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Editorial note – this story was extensively fact-checked to be sure the pay reported was accurately conveyed, including how Uber calculates guarantees for their drivers.
Ten days ago, I reported that the latest round of rate cuts for UberX, while great for consumers, might spell the end of equitable Uber driver earnings, even with promised guarantees. Analysis of the overall compensation has been on my mind ever since my own disappointing Uber driver earnings on New Years Eve.
I decided an experiment was in order to see what the net effect of the new rates would be for the “average” driver.
Uber would guarantee me gross fares of $12.00 in the non-peak time and $20.00 in the peak time (Friday and Saturday evenings between 5 pm and 3 am). To earn the guarantee, I would have to be logged in for at least 50 minutes each hour, accept at least 90% of the rides offered to me, and take at least one ride per hour. I had total control over the first variable. The second required me to be open-minded about rides which meant even accepting rides that might be 20 minutes away. And there was no control over the third variable – I had to do my best to position myself strategically.
During a typical 24/7 week, there are 168 hours of coverage. Uber requestors expect to be able to find a car at any time (I’ve gotten requests at 6 am on a Saturday morning and 1 pm on a Tuesday, so I know this firsthand) but it doesn’t mean that demand is consistent during those periods. Uber’s guarantee of $20/hour only applies to 16 of those hours (or less than 10% of the total coverage week) so it can be deduced that the majority of the time they are only comfortable guaranteeing $12/hour to their drivers.
I decided to experiment by driving eight “average” hours in the Fort Worth market. I picked the stretch from 1 pm to 9 pm on Saturday, January 10. This would give me four hours in the non-peak guarantee period and four in the peak. I decided to try to start and end my day in central Fort Worth, west of downtown in an area where three distinct ride zones intersect, all three of which regularly show up on Uber “heat maps” which show drivers areas of increased demand (yellow), high demand (orange), and surge pricing (red). This would allow me healthy enough volume to meet the guarantee criteria easily, I believed.
And I was right. I didn’t look at my individual fares or earnings until the end of the night but felt like I had a fairly busy shift. I did 15 rides and had very little downtime where I was not in my vehicle. I started from my home and had to turn off my phone at the end of the eight hours or I would have surely continued receiving ride requests. As busy as I was, I expected strong earnings that had exceeded the guarantee in at least a few of the hours.
At the end of eight hours, the raw numbers were surprising.
I completed 15 total rides – and did achieve one per hour (in three of hours I did two rides per hour and in two hours I did three rides per hour)
My longest ride was 5.0 miles and my average ride was 2.5 miles
I had riders in my car for a total of 156.7 minutes or 33% of the time I worked – not a bad ratio but ideally it would be 50% or higher. Of the 480 minutes that I worked (8 hours x 60 minutes), another 30-35% of my time was “positioning” (driving to the next request) and my waiting time (for the passenger to come out of their location and get in the car) to be equal to the drive time so that accounts for another third of my time. The remaining time includes sitting and waiting for the next request or ending a ride and waiting for the app to reset after I rated the passenger.
So far, so good right?
Let’s break it down further. One-third of my rides were minimum fare ($4) rides – ten days ago, that minimum fare would have been $5. And I put a lot of mileage on my car for even those short rides. My official Uber mileage (on passenger fares) was 37.7 miles. But my “other” mileage (driving to pickups) was 33.4 miles. So in the eight hours, I drove a total of 71.1 miles. This is VERY important because that latter mileage (driving to a requested ride) is uncompensated mileage by Uber, but thankfully a deductible expense assuming it’s tracked correctly (something that Uber does NOT do for drivers or even coach them to do after bringing them on) so those deciding to drive need to be savvy and keep good records.
But the real question we all want to know the answer to is… did I make any money?
My total fare tally was $78.47 – or an effective rate of $9.81 per hour – this was $7.66 during the non-peak time and $11.96 during the peak time – a far cry from the guaranteed rates (64% and 60% of them to be exact).
But then Uber took $1 for each of those 15 rides to cover a Safe Rides Fee. On one ride, they also charged (and then deducted) a $0.50 split fare fee for two riders who each wanted to pay half of the ride. And then of the fare that remained after that per-ride deduction, Uber took another 20% cut.
After Uber’s cut, I made $50.38 – or $6.30 per hour – below minimum wage in any state.
BUT wait, there’s more!
My total IRS mileage deduction (at 57.5 cents per mile) was $40.88. I have to deduct that to figure out my total cost of doing business as an independent contractor. This makes now makes my net $9.49 for the entire eight hours – or $1.19 per hour
Now surely Uber must have run these numbers themselves when they decided to lower rates because they promised Uber partner drivers that they would guarantee their gross earnings for a limited promotional period. During that time, they guaranteed that my gross earnings would be $12/$20 per hour.
Before we continue, let’s clarify what Uber means by “gross” (and a big thank you to the partner in the UberDallas office who responded to my detailed emails this past week requesting specific clarification on this calculation). Gross in Uber terms is exactly what is charged to the passenger. Gross includes the $1 per ride Safe Rides Fee and the 20% cut that Uber takes. That means that on a short minimum fare ride (like five of my rides on this particular day), my total net is $2.40 and that’s before I deduct my mileage expenses.
A minimum fare ride can technically be up to 3.3 miles in length. With an IRS mileage deduction of 57.5 cents per hour, I would actually lose money on the ride if I drove more than 0.9 miles to pick that passenger up for a minimum fare ride.
But since Uber requires drivers to accept 90% of rides to meet the guarantee, it’s a dice roll every driver takes (not knowing the passengers destination until they pull up and start the ride) – it could be a ride down the street. Or it could be a long ride to the airport.
Many drivers don’t meet all of the guarantee criteria. They don’t average the one ride per hour needed due to where or when they have chosen to work. Or they turned down a couple of ride requests that were too far away geographically (I still regularly get requests that are 15-20 minutes away). Or they went to the bathroom and missed a request or two. Or they got lucky and had a couple of really good hours (surge fares or airport rides) that took their average earnings for the week just above the guarantee mark.
But I was one of the “lucky ones” – I qualified for Uber welfare. (Really, it would have been nicer to just have earned the money outright, I swear!)
My guarantee was split out by both my non-peak ($12/hour) and peak ($20/hour) gross fare guarantee and in total, added $39.42 to my payout bringing me back to $89.80 – or $11.22 an hour before my mileage deduction. Or after the mileage deduction, a whopping $6.11 per hour.
$6.11 per hour?!
I couldn’t believe it. After eight long hours of sitting in my car and driving (I only got out to stretch or use the bathroom twice and both times was not out long before the next request came in sending me running back to the drivers seat), never taking my eyes off the phone screen out of fear I’d miss a request, allowing strangers to come into my personal car, and giving up my free time on a Saturday I was rewarded with less than minimum wage.
I’ll repeat again that this was a controlled experiment to see what average drivers might experience. I could have potentially earned more. And if my rides has been slightly longer, I could have actually earned even less due to expenses.
Did the time of day I drove have something to do with my earnings? Yes, perhaps – but if anything, it enhanced them. Driving at night helped as my effective rate (post-expense deductions) of $8.05 an hour after 5 pm. It was a mere $4.18 for the non-peak times. Fares are more likely to surge on the weekends, especially in those late 1 to 3 am windows when everyone wants a safe ride home regardless of the price.
But given that non-peak times (which is every time that is NOT Friday or Saturday between 5 pm and 3 am) account for over 90% of the week, where does that leave the drivers who cover the rest of the time span? Without the guarantee, I would have netted $0.76 per hour in the non-peak times and $1.62 per hour in the peak times.
My fares likely had something to do with where I drove – but not everything to do with it. Average rides in the area where I drove are known to be shorter and thus lower fare. There are many such pockets around the entire DFW Metroplex. Ironically, those area some of the areas that also have the highest regular demand so drivers in those areas have to make up for the lower fares with higher volume (but also the resulting higher mileage). I know many of higher-earning drivers who will drive as much as an hour away from their homes to position themselves for higher fares.
Average is important here – there are drivers that do have great earnings with Uber and they are the poster children for how much one can make driving with the company. I know a lot of these higher earning guys (and they are almost exclusively guys) and they hustle for the money – they work the odd hours, seem to intuitively know where the best ride or surges are going to be, and spend time cultivating their business. I’m impressed by their stamina. I regularly hear from them at 5 am when they’ve been driving for twelve hours straight and decided to stay up for a few more hours to catch the airport runs before getting some sleep.
These guys are also shrewd – they don’t accept every ride request that comes their way. They won’t drive more than a couple of minutes away to pick up their next passengers and let those twenty minute away requests roll to the next driver in the queue. They have passengers who call them directly for rides. Their list of success techniques goes on and on.
But many – perhaps MOST – Uber drivers aren’t those guys. There are a lot of average drivers out there who ply the streets looking for the highest volume, following the packs of other drivers to hot spots, and chasing the surge zones. Or those who just want to be an advocate of the greater concept of the ridesharing economy by offering rides to their neighbors and others in a specific geographic zone.
I am left to wonder how many “average” drivers will continue to drive once they have analyzed their actual Uber driver earnings correctly. Or how many average drivers don’t know how to do the math or haven’t tracked their mileage properly and thus can’t see beyond the total amount earned each week with no regard to the time and expense invested. Uber driver earnings are often far less than touted in recruitment campaigns.
The important part of the ridesharing economy is that Uber relies upon the average drivers. For the service to be successful, users need to be able to find a reasonably priced ride.
But they also need to count on clean cars and top-notch drivers who are where the riders need them.
Not just in the hot spots known for higher dollar rides.
Not just working the peak hours with higher guaranteed returns.
And not located twenty minutes away where the driver is disincentivized to drive that far for a low fare pick up, especially knowing their passenger might still try to cheat the system.
But maybe I’m not a fan of this sharing economy so much anymore – not at $1.19 to $6.11 an hour. Even my 4.9 gold stars are not enough of award to pick the shards of my ego up after facing the cold reality of analysis.