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According to a study published by MIT, a majority of drivers for Uber and Lyft in the United States make less than minimum wage — some drivers even lose money as they work for the ride-hailing companies.
For the study, MIT researchers surveyed more than 1,100 drivers at either company and found that the median profit was $3.37 per hour before taxes, less than half the federal minimum wage set at $7.25 per hour. The report factored in insurance, maintenance, repairs, fuel and other costs and found that 74% of drivers earn less than the minimum wage in their respective state and that 30% of drivers are losing money on the job.
The study found that drivers earn a median of 59 cents per mile while incurring a median cost of 30 cents per mile, and that for nearly a third of the drivers, the costs are higher than the revenue. That equates to be $661 per month.
The findings have raised new concerns as ride-hailing companies continue to grow. Uber and Lyft drivers are classified as independent contractors so they have fewer rights and protections than full-time employees — both companies are facing scrutiny over how they treat their drivers.
“This business model is not currently sustainable,” Stephen Zoepf, executive director of the Center for Automotive Research at Stanford University and co-author of the paper said to The Guardian. “The companies are losing money. The businesses are being subsidized by [venture capital] money … And the drivers are essentially subsidizing it by working for very low wages.”
The report went on to say that drivers can incur significant short-term and long-term costs because they use their personal vehicles for the ride-hailing service. Zoepf said that with this model, drivers are borrowing against the value of their own car. “It’s quite possible that drivers don’t realize quite how much they are spending.”
A representative for Uber reached out to the Center for Energy and Environmental Policy Research — the department that conducted the study at MIT — to share their “concerns and suggest ways we might work together to refine their approach.” The representative added that Uber believes that the center’s methodology and findings are “deeply flawed.”
A representative for Lyft told The Guardian that they “have not yet reviewed this study in detail, but an initial review shows some questionable assumptions.”
H/T: The Guardian
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