thoughts, but I am truly trying to make sense of it all.

      And of course I agree that you can make much more money as a tenured professor doing Uber studies, but that is a rather different game.

      The Shepherd

      March 2, 2018 at 2:13 PM

      • Uber solves a very useful problem, which is that taxi demand is highly time dependent. People can’t make a living all being fulltime cab drivers, so how do you bridge the gap during peak hours when you need 2x as many cabs.

        Paul Ryan's Sickly Old Lap Dog

        March 2, 2018 at 2:35 PM

      • And, there is the quality of life advantage of being your own boss, instead of dealing with “the Man” all day.

        First of all you have to deal with (often drunk) pieces messing with your stuff all day and treating you like shit all day. And then you serve entirely at the whim of Uber, who can cut you off or reduce the fares they give you whenever they want.

        Magnavox

        March 2, 2018 at 4:40 PM

      • And according to Bruno, down below only 4% of drivers do it for more than a year which would answer your question: the math behind the financial reality of the job is difficult enough to keep lower IQ people from being able to figure out before hand what a ripoff it is.

        Magnavox

        March 2, 2018 at 4:42 PM

    • I knew a guy who drove for Uber a few hours a week while in MBA school preparing for his self-actualizing value transference career.

      For him, Uber was a sort of hobby. It gets you out of the house and gives you a chance to meet some interesting characters. If he had just made enough money to offset his car costs, he’d have kept doing it — still makes it a better hobby than going out drinking, especially when you’re a student on a budget.

      Of course, people like him increase the competition further and make it a lousier way to try to actually earn a living.

      Wency

      March 3, 2018 at 9:32 AM

  2. There are caveat :

    – only 4 % of drivers do it for more than 1 year – so the scheme should crash if they couldn’t employ illegals .
    – They work mostly part time . Wich means that for full time , it would be even less . Those people needs another job
    – it is a median revenue . We don’t know the average but it’s probably even longer given that 30% loses money

    Bruno

    March 2, 2018 at 12:23 PM

  3. I think the key takeaway is something that’s applicable far beyond the ride-sharing business, namely, that most people don’t really understand how expensive driving is.

    anon123

    March 2, 2018 at 12:24 PM

    • The federal reimbursement rate is about $0.55 per mile right now. I looked into how it is computed some years ago and they didn’t just pull the number out of a hat. It’s a pretty fair accounting of how much it costs an American to drive. People just don’t realize how expensive cars and driving can be.

      Too much of the costs are somewhat fixed, is a big part of the problem. You’re out the insurance, property tax, depreciation, and registration fees every year no matter how much you drive. You can only really dodge a lot of the expense by going carless. Which is a lot more viable in more areas than people realize. If you can structure your life so that you only truly need a car maybe once a week, it makes more sense to rent, do zipcar, or take cabs/ubers.

      bobbybobbob

      March 2, 2018 at 12:53 PM

      • Seems to me it’s also important to know the marginal cost. If you buy a new car for $20,000 and depreciate it down to $5,000 by driving 100,000 miles over 5 years, that’s 15 cents per mile and I would ballpark it that half of that depreciation would have happened anyway. So the extra wear and tear on your car is about 7 cents a mile. Figure that gasoline costs around 13 cents a mile to make the math work out and you’re looking at a marginal cost of 20 cents a mile.

        Anyway, by that calculation, Uber is still a pretty bad deal for drivers who already have a car. I suppose it might be okay for people who have nothing better to do with their time. Either that, or they are getting unreported cash tips. Which Lion denies, but it could make a big difference.

        fortaleza84

        March 2, 2018 at 2:13 PM

      • I don’t ride Uber much but I’ve never seen anyone give a cash tip to an Uber driver.

        Lion of the Blogosphere

        March 2, 2018 at 2:31 PM

      • Lion: I don’t ride Uber but 2 or 3 times a year, living in flyover country, but I always give a cash tip of $5 or $10 depending on the ride. I assumed that was expected, observing the behavior of my metro relatives in NYC and DC.

        Kosher Kowboy

        March 2, 2018 at 4:22 PM

      • I rarely take uber but I always give a generous cash tip because of all the articles I read about what a shitty job it is.

        Magnavox

        March 2, 2018 at 4:44 PM

  4. Who drives for Uber?

    Mostly people that Trumpsters don’t want in our shores.

    JS

    March 2, 2018 at 12:27 PM

    • I’m waiting for Yakov to respond that America is a land of opportunity. Sounds good, when you come from a 3rd world sift hole.

      JS

      March 2, 2018 at 12:29 PM

    • But the same was true with cab drivers before Uber came about. The only cabbie I was personally acquainted with was a Syrian who I quite liked because his views on schvarz matched mine. But he had a lot of health problems, which are now costing taxpayers hundreds of thousands of dollars.

      Marty

      March 2, 2018 at 12:55 PM

  5. Fake news. I delivered newspapers years ago and my gross pay was about $30,000/year. The mileage deduction let me write off about $20,000 and I qualified for the Unearned Income Credit, so instead of paying taxes, Uncle Samantha sent me a small check each year — getting paid to exist is pretty awesome. I did all maintenance and repairs myself, plus my car got excellent gas mileage.

    On paper my wage was about $6 an hour, but I easily afforded a 1100 square foot rented house and had enough money left over for small luxuries like restaurant meals, booze, CDs, and books.

    hard9bf

    March 2, 2018 at 12:40 PM

  6. Provided you are a strong fit young buck, and own a pickup truck, why not collect scrap metal?

    gothamette

    March 2, 2018 at 1:02 PM

    • Most hand collected scrap metal pays relatively little particularly given the perilous process of scavenging it. On an industrial level it’s a different story. China bought WTC steel for a little over $100/ ton, but they bought 50,000 tons of it.

      toomanyspiders

      March 2, 2018 at 3:11 PM

  7. Do Uber drivers get unreported cash tips? That could make a huge difference.

    fortaleza84

    March 2, 2018 at 1:10 PM

  8. My stepdaughter does occasional driving for Uber, but not transporting passengers. Instead she does restaurant deliveries, which is basically a separate division of the company.

    Peter

    ironrailsironweights

    March 2, 2018 at 1:24 PM

  9. Some of the comments (on the article, not here) disagree with the findings of the study. Also apparently some uber drivers are more of a paid carpool than traditional taxi service, which might skew the numbers.

    One commenter states a $224 income over 7 hours with $16 in gas spent. Definitely better than fast food pay.

    I’m not sure the competition is necessarily equal since the better drivers (cleaner car, punctual, polite) will get repeat customers.

    toomanyspiders

    March 2, 2018 at 2:58 PM

    • Yeah, I would be tempted to sign up as a way of getting someone to subsidize my daily commute. The problem I see is that my insurance company would freak out if they learned I was driving professionally.

      fortaleza84

      March 3, 2018 at 7:24 AM

  10. Mate, you can rent a car on a weekly basis to work for Uber. Why, oh why did you not listen to me and drove for Uber?

    What does it mean ‘to deal with tipping’? Those poor saps make so little! They deserve their tips. It’s un-american not to tip.

    Yakov

    March 2, 2018 at 3:04 PM

    • People deserve to get paid for the labor, but Uber should pay them, not me.

      Lion of the Blogosphere

      March 2, 2018 at 7:19 PM

      • You are absolutely correct. Tipping is gateway to corruption.

        My Two Cents

        March 2, 2018 at 7:57 PM

  11. Seems like Uber is a job that an idiot can lose money while someone with hustle can play the game well and make good money.

    I know a guy who drives to work from Forest Hills to Bay Ridge. He also Ubers it in the morning on the way to work and makes $30-$40 for going a little bit out of the way.

    He also only Ubers during the peak hours and in locations he knows he will get a good fare. With Uber you can do badly or do OK. But its not a path to a middle class life.

    Jimi

    March 2, 2018 at 3:31 PM

    • I would never get on a vehicle designated as an Uber. When something is too good to be true, then it’s bad. Just the horror stories of Uber drivers who make the headlines with criminality shows you that a thug or an ex-felon-con could be driving you to wherever.

      JS

      March 2, 2018 at 10:35 PM

      • If anything in USA more Uber drivers have been harassed by passengers than vice versa.

        Jimi

        March 6, 2018 at 3:32 PM

  12. Profit is a financial gain, especially the difference between the amount earned and the amount spent in buying, operating, or producing something. It should not be called profit unless the pay is subtracted. $3.37/hr ($600/month assuming 8 hr 22 days per month is what is needed to keep Uber driver alive). So, LoB is correct when calling Uber driver’s profit zero. From what I understand (I have few friends that drive Uber), most Uber drivers are stupid. Those that are smart, use their employer’s car and gas to drive Uber.

    My Two Cents

    March 2, 2018 at 4:20 PM

    • There is a difference between economic profits and accounting profits. When most people use the term profit they mean the latter.

      ScarletNumber

      March 3, 2018 at 8:08 AM

      • Really?

        My Two Cents

        March 3, 2018 at 1:04 PM

  13. There are many videos on youtube that says Uber driving isn’t worth it when you include the wear and tear ion the car.

    People say competition is good but as Lion says too much competition can make a very unstable business environment

    We are all workers not just consumers. You can’t just look at it from the point of view of the consumer.

    ttgy1

    March 2, 2018 at 6:56 PM

    • >> We are all workers not just consumers. You can’t just look at it from the point of view of the consumer.

      Yep. I say screw the consumer. Power to the wage earner. I just wish we had some political advocates who would say the same thing.

      Daniel

      March 2, 2018 at 9:14 PM

    • This is actually covered in the Quran, where competition versus cooperation and the reconciliation of the two is central. It is arguably as important as the prohibition of compound interest. Dumb Christians believe in predestination, and living as hedonists until they repent, hopefully before they die. Jews either don’t care or just want to get rich. Only Islam addresses his fundamental concern – Uber is contrary to God’s will and prevents mankind from attaining salvation. Praise God!

      Jack Roy

      March 3, 2018 at 8:22 PM

  14. Did something similar to Uber except for food delivery for awhile as a struggling liberal arts grad. My car was on a lease and I delivered as a full-time job. I would say the job was WAY better than working some shitty minimum wage job with a varying schedule like food service. Log on anytime you want and if there’s nothing to do you can just read, goof off, etc. The wage was probably close to minimum wage but you can “work” 60 hours a week. And by work I mean sit on the coach in your apartment waiting for a delivery.

    I never had to worry about car depreciation since I would give it back to the dealer at the end of the lease. Also, my car was good on gas 32/40 street/highway. I would say the caveat for 1099 jobs is actually saving for your tax bill. It takes discipline to take roughly 20 percent of your check out on your own for FICA and the sort. In sum, uber/lyft/grubhub > min. wage service job. Additionally, I hooked up with a Jewish Harvard girl on Tinder while doing this shit job, so I figure the Lion can pay respect to that.

    Work for a tech company now filled to the brim with attractive people, yeah, way better than anything I’ve had. in the past. Full disclaimer: one of the few millennials on here I’m sure.

    Swatch

    March 2, 2018 at 9:29 PM

    • I thought almost all leases that aren’t complete rip-offs have low annual mileage limits. You basically can’t make leasing a car work unless all you use it for is light commuting.

      bobbybobbob

      March 2, 2018 at 11:29 PM

    • > I hooked up with a Jewish Harvard girl on Tinder

      Did she have big Jew tits?

      ScarletNumber

      March 3, 2018 at 8:11 AM

  15. Several years ago, after a layoff from my corporate job, I delivered flowers during a busy Valentines Day weekend. The guido flower shop owner stiffed me on pay.

    E. Rekshun

    March 3, 2018 at 5:55 AM

    • A snowbird whom I know, a guy who is a guido (the Northern variety from Milan) drives for Uber in Florida. He barely scratches $20K with or without expenses, coming from 20K miles, annually.

      A good retirement gig, if boomers still have some steam left.

      JS

      March 9, 2018 at 11:29 AM

  16. If the IRS ever cracks down on Uber drivers, which would probably be fairly easy, I’d expect them to specifically go after the auto payment write-off in the instance where personal use of the car can be reasonably proven. I’m sure that personal use is widespread in tandem with claiming full business use. The difference in the tax write-off probably amounting to a significant number per month for the guys who buy nicer sedans. Staying within the tax law would negate either a portion of the write-off or make personal use impractical (especially if the IRS is not generous in their judgement).

    Dan

    March 9, 2018 at 1:01 AM

  17. I drove cars for a living for a few years. Just like gas, you can calculate the repair bill per miles driven after a while. It’s consistent. I concur with the conclusion that, after repairs and gas, its an exceedingly poor living that amounts to just a little over breaking even if you use your own car. If you have a newer sedan, the relative absence of repair bills is fully replaced by depreciation.

    If you want to drive for a living, the way to go is to only apply to outfits that supply company cars. Before Uber, driving Town Cars or the equivalent for a limo outfit was an example.

    Though, fair warning, driving for long stretches is exceedingly stressful in a unique manner. You tend to feel it in your body. It sort of feels like what I’d imagine an eight hour straight (average shift) moderate spike in cortisol feels like. It isn’t pleasant. I had a difficult time doing it every day because of that. I’ve had a lot of other hard jobs that weren’t as physically unpleasant in a manner that made it difficult to do five days per week. Though, I also did a lot of long drives. Most trips were (45+ min average one way). I have the impression that Uber drivers do a lot of shorter runs.

    In talking to an NYC Uber driver recently, he told me that he tended to make 200 per shift before gas. So, about 150. Then subtract repairs. I forget if the number was before or after the car payment, which is a crucial distinction. I’m leaning toward the fact that he was leaving the night’s portion of the car payment out of that number. It’s a poor living.

    Dan

    March 9, 2018 at 1:15 AM

  18. The MIT study included cost of insurance, maintenance, gas, and car depreciation. I can share what I made. I drove 103 rides for a total of $927.62 which required me to drive for 51 hours for 1570 miles.

    I made $11.89 per hour pre-tax. (Better than 3 bucks)

    https://thehuangshow.wordpress.com

    thehuangshow

    April 1, 2018 at 12:02 PM


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