How well uberX pays, part 2

Maybe not quite as well as Uber would have you think

When I wrote my story about the economics of “everyone’s private driver”, I included a few calculations about the effective hourly rate that can be earned by driving for Uber. But I made a mistake: I worked on the basis of a 40-hour week.

The official Uber blog post said nothing about hours worked. Because there is no footnote or qualification here, I think this comes close to being an outright lie:

In my original article, I concentrated on the main criticism of this statistic, which is that it was gross income and doesn’t take into account the costs involved in driving for Uber. But I missed something which Tom Slee picked up on:

According to the Washington Post, Uber’s sample is “drivers working over 40 hours per week”. Are they working the same 72 hour weeks that taxi drivers are?

This is a big deal. If Uber gets its income figures by looking at the average income for drivers working over 40 hours a week, then the median number of hours worked, for drivers in this sample, is going to be well over 40. In fact, 40 is a hard lower bound.

After multiple emails, and even a desperate tweet, I finally got a non-answer answer to my question to Uber about how many hours per week these drivers are actually working. The company confirmed that “the data we provided is for uberX drivers operating on the platform 40+ hours per week”, but refused to give any indication of how many hours “40+” actually works out to in reality, or what proportion of its drivers actually work that much.

As a result, all of the hourly-wage figures in my original Uber post can be considered to be wrong. For instance, Uber reckons that the gross income of a full-time San Francisco uberX driver is $74,191 per year, while the net income works out to about $60,014. If you assume a 40-hour week, then that’s $35.67 per hour gross, and $28.85 per hour net. But if you assume a 72-hour week, then those numbers are much smaller: $19.82 per hour gross, and $16.03 per hour net.

That said, it’s easier to work as an uberX driver than it is to work as a cab driver. If you’re a cab driver, then you spend a substantial part of your working day driving around empty, looking for a fare. Uber drivers don’t do that. When Uber looks at hours worked, it looks at hours “on-app” — where you declare yourself available, in principle, to accept a ride. Aggressive Uber drivers will tend to park themselves tactically near areas where they know there is a lot of demand; others might just sit in front of the TV at home, and just wait to be pinged if someone in their neighborhood wants a ride.

In any case, if you want to get a feel for the hourly rate earned by uberX drivers, it’s better to ask a driver than it is to ask Uber. And fortunately, one such driver, Matt Monahan, has published detailed information right here on Medium.

Monahan made $601.40 after working 21.8 hours and spending $60 on gas. That works out to $27.59 per hour gross, $24.83 per hour net of gas, and less still, of course, if you start factoring in things like the cost of leasing and insuring the car.

Monahan also received emails from Uber showing the “busy hours” which were most lucrative for drivers: there were 16 such hours per week, all clustered between 7am on Friday and 3am on Sunday morning.

Which raises an interesting tension between maximizing your income, on the one hand, and maximizing your hourly income, on the other. If you want to maximize your hourly income, then you would only work 16 hours a week; maybe you would only work a weekly six-hour shift on Saturday nights, from 9pm to 3am. The rest of the time, you’d keep an eye out for surge pricing in your city, but otherwise simply go about your life.

Indeed, if you look at the email that Uber sent Monahan, it says that “top drivers” work, on average, 36 hours per week. Which means that most of the people singled out by Uber as “top drivers” do not earn the kind of money being boasted of in Uber’s blog and press release.

With 14 of the 16 “busy hours” taking place between 5pm on Friday and the end of Saturday night, uberX does look like a pretty attractive second job. If you have a Monday-to-Friday day job, but it’s not enough to make ends meet, then you could probably earn an extra $400 per week, net of gas, by working 16 hours a week on Friday and Saturday nights. That’s $20,800 per year.

As a full-time job, however, uberX is maybe less attractive. Given that there are diminishing marginal returns to working more hours, let’s say that a full-time worker grosses a bit less than Monahan was pulling in. Call it $25 per hour. In that case, a driver grossing $75,o00 in San Francisco would be working 3,000 hours per year. That isn’t a 40-hour week, it’s a 58-hour week. Which in turn is a lot of time to spend in the decidedly unhealthy activity of sitting in traffic, behind the wheel of your car.

Putting together the pieces of the puzzle, then, it looks as though the universe of uberX drivers is made up of two quite different groups. First there are the full-timers, who quite possibly used to drive cabs, and are therefore used to driving in the city for 60, 70, or even more hours per week. This group has moderate hourly earnings, high annual earnings, and has very little time (or, presumably, energy) to drive their car for any purpose other than picking up Uber passengers. As such, it’s fair to think of all their car-related expenses as genuine business expenses. For these people, the important number isn’t gross income but net income.

Secondly, there are the part-timers, who would probably own a car anyway, and who see Uber as an opportunity to make decent money on the side. They would be paying to lease and insure a car anyway, and they can pick and choose which hours they work; as a result, their effective marginal hourly income is much higher than that of the full-timers. For these people, gross income, or income net only of gas costs, is more salient. But then again, these people aren’t grossing $90,000 per year.

Uber might be sending different messages to part-timers and full-timers, but if the messaging is consistent across all drivers, then, judging by the emails Monahan received, Uber has considerably more part-timers than it does full-timers. Either way, Uber’s headline figures don’t really reflect the income numbers which matter to its drivers.

And if Uber does indeed have a lot more part-timers than full-timers, that affects Uber’s income per driver. A full-time driver in New York earning $90,766 per year generates more than $22,692 per year — $436 per week — for Uber itself. On the other hand, Monahan, who grossed $601.40 in his week of working for Uber, generated just $150 for the company.

Uber CEO Travis Kalanick said something very interesting in a recent interview with the WSJ:

We’re at least doubling every six months. It’s probably more robust than that, but that’s good enough…That’s revenue. If you look at [the number of] trips, because we’re going into lower and lower-cost products, the growth on trips is like 5, 6x.

In other words, in order to double Uber’s revenues, Kalanick has to increase the number of trips taken by a factor of 5. And he probably has to increase the number of uberX drivers by an even greater factor.

In turn, that helps explain why Uber is being less than forthcoming about the amount of money its drivers actually make. By throwing around big headline numbers like $90,000 per year, it can attract attention from the people it needs most —people who might be interested in driving for the company.

Any company like Uber, which sits in the middle of a two-sided market, has to constantly navigate supply and demand: it can never have too much of one, relative to the other. For most of its history, Uber has found itself pleasantly surprised by the strength of demand for its product; the tough thing has been generating enough supply. Right now, then, it’s trying to make driving for uberX seem as attractive as it possibly can. Even if that means that it doesn’t tell the whole truth with respect to the earnings that a typical Uber driver can expect.