An Analysis of the Individual Economics of Ride-Hailing Drivers – Transportation Research Part A: Policy and Practice – article

An Analysis of the Individual Economics of Ride-Hailing Drivers

Alejandro Henao, Wesley E. Marshall | Transportation Research Part A: Policy and Practice

2019-10-15

Ride-hailing companies are disrupting transportation at a large scale while also providing economic opportunities to millions of drivers. Companies such as Uber and Lyft constantly promote potential earnings on the order of $25–$35 per hour. Yet, the advertised earnings do not account for factors such as time spent without passengers, the need to travel back-and-forth between areas of low and high ridership, driver residential location, or driving expenses. By examining a unique and detailed dataset collected using ethnographic methods – primary data collected by one of the authors who became an independent contractor to drive for both Uber and Lyft in the Denver area – we examine actual earnings with three common expense scenarios to answer the question of how much ride-hailing drivers actually earn.This study first assesses the cost per mile to passengers – including fare, fees, tolls, and gratuity – and finds that the result follows a power law function (in relation to trip distance) with a median cost of $2.50 per mile (not including value of time). We then assess driver earnings and estimate gross wages averaging $15.57 per hour. Given three common expense scenarios, we estimate net hourly wages ranging between $5.72 and $10.46 per hour before taxes. This suggests that most ride-hailing drivers earn less than the state minimum wage in Colorado. Our results also suggest that drivers are better off parking and waiting for the next ride request rather than driving to a more active location unless doing so cuts at least 30% of ride request waiting time. We then identify cruising and deadheading as negative externalities of ride-hailing and suggest per-mile ride-hailing fees, which start at zero passengers and provide discounts, based on increasing vehicle occupancy, to help mitigate this issue. While our data collection focused on the Denver region, ride-hailing rates and cost of living adjustments to specific cities can be used for comparison, providing insight into the individual economics for ride-hailing drivers.

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