Declare Uber, Lyft drivers employees, says study

Only lack of traffic in pandemic got their pay above minimum wage in Chicago

Uber and Lyft drivers struggle to make the minimum wage in Chicago after paying expenses, according to a new study on ride-hailing services. (Shutterstock)

Uber and Lyft drivers struggle to make the minimum wage in Chicago after paying expenses, according to a new study on ride-hailing services. (Shutterstock)

By Ted Cox

Ride-hailing drivers for Uber and Lyft should be declared employees, not contractors, according to a new study finding that only the lack of traffic in the pandemic got their pay above minimum wage in Chicago.

On-Demand Workers, Sub-Minimum Wages: Evidence from Transportation Network Provider Trips in the City of Chicago” was released this week at an event held by the University of Illinois Labor Education Program. A product of the Illinois Economic Policy Institute and the Project for Middle Class Renewal at the university’s Urbana-Champaign campus, the study found that the number of ride-share drivers dropped by more than a third year to year in the pandemic, and only the relative lack of traffic — making trips more efficient — got drivers’ pay above Chicago’s minimum wage after expenses.

The study examined 78,000 trips through Chicago’s three licensed “transportation network providers” — Uber, Lyft, and Via — “completed during the exact same times on the exact same days in the middle of September 2019 and September 2020.” According to the study, in 2019 there were 110,000 registered drivers with those ride-hailing services citywide, with two-thirds of them active in September. A year later, in the midst of the COVID-19 pandemic, there were fewer than 67,000 licensed drivers, just 44 percent of them active. But the average number of trips completed by drivers over the course of the month remarkably remained steady year to year at 123.

The total number of miles driven with passengers dropped 63 percent, however. While the average distance traveled dropped 5 percent, the duration of the trips dropped 18 percent, indicating that drivers “completed trips at a faster pace due to decreased traffic congestion.”

Only that increased efficiency got ride-hailing drivers above Chicago’s minimum wage after expenses, the study found. “The average TNP driver in Chicago earned $12.30 per hour in 2019, 5 percent below the $13-per-hour minimum wage in 2019,” it stated. “The average TNP driver in Chicago earned $15.09 per hour in 2020, an estimate that is artificially inflated because TNP workers did not experience the usual levels of traffic congestion. The average TNP driver in Chicago would have only earned $13.62 per hour in 2020 with pre-pandemic levels of traffic congestion, 3 percent below the $14-per-hour minimum wage in 2020,” the study estimated.

“While Uber, Lyft, and Via drivers in Chicago make between $19 and $23 per hour in gross earnings,” the study added, “they earn significantly less after expenses and taxes.”

Chicago ride-hailing users did not attempt to make up the difference in tips during the pandemic. The study found: “The average customer tip decreased by 39 percent, and the share of trips resulting in a tip to the driver decreased from just 21 percent to 14 percent.”

Frank Manzo IV, ILEPI policy director, drew some overarching conclusions on the gig economy in presenting the paper this week. “First, the gig economy does provide some flexibility for workers. There’s really no denying that people are attracted to work for Uber — often in a part-time status to supplement their main job — because it offers flexibility,” he said. “But second, despite the flexibility, these app-based companies pay low wages for drivers. Estimates vary, but the best ones generally show that Uber drivers only earn between $9 and $16 per hour — after vehicle expenses and taxes. Many of these workers earn less than the minimum wage.

“There are just important social consequences to this industry,” Manzo added. “For example, workers in the industry are 10 percent less likely to have health insurance, likely leading to higher Medicaid costs. Other research has found that women earn less driving for Uber than men, even though it is the exact same work. So if this is the ‘future of work,’ it’s not going to help in closing the gender pay gap.”

“Although drivers for transportation network providers struggle to earn the minimum wage in Chicago, there are options that elected officials could consider to promote fairness and boost worker earnings,” the study stated. It suggested the General Assembly could pass laws classifying ride-hailing drivers as employees of Uber and Lyft, not independent contractors. That would grant them “full employment rights and access to basic labor protections, including minimum-wage laws, overtime-pay laws, workers’ compensation coverage, unemployment-insurance benefits, and the ability to collectively bargain.”

California tried to pass a similar law by referendum last year, but it failed in the face of attack ads heavily funded by the ride-hailing companies — much like the Fair Tax Amendment here, which fell to opposition from billionaires. Lyft has already launched an Illinois Super Political Action Committee to combat any similar ballot initiatives or legislation here.

Chicago could also amend its Transportation Network Provider Ordinance to set a $15 minimum wage for drivers. The study cited: “After New York City implemented a minimum pay standard, driver pay increased by 8 percent, passenger wait times decreased by 18 percent, and TNP company commission rates fell — indicating that Uber, Lyft, and other TNP companies absorbed part of the increase in costs.”

“Uber and Lyft drivers currently struggle to earn the minimum wage in the city of Chicago,” Manzo concluded. “The status quo for ‘gig’ workers only embeds a new low-wage-contingent labor force into the state’s economy. But there are options that elected officials could consider to promote fairness and boost worker earnings.”

Professor Robert Bruno,. director of the Project for Middle Class Renewal at UIUC, co-wrote the study.