The Hidden Costs of Being an Uber Driver(washingtonpost.com)
washingtonpost.com
The Hidden Costs of Being an Uber Driver
http://www.washingtonpost.com/news/get-there/wp/2015/02/20/the-hidden-costs-of-being-an-uber-driver/
13 comments
According to Uber's underlying research (http://www.scribd.com/doc/253410228/An-Analysis-of-the-Labor... , page 23), $19 an hour is just the revenue they get after Uber's cut, and does not include gasoline, depreciation/lease fees, insurance etc, which makes it a useless number.
I agree that the article was poorly written, and using the $19 an hour figure to make a point, then debunking the $19 an hour figure later to make a different point, was a poor way to structure the argument. The final take home pay after federal tax was quoted as 27,600, which strikes me as still an attractive wage for many people. Of course if you had the option to become a software engineer at Uber (or a Professor at GMU) then you should probably take that option. But that's precisely why the article is out of touch. People who drive for Uber don't have these options.
Also assuming the $50,000 figure (after ubers cut) is the equivalent yearly pay to the $19 hourly pay, then that requires working 50 hours per week, 52 weeks per year.
For anyone in the UK wanting to compare it to a normal permanent position, that takehome is equivalent to a ~£21-22k a year job (pre tax), but you'd be working 56 hours a week (47 weeks per year) and have no employment guarantees or pension. To be required to work this long in your job, you'd need to explicitly agree to it (and they can't make it a requirement of your employment or treat you differently if you opt out) [0]
[0] https://www.gov.uk/maximum-weekly-working-hours/weekly-maxim...
For anyone in the UK wanting to compare it to a normal permanent position, that takehome is equivalent to a ~£21-22k a year job (pre tax), but you'd be working 56 hours a week (47 weeks per year) and have no employment guarantees or pension. To be required to work this long in your job, you'd need to explicitly agree to it (and they can't make it a requirement of your employment or treat you differently if you opt out) [0]
[0] https://www.gov.uk/maximum-weekly-working-hours/weekly-maxim...
median taxi driver pay is $32k, and most of them are actually employees of the taxi company so don't have to deal with the car stuff.
> The author also doesn't show how the federal income tax is fundamentally different to what an employee would pay
Not disagreeing. For anyone wondering what the fundamental differences are:
1) As an independent contractor you are responsible for 100% of your FICA tax (social security and medicare tax). For most people the tax due is 15% of your income. This is in addition to your income tax. In an employee/employer relationship the employer pays for half of this. It can be a big shock to people who are hit with this for the first time.
2) If you're an employee, your employer is automatically withholding your income tax payments for you and sending them in to the IRS at a regular interval. As an independent contractor you need to be doing this yourself. If you wait until the end of the year and pay as one lump sum you'll likely be penalized.
Not disagreeing. For anyone wondering what the fundamental differences are:
1) As an independent contractor you are responsible for 100% of your FICA tax (social security and medicare tax). For most people the tax due is 15% of your income. This is in addition to your income tax. In an employee/employer relationship the employer pays for half of this. It can be a big shock to people who are hit with this for the first time.
2) If you're an employee, your employer is automatically withholding your income tax payments for you and sending them in to the IRS at a regular interval. As an independent contractor you need to be doing this yourself. If you wait until the end of the year and pay as one lump sum you'll likely be penalized.
>If you wait until the end of the year and pay as one lump sum you'll likely be penalized.
In general, you don't have to pay estimated quarterly taxes in your first year of earning self-employment income. And after you file taxes for your first year, the IRS will inform you that you need to start paying estimated taxes. So it's not super-easy to accidentally get a penalty for this.
In general, you don't have to pay estimated quarterly taxes in your first year of earning self-employment income. And after you file taxes for your first year, the IRS will inform you that you need to start paying estimated taxes. So it's not super-easy to accidentally get a penalty for this.
>As an independent contractor you are responsible for 100% of your FICA tax (social security and medicare tax).
You can deduct half of the self-employment tax from the gross income on your income tax. So, for example, if your income tax rate were 25%, you would effectively pay 87.5% of FICA, not 100%. There may also be deductions on state taxes.
You can deduct half of the self-employment tax from the gross income on your income tax. So, for example, if your income tax rate were 25%, you would effectively pay 87.5% of FICA, not 100%. There may also be deductions on state taxes.
Well the way I read it was the author poo poos $19 an hour because Uber originally claimed their drivers were making " $74,000 a year in San Francisco". $19/hour isn't great compared to $74,000 a year.
It's worth considering: $74K in the city that's just about the # 1 most expensive to live in ... I wonder how that compares with other cities. Of course, Uber drivers are going to be mostly in large cities since that's where most customers will be, but $74K in SF and $74K in Oklahoma City are two very different things.
I got that, but even in that context, it doesn't make sense to ask why Uber is still an attractive option when they only offer $19 an hour, when clearly that would be an attractive option to many people.
The gist of the article is that it isn't really even $19 an hour though with taxes and expenses.
It's difficult to have this discussion with you when you make the same confusing changes to the argument as the author does in the article.
I'm well aware that the article went on to debunk the $19 an hour figure. But in that particular paragraph, the author did specifically claim that it was surprising that people would still find a $19 an hour job attractive. It was this claim I was discussing.
I'm well aware that the article went on to debunk the $19 an hour figure. But in that particular paragraph, the author did specifically claim that it was surprising that people would still find a $19 an hour job attractive. It was this claim I was discussing.
I'm just struggling to see how the author says any $19 an hour job is unattractive. It reads as a comparison, that it is unattractive compared to the inflated figures Uber previously provided. "Uber’s no longer making those lofty claims"...
People extol all kinds of principles till those principles come to bite them (I like immigration, but I don't like H1Bs, etc.). So, everyone's whipping boy/girl is technology today. Of course they are not going to talk negative things about the ills of higher ed. How undergraduates are used as free labor, or the excessive hazing, etc.
I'm not a particular fan of Uber the tech company, but at the same time, a fair comparison would be to see how Uber compares to working for a regular taxi company. Just as it would be fair to compare Uber the tech co vs. Twitter or Amazon the tech company --not the warehouse operations. amazon's warehouse operations should be compared against other warehouse operations, and if they come up short, castigate them.
But hey, people like reading catchy titles and like consuming things which reinforce their biases.
I'm not a particular fan of Uber the tech company, but at the same time, a fair comparison would be to see how Uber compares to working for a regular taxi company. Just as it would be fair to compare Uber the tech co vs. Twitter or Amazon the tech company --not the warehouse operations. amazon's warehouse operations should be compared against other warehouse operations, and if they come up short, castigate them.
But hey, people like reading catchy titles and like consuming things which reinforce their biases.
I don't particularly care for Uber as a company, but reading this it seems to me that the "bad guy" is the US government. Making things like paying taxes more straightforward and automated, and providing a better health insurance structure to its citizens are 2 things that would allow people to partake in things like driving for Uber without most of the drawbacks exposed in this post. That's the kind of stuff really needed to enable a country built on entrepreneurship (things like a national "day of code" or White House hackathons are cute, but rank lower on the list of priorities)
US taxes are ridiculously complicated, but trying to change any of it is basically impossible - at the slightest hint of any one sector having to increase taxes, it's game over, as the US public gets very loud when that happens.
About 20 years ago here in Australia, the sales tax was simplified. It used to be that you'd pay 0, 11, 22, or 33% tax on goods if they were classed as staples, luxuries, or something in-between. They scrapped this and replaced it with a flat 10% tax nationally, except for staple foods. My mother was a bookseller, which was previously tax-free (so it wasn't good for her business), but she said that other vendors were over the moon at the much greater ease of compliance. If you ran a mixed business, it was a pain to track which items were 11% versus one of the others.
Then I look at the US system and... shudder. Sales taxes can come from several different levels, and then be chargeable depending on where the seller is and also where the buyer is. It's ridiculously complex. But fixing it means that some people will have to pay a little more (never going to happen) and some entities will lose political power to someone further up the chain (also never going to happen).
On the other hand, the US economy is ridiculously powerful, so perhaps they can afford to waste money on process, keeping armies of accountants employed :)
About 20 years ago here in Australia, the sales tax was simplified. It used to be that you'd pay 0, 11, 22, or 33% tax on goods if they were classed as staples, luxuries, or something in-between. They scrapped this and replaced it with a flat 10% tax nationally, except for staple foods. My mother was a bookseller, which was previously tax-free (so it wasn't good for her business), but she said that other vendors were over the moon at the much greater ease of compliance. If you ran a mixed business, it was a pain to track which items were 11% versus one of the others.
Then I look at the US system and... shudder. Sales taxes can come from several different levels, and then be chargeable depending on where the seller is and also where the buyer is. It's ridiculously complex. But fixing it means that some people will have to pay a little more (never going to happen) and some entities will lose political power to someone further up the chain (also never going to happen).
On the other hand, the US economy is ridiculously powerful, so perhaps they can afford to waste money on process, keeping armies of accountants employed :)
This article should be another argument in favor of calling this "The 1099 economy" instead of "The Sharing Economy".
In the end, that 1099 will be much more salient to your everyday life than the notion of 'sharing'
In the end, that 1099 will be much more salient to your everyday life than the notion of 'sharing'
Uber isn't sharing at all. It's CSR service. ZipCar, Car2Go are sharing.
I truly despise the term 'sharing economy', as used in the article. This is not sharing, none of these companies are sharing. It is renting, or selling, just like any company in the boring old normal economy.
When you share something with others, you don't charge people for it.
When you share something with others, you don't charge people for it.
Other hidden costs:
* Driving around when you'd normally be at home, to be in a position for fares
* Driving only to have ride cancelled
* Bottled water/mints/etc (I've seen these in a few Ubers)
* Toll tags (though I've had an Uber detour when the most direct route directed them through a toll road)
* Most drivers seem to prefer dedicated GPS to one built into Uber app, so there's that cost if they choose to take it on.
* Uber drivers tend to keep car cleaner than usual driver, so time/money for that.
* Driving around when you'd normally be at home, to be in a position for fares
* Driving only to have ride cancelled
* Bottled water/mints/etc (I've seen these in a few Ubers)
* Toll tags (though I've had an Uber detour when the most direct route directed them through a toll road)
* Most drivers seem to prefer dedicated GPS to one built into Uber app, so there's that cost if they choose to take it on.
* Uber drivers tend to keep car cleaner than usual driver, so time/money for that.
> unlimited vacation policy
How about a "minimum vacation" policy?
http://www.paperplanes.de/2014/12/10/from-open-to-minimum-va...
http://www.paperplanes.de/2014/12/10/from-open-to-minimum-va...
I think you start to get in to trouble the moment that holiday stops being seen as remuneration. When it's clear that some people have negotiated different holiday allowances, and have different holiday needs, and that's been factored in to their take home, then everyone knows that everyone has earned their holiday.
As for minimums, at any European company with a vaguely competent HR function, unused holiday will get flagged as a risk in terms both of resource planning, but also from a staff wellbeing perspective.
As for minimums, at any European company with a vaguely competent HR function, unused holiday will get flagged as a risk in terms both of resource planning, but also from a staff wellbeing perspective.
Uber's driver income numbers have been wildly deceptive. They don't include the cost of the car, or of operating it.
Uber is a pretty good option for people who already have a suitable car, especially people who already have one they've previously been using to run a limo service.
To call ignoring the cost of the car "deceptive" seems a bit like calling it "deceptive" to say software engineers can earn 6 figures because you haven't factored in the cost of getting a computer science degree.
To call ignoring the cost of the car "deceptive" seems a bit like calling it "deceptive" to say software engineers can earn 6 figures because you haven't factored in the cost of getting a computer science degree.
this article points out several important aspects of uber's 'unfair advantage,' which in the labor market almost completely boils down to structural forms of tax avoidance that regulated incumbents are unable to match, but neglects to mention some of the longer-term benefits that 'real' employment brings.
for example, having a W-2 job in the united states typically means contributing to social security, which helps people build up to qualifying for certain benefits in retirement. not so with uber.
especially over a typical worker's lifetime, comments about $x/hour dramatically oversimplify and abstract away the NPV of these endeavors for employee-like participants. NPV for employee-like participants is considerably lower than many reasonable-sounding discussions would have you believe because a lot of the discounts that uber captures as profits are not as cleanly captured in $x/hr numbers....social security is one of many.
for example, having a W-2 job in the united states typically means contributing to social security, which helps people build up to qualifying for certain benefits in retirement. not so with uber.
especially over a typical worker's lifetime, comments about $x/hour dramatically oversimplify and abstract away the NPV of these endeavors for employee-like participants. NPV for employee-like participants is considerably lower than many reasonable-sounding discussions would have you believe because a lot of the discounts that uber captures as profits are not as cleanly captured in $x/hr numbers....social security is one of many.
Wrong, as a self employed person you are absolutely required to pay in to social security. Heck, the article even spells that out...
My only problem with Uber is this clause;
"Vehicle requirements are subject to change"
The list of approved cars didn't make much sense when I looked into it. I have a feeling there's a bunch of people who went into debt buying a four door Uber approved car--and are now saving up for bankruptcy?
"Vehicle requirements are subject to change"
The list of approved cars didn't make much sense when I looked into it. I have a feeling there's a bunch of people who went into debt buying a four door Uber approved car--and are now saving up for bankruptcy?
Could someone explain why Uber doesn't have an Android app for their drivers? It looks to me like they are trying to skim a little extra from those without iPhones. Surely they can afford the engineering costs associated with an Android version?
You underestimate how much engineering would cost for an Android port.
From my friends who have maintained both iPhone and Android versions of the same product, the Android dev costs were roughly 4x that of the iPhone, and that continues with QA for every single new feature released, assuming you want feature parity.
From my friends who have maintained both iPhone and Android versions of the same product, the Android dev costs were roughly 4x that of the iPhone, and that continues with QA for every single new feature released, assuming you want feature parity.
The Uber claim is about the bay area/sf only.
Then the counter study is about the USA average for Uber.
Based on that, I can't say who tells the truth - but I can certainly say that I don't believe anything from this article either.
Then the counter study is about the USA average for Uber.
Based on that, I can't say who tells the truth - but I can certainly say that I don't believe anything from this article either.
The article should be called "the (not so hidden) cost of being an independent worker".
Yes, you're making a big mistake if you compare the amount you would make as an independent worker vs being employed.
Yes, you're making a big mistake if you compare the amount you would make as an independent worker vs being employed.
Clickbait-y article. Hidden costs? How are these hidden? You live in the US and expect to NOT pay taxes or something? I expected to read about some surprising cost, but insurance, gas, taxes, car maintenance, uber's cut, etc., are all straightforward.
...and downvoted why? ;-)
marincounty's comment here represents a potential hidden cost. The article's contents don't.
marincounty's comment here represents a potential hidden cost. The article's contents don't.
...a more recent study commissioned by Uber reported that the typical Uber X and Uber Black drivers make about $19 an hour after paying Uber’s 20 percent commission ... yet that hasn’t diminished the appeal of driving for Uber.
Does the author really not realize that $19 an hour would be appealing to a very large proportion of the population?
The author also doesn't show how the federal income tax is fundamentally different to what an employee would pay, and yet the tone of the article suggests that the amount of income tax paid is a special burden for Uber drivers, e.g. ...there can be a big difference between the fares from driving for Uber, say $62,000, and what’s left over after paying Uber’s commission, your gas, car maintenance, health and car insurance expenses, and your federal income and self-employment taxes, or about $27,600. And you may still have to pay state and local income taxes, which might add up to another thousand dollars or so. I thought only the crazy libertarian right talked about "what's left over after federal (and state and local!) taxes".
Finally the author makes a ridiculous comparison with actual employees of Uber: Things would be different if you worked for Uber Technologies. You would receive a 401(k) plan, gym reimbursement, nine paid company holidays, full medical/dental/visions package and an unlimited vacation policy. You might even get snacks in Uber’s lunchroom. How is this relevant? Is the author going to get the Uber drivers jobs as professors at GWU, since the mean tech nerds won't pay them software engineer salaries?