To surge and flex: finally, a proper look at Uber and the gig economy

Finally! Some proper information on the gig economy and who is in it. This has been an enormous, embarrassing national blind spot. The big problem with the gig economy — okay, one of the big problems — is we know next to nothing about it. It’s a slippery thing — and what makes it even more like holding onto a thrashing barramundi while standing in a tiny dinghy is the nation’s slow-moving statistical agencies have not bothered to measure it.

Do Uber drivers make $10 an hour? $50 an hour? Are they working two jobs at the same time? Do they feel exploited? Do they stick around for years? We had our hunches but we weren’t sure, until now.

How are you going to try to make effective labour market laws that protect workers if you don’t know who they are, where they’re working, or how much they’re making, etc? You can’t. But now, into the breach, step a team of heroes. A huge detailed academic study on Uber drivers was published in the latest Australian Economic Review. It has four authors:

• Andrew Charlton, Kevin Rudd’s old economic adviser. He started a really good economics consultancy which got bought out by Accenture
• Jeff Borland, my old economics lecturer and the best labour market economist in the country
• Oliver Alexander, junior guy who works for the consultancy that got bought out by Accenture (who realistically probably did 90% of the work)
• Amit Singh, senior guy who works for the same consultancy (and probably made Oliver Alexander do some really late nights in the office).

They looked at 11,000 Uber drivers, which is one in eight of all the Uber drivers who were working in the study period, over 2017-2018. 

Money money money?

The most shocking finding is how bad the pay is. Uber drivers made $29.46 for every hour they were online. That might seem okay if you forget that they have to bring their own wheels. The study calculates the cost of driving at $8.46 an hour, including “GST, fuel, maintenance, vehicle depreciation and the additional cost for comprehensive insurance for Uber drivers”. 

What’s left is a paltry $21 an hour — below the award for the lowest grade of passenger vehicle driver, which is $21.93 an hour, and very close to the minimum wage of $20.33 per hour for any worker not covered by an award. The average hourly earnings of casual workers in the road and rail industry is $26.82 an hour. 

Uber is clearly less rewarding financially than these other jobs. The fact Uber can compete at these wages hints that there are probably a lot of other jobs out there also not paying the award. It’s convenient for our political classes to ignore these jobs I suspect — conservatives because doing so helps business; Labor because their constituency is union-members, which these workers aren’t.

Nice flex

Uber is not all penury and exploitation. One thing drivers get is flexibility. They can start when they want, finish when they want. Uber drivers exploit this flexibility mercilessly.

Drivers who usually work only zero to nine hours a week of Uber? They sometimes throw in a week doing 20-34 hours. Meanwhile drivers who usually do 45 hours a week on Uber sometimes do a week of zero to nine hours. Drivers also vary their times of working. Some weeks they might drive in the daytime, other weeks not in the daytime at all. This is perhaps the way in which Uber driving differs most from most jobs. 

It is the love of flexibility that determines whether people like driving for Uber. Job satisfaction for Uber drivers who like flexibility was substantially higher than for the drivers who wish it was more like a regular job. They scored eight on an 11-point scale, compared to around six to six and a half for the group who wanted stability. (Satisfaction with pay, however, was about a five to six on the 11-point scale for all groups.)

Degrees of separation

Half of all Uber drivers have another job at the same time, while 11% are studying and 18% are looking for a job. Often the Uber driver is more highly qualified than their passengers, the study reveals:

“Almost 50% of Uber drivers have a bachelor’s degree or above as their highest education attainment, compared to just over 30% for all employed persons and 25% for automobile drivers.”

What can Uber drivers do to make more money?

Working Friday and Saturday nights is the best way for drivers to make money. Drivers who did 10% of their hours on weekend evenings made 5% more money than drivers who only worked weekday daytimes. Drivers pulling up outside pubs and clubs on Saturday night get more fares and bigger fares (they are also probably most likely to get vomit on their upholstery).

Uber uses a system called surge pricing, where prices rise when demand is highest. Drivers who do 10% of their hours during surge pricing make 7.2% more money than those who do no driving during surge pricing. 

The other trick for making money from Uber is sticking around. About half of all drivers drop off within the first six months, but the higher the number of weeks worked on the platform the more money drivers make. The explanation is that it takes drivers time to learn Uber’s algorithm as well as the geography of their city — especially knowing where to lurk to win the best fares.

The future of the gig economy

Will Labor take on the gig economy if it wins power? Their small target strategy is not in fact so small in this topic. They plan to give the Fair Work Commission power over the gig economy, which would go a long way to making gig economy work more like being an employee.

The economic and political conditions have probably never been better for this kind of policy shift, because unemployment is at multi-decade lows, underemployment is the lowest it has been in eight years, and the number of migrant workers in the economy is at a very low ebb. Such a change would be much harder to make in an environment of high unemployment. What’s more, this study permits Labor to make the changes with at least some knowledge of who is in the gig economy, what they are regulating, and what might happen next. 

Changing the rules around the gig economy would of course make the findings of this study obsolete. I look forward to bringing you the results of a follow-up survey in a few years time.