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Uber says its drivers make $55,000 a year, but some critics cry "phony-baloney"

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Uber for the first time is giving access to internal data about how much its drivers earn in dozens of urban areas around the U.S. The amount — $55,000 in cities like Washington, D.C., and Denver — is about $5,000 more than the median annual wage for American workers.

That income also far exceeds what independent studies estimate Uber drivers earn. For instance, a joint study from the Center on Wage and Employment Dynamics of the University of California, Berkeley, and The New School's Center for New York City Affairs last month found that Uber drivers in Seattle earned about $9.73 an hour — or just over $20,000 a year. 

Uber CEO Dara Khosrowshahi announced a new tool that lets people estimate driver pay in a New York Times opinion piece on Monday, in which he also argued that gig workers like the company's drivers deserve better treatment. At the same time, Uber and competitor Lyft have been ordered by a California court to treat drivers in that state as employees instead of independent contractors, a shift that would guarantee benefits like overtime and sick pay. 

Khosrowshahi said the company's earnings estimator is designed to provide more transparency about driver wages. But critics say it's misleading. 

"I think [Uber's numbers] are phony-baloney," said economist Larry Mishel, a distinguished fellow at the left-leaning Economic Policy Institute and author of a 2018 study about Uber's wages. 

Mishel, who also found that most full-time Uber drivers make less than $20,000 a year, said the company's earnings estimates fail to account for out-of-pocket costs drivers pay, such as gas and vehicle maintenance, which results in sharply lower wages.

"People often mistake earnings for wages, and you can't compare Uber's numbers to what you would make driving a truck or working at McDonald's," he added.

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In his Times op-ed, Khosrowshahi called current unemployment laws outdated, adding that gig economy companies should to be required to pay into a designated fund that workers could tap to pay for benefits like paid time off or health care. Both Uber and Lyft say they will appeal the California ruling that would require them to provide benefits to workers.

The Uber earnings estimator provides results for 32 metropolitan areas, but excludes some major cities such as Chicago, New York and San Francisco. An Uber spokesperson said the company plans to add more features, such as allowing drivers to determine the most profitable hours to drive.

The estimator computes expected weekly earnings based on the driver's city and how many hours they plan to work. But it doesn't specify how many trips or miles a driver would have to travel in that time to achieve those earnings.

Screenshot of Uber's earnings estimator, displaying the company's estimate of how much its drivers earn in Denver, Colorado. Courtesy of Uber

In Denver, for example, Uber's earnings estimator says drivers who work 40 hours a week can expect to make $1,171, including $96 in tips. If a driver also makes deliveries for Uber Eats, the company's food service, drivers can expect to make $1,200 a week, which translates to an annual salary of $62,400 a year.

But Uber's earnings estimator, unlike outside studies, provides a gross figure that's more like a company's sales rather than its earnings, which factor in expenses. The Berkeley-New School study, as well as EPI's research, subtracts the expenses Uber drivers cover themselves, such as gas, insurance and damage to their cars. 

Even before such costs, the Berkeley-New School study found that Uber drivers still only earn about $21 an hour, or the annual equivalent of $45,000 — and that's if the driver works 40 hours a week for 52 weeks a year.

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Uber's new wage tool bases pay estimates on data only from the past month, rather than a year or more. The ride-share company said that using data from the previous month helps to provide the most up-to-date estimate on what drivers can expect to earn. 

But that approach could lead to misleading earnings estimates, according to experts. Because Americans are still reluctant to travel during the pandemic, Uber's ridership has plunged, as has the number of drivers. That recent drop in drivers could be boosting earnings for those who remain, and causing atypically high earnings estimates from Uber's calculator.

An Uber spokesperson said the Berkeley-New School study was based on "limited data and flawed assumptions about drivers' experiences that are unsupported by facts, evidence or reality." The spokesperson also said the authors of the study "throw the kitchen sink" at driver expenses in order to deflate wages. 

On the EPI study, the Uber spokesperson said, "While we appreciate EPI's contribution to this important topic of research, the paper makes several questionable claims and assumptions while altogether ignoring the flexibility drivers tell us they value and cannot find in traditional jobs."

EPI's Mishel said Uber has previously compared driver salaries to retail or restaurant services workers, who tend to make less than the average American worker. 

"Uber looks at driver wages as a second source of income where drivers don't have to have an extra car or pay for additional insurance," he said. "Compare their drivers to workers at traditional full-time jobs, and Uber's drivers are making much less."

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