Episode 1: May 2014
Last May, Uber wrote this in a blog post:
MEDIAN UBERX SMALL BUSINESS INCOME PER YEAR: $90,766 (NYC); $74,191 (SF)
UberX driver partners are small business entrepreneurs demonstrating across the country that being a driver is sustainable and profitable. For example, the median income on uberX is more than $90,000/year/driver in New York and more than $74,000/year/driver in San Francisco.
There are all kinds of issues with the claim, but put them aside for the moment. Instead, here’s a question: assuming the claim to be true, what does Uber’s post tell us about the income of uberX drivers in cities other than New York and San Francisco?
One obvious thought is that it tells us nothing, because it only makes claims about NYC and SF. Another is that we could extrapolate from these numbers as if they were randomly chosen, and guess that the income in other cities is somewhere in a distribution centred around $82K. That’s what the Washington Post did by implicitly comparing the Uber numbers to a national average for taxi drivers:
Estimates of the typical cab driver’s salary hover around $30,000. According to Uber, the median wage for an UberX driver working at least 40 hours a week in New York City is $90,766 a year. In San Francisco, the median wage for an UberX driver working at least 40 hours a week is $74,191.
But Uber’s blog post actually tells us something different about driver income in other cities: it tells us that it is less than $74,000. How come? Simply because this is a blog post from Uber. Uber wants to make a compelling case to the media and to the public, so if drivers in Chicago or Los Angeles were making more money than those in NYC or SF they would have appeared in the post instead of those two cities. So we don’t know how much drivers elsewhere make, but we can be pretty sure that it’s less than $74,000.
Episode 2: Oct 2014
In October 2014, Uber published another blog post saying that drivers in New York City take an average of $36.16 per hour in fares, and make $25.17 per hour after Uber’s cut, but before expenses. (That’s about $50,000 per year for a 40-hour week, by the way.) What does this tell us about driver income in other cities? Again, it tells us that it’s probably less than $25 per hour because otherwise they would not choose New York City for their blog post.
Episode 3: January 2015
So last week Uber posted both a survey of its drivers and a report (PDF) by eminent economist Alan Krueger and Uber Head of Policy Research Jonathan Hall. The main things to come out of the report were that Uber is growing really quickly – impressive, but no surprise — and that Uber drivers are paid better than taxi drivers. That conclusion comes from Table 6:
The table confirms what I was saying above: earnings in New York City are 50% more than anywhere else apart from San Francisco, and San Francisco is the second highest earning city.
As several other commentators have pointed out (eg Ellen Huet at Forbes, Jacob Davidson at Time, Andrea Peterson at the Washington Post), the comparison between Uber “earnings per hour” and taxi “hourly wages” is apples and oranges, because the report has nothing to say about Uber driver expenses. Krueger and Hall have this to say in their defence:
A detailed quantification of driver-partner costs and net after-tax earnings is a topic of future research. Nonetheless, the figures suggest that unless their after-tax costs average more than $6 per hour, the net hourly earnings of Uber’s driver-partners exceed the hourly wage of employed taxi drivers and chauffeurs, on average.
(Oh Alan Krueger: you were given a set of data and “full discretion over the content of the report” but you come out with this? I’m not angry, I’m just disappointed.)
So what do we know about driver expenses? The Sound of Silence rule tells us that, if expenses made a good story for Uber, the company would have included expense data in the data set given to Krueger. In fact, if expenses made a good story, they would have been included in the earlier company posts as well. So we can be pretty sure that the expenses of drivers are $6/hour or more in most cities.
Is $6/hour expenses reasonable? Certainly: the Washington Post’s Peterson notes that the IRS estimate of costs is 57.5 cents per mile, but that Uber don’t include distance driven in their report. Still, 12 miles an hour (including driving to pick up a fare and driving back to a good spot afterwards) is not implausible. And then there is the thorny question of commercial insurance, which would be an additional cost. It seems likely to me that Uber drivers are getting about the same as taxi drivers.
Episode 4: January 2015
Just to finish off, here is another sound of silence. Thanks to the efforts of Share Better, my data on Airbnb rentals got picked up in New York City last week when City Council held hearings about short term rentals. That data suggests that the percentage of illegal rentals in Airbnb’s New York listings has decreased only slightly since a year ago, and that the decrease has been swamped by an increase in the overall number of listings. There is not enough firm data on the Airbnb public web site to be absolutely solid on this, but that’s how things look.
What did Airbnb have to say? Their response is that the data is “flawed” and “inaccurate”, and that is literally the extent of what they have to say. So it’s kind of a joke. This piece in Mashable by Jessica Plautz includes Airbnb saying they don’t really know anything about their hosts, and Josh Dzieza in The Verge includes more of Airbnb’s exchange with the council in which the company says, well, nothing. Airbnb executive David Hantman’s testimony ‘acknowledged that his company did not keep track of the number of users who are renting out their apartments illegally. “We don’t research that,” he said during the hearing.’
Sometimes I wonder if I’m doing the right thing going after Airbnb, because there is a role for occasional casual short-term rentals. Maybe the company’s heart-on-its-sleeve attitude is for real? But then I realize that in the last year they could have put out realistic, convincing numbers at any time (and saved me a lot of work) but they haven’t. And like Uber’s silence on driver expenses, Airbnb’s silence speaks volumes: if the data were good for the company, they would have made them public. The fact that they haven’t (and their content-free responses to people trying to piece together a picture of reality) makes me more convinced than ever that they have things to hide.
Dean Baker has a nice analysis of Uber expenses over at CEPR.
There’s been a good bit of press on AirBnB in the Raleigh, NC area. Questions relating to insurance coverage and zoning issues are being raised. The AirBnB model might make sense as a sharing model but raised to the level of frequent visitors it becomes free riding on community standards.
Uber is even more problematic. There are certainly huge problems with taxi medallion systems in major cities but avoiding insurance and safety standards while promoting a “contractor” economy that evades labor protections simply exchanges one set of problems for a different set. The folks who are making millions off these types of exchanges are simply rent seekers. Promoting a sharing ethic may be a reasonable response to consumerism and the ever encroaching market society (not economy but society) but outfits like Uber and AirBnB are wolves in sheep’s clothing.
Thanks for the Dean Baker link, and I agree with you about everything else you say.
Thanks. I very much enjoyed your book, a very clear take. Wondering if you’ve read much by Michael Sandell, a political philosopher from Harvard who approaches this issues from an ethical standpoint.
Not germane to this thread but your recent piece on Yelp was spot on. Yelp seems to me akin to an organized crime protection racket, “advertise with us and nothing bad will happen to your business”. I am reminded of the Monty Python skit where Palin and Jones play mobsters threatening the commander of an army base.
Thanks for what you do, very important and very useful.
I’ve been saying this for a while but nowhere near as eloquently as you. The Sound of Silence Rule definitely applies here.
Harry – Thanks. I’m a regular reader of your fascinating blog. Good to see you here.