Uber is the Future of Work – Uber Driver Pay and Salary

Vimeo / Via vimeo.com

Vimeo / Via vimeo.com

Looking for flexibility? Then Uber is for you. It probably isn’t your dream job, but makes a great flexible second job. Work when you want, and as much as you want. With Uber you are a business owner — you decide when fares are worth going out, and have control of your profits.

Ready to work? Just turn on the app. Uber will alert you to riders waiting for a pickup. This is work on demand, and it is the future.

With Uber you get paid based on demand for riders. They share this information so you can optimize your earnings and your time.

We will cover how you get paid, how much some people are earning, and why the Uber business model is the future of work.

Uber driver income

Uber drivers make money based on the number of miles you drive and how long those trips take. Fares vary based on city. Here is the formula:

(# of miles * $ per mile) + (# of minutes * $ per minute) + booking fee) = Gross Revenue

Explore rates at, https://www.uber.com/cities/

During peak hours your gross revenue is multiplied by the Surge Multiplier. It is a genius idea to make sure that their are enough drivers to pick up riders when demand is high. Rewarding drivers when demand is high. Optimize your schedule and you can make ~$40 an hour. If you don’t you can make as low as ~$10 an hour.

Companies do the same thing with part-time employees. Sophisticated software optimize schedules based on predicted demand. Sticking employees with short-shifts, clopens, and being held on call in case demand spikes.

Instead of just getting told when to work based on demand, Drivers get data and Uber lets them decide when it is best to work. This way Drivers can optimize their earnings, and free time. They aren’t limited to 29 hours, and aren’t forced to work when they don’t want.

Uber driver expenses

The key to success as an Uber Driver is remembering you are a business person. No one is taking care of you. You have control over revenue, and can manage your expenses. Your expenses are impacted by your car, where you drive, and you.

Here are a list of the expenses you have as an Uber Driver:

Taxes and Fees:

  • Taxes. Now that you are the boss, you have to pay both the individual’s and the employer’s portions of income taxes. The employer’s portion is an additional 7.65%. However, you can also manage deductions. I recommend using a mileage and expense tracking application.
  • Uber Fees. You also pay a fee to Uber for providing you with access to the marketplace. You pay a 20% commission, sales tax, and a $10 data fee for the ipHo.
  • Black Car Fund. This is an Injury Compensation Fund that provides Worker’s Compensation cover to Black Car operators in the State of New York. If you drive in New York State, Uber is required to charge drivers a 2.5% surcharge for people driving inside of New York State. Learn more.

Location.

  • Tolls. You are responsible for all tolls when a rider is not in your car. Plan your day to minimize tolls. Avoid tolls before you pick up a rider, and stay in areas until you have a rider going the other way. You won’t be able to eliminate tolls, but you can minimize their impact on your total earnings.
  • Dead Miles. These are the miles you drive without a passenger. They don’t help you earn money, and waste gas. Yet, I know people that drive an hour a day to where demand is highest — without a passenger. Get smart about your route. Don’t drive an hour without a passenger. Instead, pick someone up that is headed your direction – preferably to where demand is highest.

Your Car. 

  • Car Payments. Likely your biggest expense — manage it. Don’t rent a car weekly. People are paying $500 a week for a car. You can buy a really nice car for $400 to $500 a month.

Remember you are a business owner. The fewer expenses you have the more profit you take home. Do the work to find a nice car at a low price. You don’t need your dream car.

Next, get a great loan. Shop multiple banks. Let them know who you are talking with, and what rates you are being offered. Get them to compete.

If you can’t get a loan, find someone to cosign for you. It will help you build your credit. As a business owner you should be able to convince someone to cosign for you, or offer you a loan. Persuasion is an essential skill when you own a business.   

  • Car Insurance. Shopping for insurance sucks, but do the work. Talk with multiple brokers to find the best coverage. Work hard to keep your driving record clean — avoid speeding. And if you get ticketed go to all classes offered.

You might also want to consider Rideshare Insurance. This can cover the gaps in coverage between your personal liability insurance, and the coverage Uber provides. Uber provides up to $1million in libaility protection while you have passengers in your car. However, most personal policies don’t cover you while the Uber App is open and you are waiting for Riders. Allstate, Erie, USAA, Progressive, Farmers, MetLife, Metromile, and Geico provide Ridesharing Insurance at least in some states.

Rideshare Insurance is typically cheaper than Commercial Insurance. If you don’t qualify for Rideshare Insurance you will need to get Commercial Insurance. Remember that you are business owner. If your insurance costs are too high, you might need to pursue other options. Commercial policies for passenger cars typically cost between $1,200 and $2,400 per year, but can cost more.

  • Gas. Remember savings add up. Get a credit card with cash back, that way you get 1% to 2% back when you buy gas. Also, use retailers that can provide you with discounts on gas such as CostCo, Sam’s club, and some grocery stores. You won’t always be able to use these providers, but overtime the savings add up.

If you live near a CostCo, get the Executive Membership. It is $110 a year. You get 2% back on your CostCo purchases. Your membership is free if you spend only $5,500 at CostCo. This is pretty easy. $5,500 a year is only $105 a week. Use it to buy your groceries, gas, tires, car maintenance, and even your car.

  • Car Maintenance. Anything you don’t do yourself, the less profit you will make. Clean your car, and learn to do routine maintenance. Also, learn to source your own parts. The scrap yard is your friend. Unions and regulations have conditioned us to leave things to the experts. Remember you are a business owner — be resourceful and maximize your profits.

Most drivers get paid weekly, and their fares are deposited directly into their bank account. However, Uber is rolling out Instant Pay. This allows you to get paid quicker via debit card. If you use your own debit card there is a fee of $0.50 per cashout. There are no fees if you sign-up for a Uber Debit Card from GoBank.

Uber driver salary

Driving for Uber is the future of work. As a society, we like the ideal of secure full-time employment. However, that isn’t the future. Technology makes things more flexible; not less.

Uber’s innovation is surge pricing. Pricing rides based on demand, and paying drivers accordingly. Expecting Uber to be a full-time job denies the value of this innovation.

Surveys of driver earnings make it obvious that if you want to earn $25+ per hour, you need to optimize when you drive. Otherwise you might only make $10 to $15 an hour. Uber freely shares this information with you. They tell you exactly when you can make the most money — when your efforts will be best rewarded. With Uber information is symmetrically.

Uber provides jobs on demand. As a driver, you open the app when you want to work. You can work as much or as little as you want, and if you are willing to work when the demand is highest you will get rewarded.

Work on demand is an important innovation. It provides workers the same level of data-driven optimization that is being used by companies. Work on demand gives people the ability to use data and technology to make decisions about when and where they work.

Officially in the United States there are two classes of workers: 1099 contractors and W2 employees. However, in reality there are three classes:

  1. 1099 Contractors. These are individuals that provide services to more than one company, use their own equipment, and have the freedom to do all the work they can find. They do have to buy their own healthcare, don’t get paid vacation or sick days, and have to pay the 7.25% taxes for Social Security and Medicare that are typically paid by employers. (graph of 1099 Contractors in the United States over the last 20 years)
  2. Part-time W2 Employees. These individuals — while employees — are trapped in the 29-hour loop hole. Their wages are limited, because past 29 hours their employer has to pay for healthcare benefits. Second jobs aren’t a option, because of the flux of schedules from week-to-week, and having to be on-call waiting for the possibility of having to work. Workers are fired if unavailable while “on-call”, even though they aren’t receiving compensation. (graph of 1099 Contractors in the United States over the last 20 years, and Annual Hours Worked)
  3. Full-time W2 Employees. This is the ideal, but is inaccessible for most workers due to the skill premium. The skill premium is the premium paid to skilled workers, and has been increased by technology and globalization.

Technology’s nature is skill-biased. It requires skill to operate, and multiplies the returns to increases in skill. Simultaneously, technology reduces the number of low-skilled workers needed.

Screen Shot 2016-12-18 at 3.22.55 PM

Courtesy of BLS.gov

The Skill Premium has increased the amount that companies are willing to pay high-skilled workers, because they are more productive. Companies need fewer low and mid-skilled employees. The jobs that are left require high-levels of skill, and are focused on expanding the the firm’s unique competitive strength..

People want to argue that Uber should provide full-time W2 employment, but they fail to see reality. Technology has replaced the low and medium skilled jobs. Accelerated by the Great Recession, companies are using technology to automate work. Hardest hit are jobs in sales, administration, production, and operations. These were great full-time jobs, and they aren’t coming back.

An Aside The United State’s of Work in 2017.

  • Workers with less than a Bachelor’s Degree saw their real wages fall between 1980 and present day. Learn more.
  • People with a Bachelor’s degree out-earn high school grads by 70 to 80%. The Cost of Not Going to College is Increasing. Learn more.  
  • In 2015, 22 percent of men without a Bachelor’s degree between 21 and 30 had not worked at all during the prior 12 months. Learn more.
  • College remains a bad investment for roughly 70% of the population. While 60% of Americans have attended College, only 30% of Americans have Bachelor’s degrees. Loans don’t get refunded if you don’t graduate, yet there is little to no return for attendance. Learn more.

Uber is providing jobs to the people that are trapped working 29 hours a week. When thinking about the pros and cons of Uber we need to consider the 29 hour loophole, because it is the alternative.

Eighty-eight percent of taxi drivers in the US are independent contractors; most pay a rental fee of up to $125/day to the taxi owner, and only start to make money once they have paid off that fee each day.

The 29 hour loophole is when employers use sfotware to avoid paying for healthcare benefits, overtime, workers’ comp, and many other benefits that “Full-time employees” are entitled too.

Software allows employers to optimize schedules based on forecasted demand. With predictive analytics they know when demand is high. Just to make sure that they aren’t wrong, they keep “employees” on-call.

These data-driven schedules allow employers to make sure that each employee gets 29 hours, and no more. It allows them to maintain large workforces, while avoiding expensive benefits. For many working part-time is worse than being a 1099 contractor, because they told when to work, and the hours they can work a week are limited.

We can’t put the technology “genie” back in the bottle. Software will be used to optimize when people work. Our choice is between having it benefit both the workers and the company, or just the company. Uber’s use of software benefits for both employers and employees. They are embracing change, and taking the high road. Now people can work when and as much as they want to. They can balance time and money.

People don’t just consume money. They also consume time. Part-time W2 Employees are denied control of their time. We need to consider both time and money when evaluating compensation.

Uber and other work on demand apps are providing more opportunities for people to escape the trap of being part-time. They can:

  • Work as much as they want.
  • Avoid being on-call without getting paid
  • Work multiple jobs
  • Optimize their earnings

Working on demand, allows people a better alternative. For example, parents can choose to make it home everyday to greet their kids from school, have family dinner, or read bedtime stories. This is better than many alternatives for less educated low skilled workers. With on-demand work, people don’t get to do everything they want, but they will have control to optimize their time and money.

Flexible work used to be only accessible to the privileged few. High skilled executives, artists, and technologists could work when they wanted, and spend the rest of their consuming entertainment. They worked when the price was right, the work was interesting, or both. It allowed them to hold out for the right full-time career, and gave them time to hone their skills.

Most people didn’t have access to this project based work. To get work, people had to know you and your work. Social standing was how you got matched with the right work. Today, software does this for millions of people. Now everyone can get matched with the right people and the right projects.

Kevin Kelly — founder of Wired — envisions a future where technology enables everyone to work like Alan Greenspan, Warren Buffett, and Frank Lloyd Wright. He argues that working on demand will make our lives better, and allow society to quickly respond to change.

He outlines his vision in the Inevitable. He describes a lightweight future, where people:

    • Subscribe to their lifestyles. We are already seeing this with subscription services such as Blue Apron, Trunk Club, and We Live.
    • Work on Projects. He sees a proliferation of studio style work: where people come together for a project and then disband once the project is complete. Today, this style of work is popular among creatives and technologists, but isn’t yet mainstream.  
    • Co-Working. Offices will bring people together by shared interests, not shared employers. This facilitates learning, and self-organization around projects. We are already seeing this with We Work, and other co-working spaces.

Kevin Kelly’s vision is specific to technologists and professionals, and I disagree with some of his arguments. However, it provides a useful framework for how society can respond to rapid change.

The rate of change is increasing. This means that the world isn’t just changing, but changing faster. New technology makes it easier to create new technology. For example, developing software is 2000 to 3000% quicker than it was 10 years ago.  

It used to be that our standard of living didn’t change from generation to generation. What our parents taught us, would prepare us for the rest of our lives. We could expect to live like they did. Eventually progress reached the point, where each generation was different from the next. Now, we are entering a period where each decade requires different skills and knowledge. Soon we will reach a period of continual learning, and finally things will reach a speed where we will never be able to catch up.

Contained in the speed is hope for a brighter future. We adopt technology because it makes the future better in the long-run. However, change — even positive — isn’t without pain.

We are entering a period of great change, and pain. This is being driven by a culture focused on things never imagined. Things that science fiction writers got wrong. They thought we would create new gadgets for each task, and that these gadgets would improve our lives — incrementally.

Instead we have a society that is post-materialistic, only invests in things that are 10x’s better than previous versions, have managers focused on building billion dollar ideas, and customers that expect products, service, and sales at scale.

Post Material. Things are still important, and we are still surrounded by things. What Post Material means is that the majority of what we do, get value from, are beyond our physical things. Today, what matters most are on our screens — they are electrons and light. Even in manufacturing we work with representations of things, not the things themselves.

10X Improvements. Each version of a product is 100 to 200% better than previous versions. New products are expected to be 10x better than existing products. This isn’t slowing down, because as technology improves it makes easier to build new technology. That means that things can improve, while effort stays consistent.

Scale. Efficiency isn’t just for companies looking to increase profits, customers demand it as well. We don’t want to wait in line, on hold, or to be served. We demand consistent and delightful experiences. Customer expectations are driving automation.

Modern companies build automation into everything they do. It allows them to provide consistent and great experiences. It allows them to focus resources on improving systems, and creating new ones. This has eliminated many differences between small and large companies.  

Billion Dollar Ideas — At many Silicon Valley companies, product managers are instructed to only focus on ideas if they can result in a billion dollars in new market capital. This is not a framework that many of us have.  

Our society wasn’t built to handle these ideas. Our society’s values are based on stability — not creation. That what you learn in college will be valued your entire career, that your earning power will never decline, and you don’t need to move to find work.

These values allow us to justify:

    • Student Loans. In 2016, Americans’ had $1.26 trillion in Student Loans, and the Average U.S. Household had $48,591. That is more than the $769 billion in credit card debt, and the $1.1 trillion in Auto loans. Learn more.  
    • Geographic Immobility. One in 15 of us used to move counties every year, now it’s about 1 in 30. We aren’t moving to find work — Americans have lost their frontier spirit. Learn more.

In today’s unstable environment, these things are create a lot of pain. Instead we need to shift our cultural values to lightweight living. This means that we need to avoid long-term debt, and focus on project-based learning. Making sure that we are constantly learning new skill.

In conclusion, Uber helps make society more flexible, and makes change less painful. You probably don’t want to drive for Uber full-time, but it is a great way to earn money between projects.

Uber and work on demand give us what we want. We don’t want to be tied to our desks and schedules. We want to be free to work, vacation, and care for our families when we want. Software will gives us what we want, because software makes things more flexible.

At work rigidity is caused by high transaction costs. Transaction costs are why we only work for one employer. It is what keeps us working for a boss that we don’t like. It is what keeps our manager from firing a bad or underperforming employee. Each time we change jobs, or hire new employees we have to invest time and money, and incur the risk that we will make a bad choice.

If you liked this article, you should read “Welcome to 2030. I own nothing, have no privacy, and life has never been better”.