The Uber business model has received a great deal of fanfare. While the service brings up a number of other valid concerns such as driver and rider safety, the concept of making money through Uber is revolutionary. The gig economy is changing the way people look at work and given them flexibility to have greater control over how they make a living.
An Uber driver can choose to work as many or as little hours as they would like, as well as choosing what times, dates, and places that work is in. The work can be done by anyone who can drive and use an app, provided they are willing to use their own vehicle. The work can be done by someone who has no experience as a driver-for-hire. All of these reasons make Uber accessible to people who would otherwise be working in a minimum wage position.
But how much money does an Uber driver really make? There are a couple of different ways to answer that question.
In a nut shell, Uber’s base rate is calculated on a fee per mile and per minute. During busier periods, surge pricing acts as a multiplier. Then, rider fees are added to equal the total cost of the ride. For example, $0.15 per minute and $0.90 per mile would mean that a 10 mile ride spanning 30 minutes has a base cost of $13.50. A 1.2 surge bumps the cost to $16.20. Add a $1.65 rider fee, and the customer has a total bill of $17.85.
Uber keeps the rider fee and a 25% cut, leaving the driver with $12.15 for 30 minutes of work, or $24.30 per hour.
For many Uber drivers, a rate of over $24 per hour is a dream come true compared to the minimum wage options previously available to them. But there are some differences between hourly work and gig work that make that figure slightly misleading. Number one, gig workers are only paid for the time spent actually completing the task. The time between dropping off one ride and picking up another isn’t paid time, in addition to anything else you have to do to prepare for your shift such as put gas in your vehicle. These little “in-between times” will drag down the hourly average.
Surge pricing plays a big role in how Uber driver rates are calculated. On a night where lots of people are out on the town like New Year’s Eve, surge pricing can skyrocket to multiples of three, four, or even five. At those rates, there is a lot of financial incentive to drive for Uber. Slower nights will not have such a great yield.
Since gas prices fluctuate, Uber drivers will make more money when gas prices are lower. Having to pay more money in expenses when gas is high is considered part of being a contractor, and is not offset in any way by Uber.
These variables do not mean that Uber is being dishonest or cheap. On the contrary, many hail the system as a more simple way to hire employees and have them work as an independent contractor. The payment model is clearly laid out for drivers to make sure they understand the deal. However, these are things that the average hourly employee may not think about when they consider making the switch to working for Uber.
Hourly rates are going to vary geographically, but a TechCrunch survey found that New York City Uber drivers make an average of $30.35 an hour, drivers in LA make an average of $16.98 an hour, and drivers in Boston make an average of $19.06 an hour. Many drivers choose not to work 40 hours per week, either because the work is part time in addition to other employment, or because the extra money per hour means they don’t have to work as much to get by.
That makes it a little more difficult to calculate the average yearly wage an Uber driver is earning. But the data TechCrunch offers is pretty clear that Uber drivers are making more money per hour than taxi drivers and chauffeurs, across the board.