Exposing the Rideshare Industry’s Misleading Wage Claims

The rise of Uber and Lyft to ubiquity over the last decade has been astonishing — over 3 billion trips were taken using the platforms in 2023. Throughout that meteoric expansion to nearly every inch of the globe, the companies have waved away concerns that the drivers keeping the platforms going are being underpaid for their labor. 

Anecdotal cases of drivers working grueling hours for a pittance abound, but Uber and Lyft have been able to shrug them off through a combination of industry-funded studies and wage secrecy. However, a few independent analyses have managed to puncture the narrative that the gig economy pays well.

A new study from the U.C. Berkeley Labor Center is one of the strongest examples of that so far. Researchers analyzed 52,370 trips by 1,088 drivers on six rideshare and delivery apps across five major metro areas and found that they earned well below the minimum wage in all five.

The study is particularly notable for the results it extracted about California, where in 2020 gig companies poured tens of millions into Proposition 22, legislation which allowed the industry to continue to classify their workers as independent contractors rather than employees. 

The companies promised that exempting drivers and delivery workers would preserve the “flexibility” of gig work while ensuring that they would make over the minimum wage. 

Four years later, that promise seems broken. Rideshare passenger drivers, the study found, take home $7.12 per hour in median net hourly earnings before tips — a fraction of California’s $16 minimum wage. When you account for the employee benefits and taxes that drivers have to pay for themselves, the number is even lower.

The lesson for other states and cities considering similar exceptions to labor law for gig companies? Don’t take rideshare companies at their word when it comes to worker pay.

I discussed this report with one of its authors, Ken Jacobs, co-chair of the UC Berkeley Labor Center.

This conversation has been edited for length and clarity.

First of all, congratulations on this major report! Can you tell me a little about how you collected this trip data? What kind of roadblocks do rideshare companies put up to knowing how much workers get paid?

The data comes from a third party app called Gridwise. Drivers use it to track mileage and earnings. We analyzed data for over 1,000 drivers and more than 50,000 trips over a two week period in January 2022 in five metro areas: Los Angeles, San Francisco, Seattle, Chicago and Boston. 

The data allowed us to analyze how much drivers earned per hour and shift across the main passenger and delivery services. I have looked at lots of screenshots from the company apps. The companies don’t make it easy for drivers to calculate their net earnings. 

This study split apart passenger and delivery drivers — were there any notable differences in the pay for those distinct groups?

The biggest difference was the share of income that comes through tips. Tips account for a little more than half of the gross income of delivery drivers, but only 10 percent for passenger drivers. Overall we found that the typical passenger driver earned the equivalent of a $5.97 an hour wage before tips in California, and $7.63 an hour after tips. 

Delivery drivers earned about $5 an hour in California without tips and $11.43 an hour with tips. In the three metro’s outside of California, non-tip income — base pay, incentives and bonuses — barely covered expenses. Drivers were essentially working for tips.

Can you explain a little more about how gig companies and this study calculate pay differently, especially when it comes to time between trips and expenses?

When the gig companies talk about how much drivers earn they usually put out figures for gross pay per hour and they don’t include the time a driver is waiting for a request or returning after dropping off a passenger or delivery. That is work time! It is an essential part of the job. 

A recent study looked at data from 5.3 million San Francisco rideshare trips to see what drivers did between trips — they found that drivers were mostly heading back to hub areas where they had a greater chance to find a passenger or were cruising while waiting to get the next ride. They were working. When the companies talk about expenses, they don’t include costs associated with any of those miles.

The Gridwise date allows us to account for drivers full time and miles for each shift. For expenses, we use the IRS mileage rate for the time period under study of 58.5 cents a mile. This reflects the full cost of owning and operating a vehicle. 

Proposition 22, the initiative put on the California ballot by the gig companies, set an initial mileage rate of only 30 cents a mile. The companies justify this by saying that most drivers work very few hours. What they don’t tell you is that most trips are done by drivers who work 20 hours a week or more and for whom gig driving accounts for the greatest use of their vehicle.

We also account for the fact that gig companies do not pay the employer side of payroll taxes or provide other mandatory benefits to drivers. 

Your report mentions that concentration in the rideshare and delivery industries may be contributing to low pay, could you tease that out for me?

There are two major gig passenger companies, and four for food and grocery delivery. That gives them significant power to set pay in the industry. They are also able employ what UC Irvine law professor Veena Dubal calls “algorithmic discrimination.” They can see what trips or deliveries drivers have been willing to take for how much money in the past, and can individualize what they offer each driver for the same ride. They do the same in setting what they charge passengers. 

How did pay in California compare to the other metro areas you analyzed?

The typical passenger driver earned around $3 less an hour in California than in the other three metros before tips. If we include tips it was around $3.50 less.

For delivery drivers it was the other way around. The typical delivery driver earned $4.50 more an hour in California than the other three metros before tips; $3 more with tips.

What does that say about the ways that Prop 22 affected the industry?

Proposition 22 was sold to voters as setting a higher minimum wage for drivers. In the case of passenger drivers, it had very little effect. Delivery drivers were much more likely to receive Proposition 22 payments and did have higher earnings than their counterparts outside of California. In both cases driver earnings were still well below the state minimum wage. The gig companies are promoting Proposition 22 like policies in other states. Our research demonstrates clearly that such policies can be expected to leave drivers with sub-minimum earnings.

The California Supreme Court recently upheld Prop 22 against a constitutional challenge — how should we expect that situation to evolve.

With the court’s recent decision upholding Proposition 22, we can expect gig companies to continue to pay subminimum wage in the state. The courts did leave open the possibility for the legislature to grant collective bargaining rights to gig workers. Massachusetts will be voting on a gig worker collective bargaining initiative this November. The results of that vote may shape what happens next in California.