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Uber increases transportation access, employment opportunities

By   /   September 14, 2015  /   No Comments

MAHATHIR MOHD YASIN / Shutterstock.com

MAHATHIR MOHD YASIN / Shutterstock.com

By Jared Meyer | Watchdog Opinion 

In a new report entitled “Uber Positive,” I show that Uber increases transportation options for low-income neighborhoods in New York City and provides many benefits to outer-borough residents. My analysis covers Uber’s private data for every ride in the New York City area during 2014.

There were almost 9.5 million UberX rides in New York City in 2014. The monthly ride total increased 450 percent from January to December of that year. As Uber’s popularity grew, its rides shifted away from downtown and midtown Manhattan and towards low- and middle-income, outer-borough zip codes.

The benefits of Uber’s growth do not end with riders. Uber could not have achieved its growth in New York City and across the globe without strong participation from its driver-partners. A report released by Uber in early 2015 provided information on those who drive for the technology company and why they choose to do so. The report, authored by Jonathan Hall, Uber’s head of policy research, and Princeton University professor Alan Krueger, relied on internal company data and an outside survey of 601 drivers.

The report’s results, along with the rapidly increasing number of people who drive with Uber, point to the conclusion that driving with Uber is a desirable way to make extra money or earn a living. At the end of 2014, Uber had more than 160,000 active drivers, and this number has about doubled every six months over the past two years.

Uber and other ridesharing companies do not own the cars that their drivers use. What ridesharing companies do is provide a technological platform to facilitate and manage the connection between riders with drivers. Drivers are classified as independent contractors since they control the number of hours that they work and their schedules, though this classification is in possible jeopardy due to a June California Labor Commission ruling.

Removing the independent contractor designation from Uber drivers would take away many of the benefits that make partnering with the company an attractive employment opportunity. Because rideshare drivers are classified as independent contractors as opposed to employees, they are granted the flexibility to earn either the entirety of their living with Uber or to supplement their incomes by only working part-time.

Most Uber drivers work part-time, and less than 10 percent of New York City Uber drivers drive for more than 50 hours a week. This means that many drivers already have a vehicle, and would in any case pay some of the fixed costs of vehicle ownership. The available data show that, in the vast majority of markets, the net earnings of Uber drivers’ are at least as much as those of taxi drivers. 

Photo by: Shutterstock

Photo by: Shutterstock

Before expenses, Uber drivers earn an average hourly rate of $19, compared with $13 for taxi drivers (though the Uber driver survey data are not strictly comparable with the Bureau of Labor Statistics data on taxi driver income). In New York City, Uber drivers earn an average of $30 an hour. While this figure does not factor in additional expenses, it does account for Uber’s fee that it takes from each ride total. Although take-home pay is lower after adjusting for vehicle maintenance, depreciation, fuel, and insurance costs, earnings made by Uber drivers are higher than those of the average New York City cab driver.

About 75 percent of Uber drivers say that the platform has made their lives better by giving them greater control over their schedules. A similar percentage of drivers say that they prefer being their own bosses over having traditional employers who offer set salaries and benefits.

Driving with Uber can also serve as a bridge between employment opportunities. The extra income earned allows drivers to take their time seeking other employment that fits their needs. For this reason, about one-third of drivers say they partnered with Uber “to earn money while looking for a steady, full-time job.”

Driver demographics differ drastically between Uber and taxis. Only 9 percent of taxi drivers are under 30, but 19 percent of Uber drivers come from this age group, and 7 percent are students. The cost of starting work as a taxi driver is often prohibitively expensive, especially for those just beginning their careers. As Hall and Krueger state, “The greater representation of younger people… may also reflect entry barriers into the taxi driver and chauffeur professions that make it more difficult for younger people to obtain such jobs.”

Ridesharing offers a low-cost way for those with vehicles to try out a new way to earn money. Some people find that the arrangement does not work for them, but moving on to another career is easier in an industry such as ridesharing that has relatively low barriers to entry, especially compared to driving a taxi where there are high entry barriers in the form of expensive medallion requirements. Among new Uber drivers, 70 percent are still using the platform after 6 months, even though about half of Uber drivers have no previous experience as professional drivers.

Ridesharing offers a safe, often enjoyable, employment option that many people find attractive. Drivers are able to choose their work hours, and this means a wide array of individuals choose to partner with ridesharing companies. Some use the platform for full-time employment. Others use it as a way to gain extra income from working part-time. Still others work while they are in between jobs or looking for work.

If people did not think that they were gaining from the opportunity to partner with ridesharing companies, there would not have been such drastic, accelerating growth in the number of drivers and rides over the past few years. State and local policymakers need to keep this in mind as they debate how to respond to this new industry.

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Jared is a fellow at the Manhattan Institute.