Underpaying drivers is ‘essential’ to Uber’s business model, according to a new study on low wages

Uber low fares protest unhappy sad drivers

Uber can’t get away from academic studies criticising how little it pays drivers.

A new Australian study claims Uber’s entire business is subsidised by its low paid drivers, to the tune of “hundreds of millions of [Australian] dollars per year.”

The study, conducted by economist Jim Stanford at the Australia Institute’s Centre for Future Work, found that the average Uber wage in Australia came to $14.62 (£8.23, $11.42) per hour, well below the national minimum wage of $18.29 (£10.30, $14.29) per hour.

That’s the estimated money drivers take home after deducting Uber’s fees, net taxes, and vehicle maintenance costs from their gross hourly earnings, according to Stanford.

The figure only applies to UberX, Uber’s cheapest and most popular service, and the study simulated fares across six Australian cities.

Stanford calculated that waged drivers earned a weighted average of more than $30 per hour. “By this benchmark, UberX drivers are underpaid by $15.50 [£8.73, $12.12] per hour,” he wrote.

“This subsidy is extracted from drivers, perhaps unwittingly and unwillingly, and is crucial to the company’s aggressive growth strategy (which has relied on a fare structure which undercuts established taxi providers),” he added. “It turns out, in fact, that the subsidy provided to Uber by its drivers is a crucial component of Uber’s pricing advantage over its traditional rivals.”

Normal taxis cost anything between 27% and 60% more than UberX in Australia, according to Stanford. If Uber paid its drivers properly, it might become just as expensive, though.

Stanford called on Australian politicians to investigate Uber’s fares and create new regulations to protect drivers.

Uber has not responded to a request for comment.

Uber has already argued against another study about how little drivers earn

The Australian study follows a similar paper from MIT in the US which found almost three-quarters of drivers working for Uber and its rival Lyft earned less than minimum wage.

The MIT study relied on data from a survey of more than 1,100 ride-hailing drivers, and found their median pre-tax profit was $3.37 (£2.43) per hour.

But Uber brought out its in-house economist to pick holes in the study – though the firm didn’t openly volunteer its own pay data – and asked that MIT revisit the study. The researcher, Stephen Zoepf, agreed andrecalculated median profit at between $8.55 and $10 (£6.16 and £7.21) an hour.

Drivers have complained about low wages almost since Uber launched

Academics are only now making official what Uber drivers have been complaining about for years: that the firm keeps fares artificially low in order to undercut taxis.

Last February, British Uber driver David Dunn complained to UK politicians that he couldn’t make back his costs on a £37,000 Mercedes while driving for Uber’s more expensive “Exec” service.

“I find myself running about with an E-Class doing jobs for £2.25 – that’s unheard of,” he said at the time. “Black cabs charge £6 or £7.”

Another driver complained he had to work up to 90 hours a week just to break even.