Uber and Lyft's Low Wages Mute Economic Optimism


Lower than Minimum Wage Earnings Triggers High Turnover Among Uber and Lyft Drivers

While many sing the praises of new economic opportunities that technology will bring us in the near future,  current trends contradict such nouveau optimism.

Just this week, a new study by the Massachusetts Institute of Technology (MIT) concluded that the nearly a million of so-called, entrepreneurial jobs created by ride sharing services such as Uber and Lyft are delivering an average wage of $3.37 an hour, pitifully less than the U.S. Federal minimum wage of $7.25. Furthermore, the MIT study concluded that 74% of the drivers working for these companies made less than minimum wage in the state where they drive.

Of course, Uber trotted out its own economist, who claimed that MIT’s study was flawed; however,  let me give you some personal, anecdotal information that backs MIT’s take.

My Experiences As Uber Driver

When the bottom fell out of the economy and there were no longer any newspapers, newsletters and freelance writing jobs available to older, seasoned reporters, the only employment I could find was driving with Uber. I joined an army of those who included the unskilled, under educated, over educated, over skilled and older workers who found themselves in similar circumstances.

I actually drove for Uber for a year, but even in the first week of hauling young people barhopping late at night, I soon realized that achieving minimum wage was an impossible goal. At the time, Uber didn’t make it any easier by always cutting its rates and telling customers they definitely didn’t have to tip drivers and that drivers didn’t expect them to. As a result, of the more than 1,000 rides I provided to passengers, only two actually gave me a tip during that 12-month period: one was a young student, the other was a lawyer. Uber has recently allowed its app to accept tips, but I doubt that many drivers are getting them from the cash-strapped Millenniums, who love and are the largest group of users of the ride-sharing service. They will tell you they use Uber because it is cheap and no tips are required.

Extremely High Turn Over

You might be asking yourself at this point, why in the world did I continue to work for below minimum wage? In two words: desperation and pride. I really needed the money and I decided I would rather work incognito driving for Uber than being a greeter at Wal-Mart  or working as a cashier in a dollar store.

Still, after a year, I realized that working for Uber was also exposing me to potentially catastrophic financial loss. That’s because, when you are driving for Uber, you are not covered by your own insurance policy, even though your passengers are covered by Uber’s policy  for up to $1 million. The problem with this is that unless you purchase a rider from your insurance company, which can be quite expensive, if have an accident, you’re on your own. In fact, after reading my insurance policy, I discovered that if I used my car to carry passengers for hire, my policy would be automatically canceled.

So, I faced the prospect of a hefty a premium increase or the cancellation of my insurance policy, which I couldn’t afford. This would have turned the hourly wage I earned with Uber into a loss. Or course, I quit.

However, the fact that I lasted a year puts me in rarefied territory. That’s because 96% of Uber drivers last less than a year, according to a report by the Independent. The point is that if the ultimate goal for drive-sharing companies is to create fleets of driver-less cars, their current pay plan will surely accelerate that process. Also, one has to wonder how long it will take before the cab industry, labor leaders and ambitious politicians will join forces and put a stop to what I consider pure worker exploitation.

If future economic opportunities follow Uber and Lyft’s lead, then the prospects for those seeking employment in the near future are grim.

Also read: Strange Stick-Men Creatures Came Climbing Through My Window

© 2018 Chet Dembeck

Categories: Future Trends

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