It seems like these days everyone wants to be their own boss. The Internet age has made working from your computer, or even working from your phone possible for a growing legion of independent contractors, small business owners, and other workers. The sharing economy, which Investopedia defines as, “an economic model in which individuals are able to borrow or rent assets owned by someone else,” has helped to push these online platforms into the forefront, and many of the companies participating only continue to grow in popularity. As a result, companies like Uber, Lyft, Etsy, and Airbnb are practically household names.
But lately many of these sharing-economy, on-demand platforms have been taking some heat for their business models, as well as their insistence that their workers are making decent wages from their work when in reality, it remains unclear whether it’s even feasible for anyone to make a living off of these platforms.
Uber is perhaps one of the worst offenders (it’s certainly received the most press). One of the most widely cited complaints is the fact that in 2014, the company reported that the average driver working for Uber made $90,000 a year, an astonishingly high salary for anyone let alone a cab driver (independent contractor or not). At the time, The Washington Post, which reported the story, lauded the company for promising to end the era of the poorly paid cab driver, and the company itself touted its drivers as “small business entrepreneurs,” per Slate in 2014.
Smaller earnings than Uber reported
Regardless of whether or not drivers were ever able to make $90,000 salaries, one thing seems pretty clear: that’s no longer the case. The company’s January price cuts made headlines and resulted in both criticism in the media as well as from its own drivers, many of whom took to protesting the policy change.
But even after criticism of the app came to the forefront, Uber continued to maintain that its drivers were well-paid. In response to a Business Insider piece which revealed what most drivers actually make, the company simply commented that “drivers on the app for a full hour can earn an average of $25.29 per hour,” commentary which frankly sounds more like a line from a promotional video than a response to criticism.
Uber is a formidable foe for the discontented drivers that have retaliated since the company’s price cuts took hold; the company currently reigns king of the ride-sharing model. As of 2014, the company operates in 45 countries and 100 cities around the world, servicing millions of customers and employing hundreds of thousands of drivers.
Jason Fragoulis, an Uber driver who was interviewed by Business Insider in New York, says that much of the struggles facing drivers has to do with the recent price cuts, though from his perspective it seems the $90,000 figure was steep even before Uber lowered fares. “Before the price cuts, if you did 14 trips with a few airport calls sprinkled in you could make between $350 and $400 in a day before Uber takes their 20% cut,” Fragoulias said, though he notes that “you also have to take into account your daily fuel costs, car payments, commercial insurance and registration, and maintenance costs. With the new cuts you will be lucky to get $250 and $300. The cuts have cut into our operating expenses. With the money I earn I can apply for food stamps and that is no joke.”
Uber isn’t the only online platform whose workers make miserly wages, however. According to Forbes, “56% of people who work in the on-demand economy through online platforms report total earnings of $40,000 or less.” In comparison, 46% of independent workers who do not participate in the on-demand economy fall into the same income range.
While it’s tempting to criticize Uber, Lyft and other platforms for their lack of integrity, it’s worth noting that individuals attempting to utilize these platforms as their sole source of income are in the minority. Instead, most people working in the on-demand online sphere are simply trying to make a little extra money. Many see their work through these platforms as simply a safeguard, or a way of funding a hobby they would be doing anyway (such as with many Etsy sellers). According to Forbes, 83% of respondents said they work part-time on the platforms, not full-time, and 68% view it as a source of extra money.
Gene Zaino, president and CEO of MBO Partners, who spoke with Forbes, says that he doesn’t see why anyone would expect to make money from online social platforms like Uber. Those who want to make their livelihood off of these kinds of platforms, he said, “are not going to make any real money. You are competing with people willing to work for prices that are very, very low.”
“They do it almost socially,” Zaino adds, of the people online platforms like Uber employ. “They meet people. They talk. They learn. It’s become a social experience as well as it is an income-producing capability.” Zaino added that working for social online platforms such as Etsy or Airbnb offers something that was previously difficult to achieve: a safe training ground for potential small businesses that doesn’t require quitting your day job, as well as a kind of insurance policy if, for whatever reason, your main source of income goes down the tubes. There’s a kind of security in establishing an independent income stream, in other words, no matter how small.
Not meant for full-time status
Though this idea that Uber was only meant to be a flexible source of part-time income is convenient, it’s also at issue with the way Uber’s own recruitment website promotes the platform. In an effort to recruit new drivers, the company boasts that with Uber you can “set your own schedule, so you can be there for all of life’s most important moments,” an image that seems at odds with what many are touting as a kind of after-hours gig. Further down its recruitment page, the company is more explicit, claiming that driving for Uber can suit a multitude of needs, from “supporting a family to saving for something big.”
The problem with Uber and the myriad of other platforms like it, then, isn’t so much that they exist, or that they don’t pay well, but that they are not being honest. Hopeful new recruits might expect to make a fairly comfortable living on their own schedule, when in reality, they ought to have only expected a little extra pocket change and some added miles on their cars.
In a sense, the issue with these platforms is because we still don’t quite understand how independent contractors should fit in to the overall landscape of workers out there. They don’t have the rights that “normal” workers do, nor the benefits, yet for better or worse, their numbers are growing. Further, with on-demand platforms continuing to gain in popularity, it’s likely that this particular tension with Uber is only the beginning.