Uber calls MIT study concluding drivers make less than $4 an hour ‘flawed’
“MIT = Mathematically Incompetent Theories (at least as it pertains to ride-sharing),” Uber CEO Dara Khosrowshahi tweeted.
The average Uber driver makes less than $4 an hour, at least according to a new paper published by MIT. In fact, the study, which coupled data from a survey of 1,100 drivers with vehicle cost information, found that 74 percent of drivers earned less than minimum wage in the state they worked in.
Uber trotted out its in-house economist Jonathan Hall to respond to the claims, and he says the study is flawed because of a discrepancy in the way the researchers analyzed the survey results.
“Perhaps most surprisingly, the earnings figures suggested in the paper are less than half the hourly earnings numbers reported in the very survey the paper derives its data from,” Hall writes in a new post.
Even Uber CEO Dara Khosrowshahi sounded off on Twitter, saying MIT stood for “Mathematically Incompetent Theories.”
MIT = Mathematically Incompetent Theories (at least as it pertains to ride-sharing). @techreview report differs markedly from other academic studies and @TheRideshareGuy recent survey. Our analysis: https://t.co/S2aAqCuDR0
— dara khosrowshahi (@dkhos) March 3, 2018
Uber has embarked on a campaign to win back drivers after years of mistrust. The company has recently instituted some driver requests such as tipping and more convenient fare routes.
The Rideshare Guy survey — the underlying data used for the paper — found Uber drivers made an average of $15.68 an hour — but that’s before the costs of gas, maintenance and other expenses.
The MIT paper then incorporated the cost-per-mile for driving for Uber.
A brief on the study, which won’t be released in full for a few months, reads:
A Median driver generates $0.59 per mile of driving, and incurs costs of $0.30 per mile. 30% of drivers incur expenses exceeding their revenue, or lose money for every mile they drive. (Figure 1) On an hourly basis, the median profit is $3.37 per hour and 74% of drivers earn less than the minimum wage in the state where they operate.
Still, Uber claims the researchers’ methodology was flawed and further that drivers may not have understood the questions they were asked.
This is the crux of the company’s argument:
The Rideshare Guy survey asks a number of questions about how much drivers earn and how many hours they work per week. The most important are questions 11, 14, and 15.
Q11: “How many hours per week do you work on average? Combine all of the on-demand services that you work for.”
Q14: “How much money do you make in the average month? Combine the income from all your on-demand activities.”
Q15: “How much of your total monthly income comes from driving?”
The problem in this case is inconsistent logic on the part of the paper’s authors. Consider this: for question 14, the authors assume respondents are reporting income from *all* sources, not just on-demand work. As a result of this assumption, the authors discount the earnings from Q14 by the answer to Q15, “How much of your total monthly income comes from driving?”
For example: if a driver answered $1,000 to $2,000 to Q14, the authors would interpret that as $1,420.63² according to their methodology. If the respondent then answered “Around half” to Q15, the authors conclude this driver made $710.32 driving — half what they actually earned from driving with ridesharing platforms.
However, and perhaps just as important, the authors also assume that drivers understood Q11 perfectly well and that the hours reported only applied to on-demand work. As a result, they divide an incorrectly low earnings number by the correct number of hours.
We’ve reached out to the researchers and will update when we hear back.