New Study Finds Chicago Uber and Lyft Drivers Are Paid Below Minimum Wage

On Tuesday, a new study published by the nonprofit Illinois Economic Policy Institute found that Uber and Lyft drivers in Chicago were paid below the minimum wage in 2019.

The researchers write that “the treatment of [Transportation Network Provider] drivers as ‘independent contractors’ suppresses their earnings, shifting income from the workers to the executives and shareholders of TNP companies.” 

Ride-hail drivers for Uber, Lyft, and Via may make between $19 and $23 an hour in gross earnings, but the study found this does not account for significant expenses and taxes. In 2019 the minimum wage was $13 an hour, but the average driver earned $12.30 an hour, according to the study. In 2020, the minimum wage was $14 an hour but drivers only earned $13.62.

The study comes as gig companies are busy implementing measures in Proposition 22 in California, which exempted gig companies from reclassifying workers as employees and promised drivers would make 120 percent of the state’s minimum wage.  A Berkeley Labor Center study found drivers in California would likely earn $5.64 an hour if Proposition 22 passed.

Other gig economy research, when it is not sponsored by companies such as Uber and Lyft, tells a similar story. 

In Seattle, a battle emerged between whether research done by independent economists or a team given data by the companies was correct. Economists Michael Reich and James Parrott found drivers made an average of about $9.73 an hour (in 2019, Seattle’s minimum wage was $12), while a team of Cornell researchers sponsored by Uber and Lyft pegged the average pay at $23.25. And even as the Berkeley Labor Center published research saying wages after Prop 22 would be low, , a study published by other Berkeley researchers  backed by the coalition of companies who wrote Prop 22 found that failing to pass the initiative would eliminate 900,000 jobs.

In a recent New York Times op-ed, law professor Veena Dubal and sociology professor Juliet Schor drove points similar to the Illinois EPI study, especially around the fact that misclassification prevents app workers from accessing “the same benefits afforded to traditional workers, including payment for time between assignments, unemployment benefits and the right to organize.” Misclassification would not only deny workers protections, however, but preserve a business model with unworkable unit economics that require minimizing labor costs, concentrating market power, and rewriting laws to realize greater returns for investors.

Wages are just one head of the hydra of issues that stem from gig companies’ refusal to properly classify workers. Over the past few years, Uber, Lyft, and other app-based gig labor platforms have fought a series of protracted battles across the country to erode U.S. labor laws that would challenge the murky legal basis upon which their wholly unprofitable enterprise works. 

In California, over $200 million was spent on Proposition 22 and carving out a giant—potentially unconstitutional—exemption for gig companies protecting their bottom lines from reclassification. In New York and Illinois, Uber and Lyft have spun up massive political machines to begin lobbying for bills and compromises similar to Proposition 22. An early favorite for Biden’s Labor Secretary pick, Seth Harris (a former Labor Secretary himself), was an early pioneer of a “hybrid category” that would give app-based workers a few protections like collective bargaining, but deny them others like a minimum wage.

And while President Biden has promised to federally reclassify gig workers as employees, there are signs he may ultimately falter in the face of resistance from conservative Democrats and party insiders-turned lobbyists. There is also concern around half-measures that end up favoring gig companies and putting workers at a disadvantage. 

For example, Uber and Lyft have created a labor system that relies on massively over-hiring drivers to keep waiting times low, even though this leaves drivers spending a significant amount of their time waiting for drivers, unpaid. In New York City, instead of reclassification, regulators pursued a flawed pay standard system that successfully increased wages to a livable level but led to “The Lockout”: the companies effectively fired tens of thousands of drivers by limiting access to the app behind strict quotas necessary to schedule shifts, a development that forced many drivers to sleep in their cars and working 60 or more hours a week.

If Biden is serious about justice for gig workers, he’ll need to reclassify workers, yes, but also go beyond basic employee protections and sharply limit gig labor platforms so they can’t wield the same sort of power they did in New York City. 

That would mean, as one example, getting creative with antitrust reform to change how the law allocates coordination rights (e.g. organizing production, setting prices, directing investments, etc.) to firms while denying them to workers, boosting the ability of these firms to further crush workers by cutting wages, organizing efforts, and denying them dignified working conditions.

All that, however, may be neither here nor there if Biden continues to signal that he will appoint former Big Tech lawyers to key positions in his administration.

“This report makes unfair assumptions and recommendations that are out of touch with what drivers themselves actually say they want,” Uber told Motherboard in a statement. “We agree independent work should improve, but it shouldn’t be defined by the political status quo that says traditional employment is better than independent work. We will continue to push for solutions that provide new benefits that workers need, while guarding the flexibility they want most.”

“This deeply flawed study ignores basic economics in an effort to achieve a predetermined conclusion, and its assumptions are wildly off,” Lyft said in a statement. “Pulling out taxes from earnings without including the myriad of deductions drivers have access to proves the study’s findings aren’t based in economic reality.”

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