Drivers and people thinking about giving rideshare driving a try might see the referenced article headline: “The Uber/Lyft Ballot Initiative Guarantees only $5.64 an Hour” and be concerned that the present and future Uber driver employment status is less than positive.
In September of 2019 the California governor signed California Assembly Bill 5 (AB5) and it became part of labor law in California. AB5’s goal is to make it more difficult for companies to classify workers as independent contractors however AB5 does not specifically say anything about the rideshare driving industry.
After AB5 was passed a spokesman for Uber’s legal department made clear that Uber will not make any changes to their business model in California in response to AB5.
Here’s the statement from Uber on potential changes to Uber driver employment status:
"Contrary to some of the rhetoric we’ve heard, AB5 does not automatically reclassify any rideshare drivers from independent contractors to employees. AB5 does not provide drivers with benefits, nor does it give drivers the right to organize. In fact, the bill currently says nothing about rideshare drivers."
Uber, Lyft, and Doordash teamed up to write a California ballot initiative counter-proposal to AB5 known as the “App-Based Drivers and Services” ballot initiative.
The ballot initiative is meant to be a compromise… drivers would remain independent contractors but would gain a guaranteed minimum wage and benefits not currently part of the rideshare driving “gig.”
At some point in the future California voters will have opportunity to choose to vote the ballot initiative into California labor law.
Obviously AB5 and the new ballot initiative are important for California drivers to understand… drivers in other parts of the United States should understand the contents of the ballot initiative because it provides insight into Uber, Lyft, and Doordash’s thinking about stabilizing average hourly pay and the potential for modifying Uber driver employment status.
I’m not going to give a step-by-step analysis of the referenced article in this blog post because this article, with it’s scary-sounding headline, is another example of an opinion piece posing as a “news” article and since the article references some research done by Berkley University and presents step-by-step math how they arrived at the $5.64 per hour number it sounds credible.
I will spend most of my energy for this blog looking at the contents of the “App-Based Drivers and Services” ballot initiative.
Before we get to the ballot initiative let’s take a quick look at the contents of the referenced article, the “nut” of which is communicated in this quote:
“… we estimate that the pay guarantee for Uber and Lyft drivers is actually the equivalent of a wage of $5.64 per hour.”
The article says there are “five loopholes” in the joint Uber/Lyft/Doordash California ballot initiative but near the end of the article there is an important to understand quote:
“We have used the best available data to analyze the effects on the pay of TNC drivers. However, the companies [Uber/Lyft/Doordash] have refused to make their own data public. For a complete analysis, the state needs much more data from the companies, including detailed data on wait times, hours worked, and earnings.”
Well there it is… “best available data” which was not provided or obtained from Uber, Lyft, or Doordash – which is exactly why I’m not going to spend a lot of time and energy providing a counterpoint to the “five loopholes” the article and Berkley study used to calculate $5.64 per hour from the ballot initiative’s guaranteed 120% of minimum wage and payment for vehicle expenses.
Gig Economy Companies Do Not Share Business Data
First understand that gig economy companies do not willingly share detailed data claiming that the data is “proprietary information.”
This is true because analyzing actual data from (as example) Uber for all passenger trips completed in San Francisco in 2018 would give Uber’s competitor Lyft invaluable information on how to compete effectively against Uber in San Francisco.
In the Information Age this kind of data is “gold” and I don’t blame any gig economy company for keeping their extremely valuable data in-house. Unfortunately, this also means it is challenging to write meaningful news articles (or blogs) about the rideshare driving industry and what the average rideshare driver actually earns.
Without meaningful data (actual completed passenger trip history covering a significant period of time) the mostly negative articles we see in the news, (including the one referenced for this blog post) are without question the author’s opinion which has to be based on anecdotes (drivers stories) and calculations have to use math that is “fuzzy” because there is frankly a whole lot of guessing required.
So again, I’m not going to spend the effort to dig deeply into the referenced article but will provide a high-level analysis for some of the article’s content.
Driver Waiting Time
In the first “loophole” the referenced article states:
“The companies would not pay for the approximately 33 percent of the time that drivers are waiting between passengers or returning from trips to outlying areas.”
And:
“Not paying for that time would be the equivalent of a fast food restaurant or retail store saying they will only pay the cashier when a customer is at the counter. We have labor and employment laws precisely to protect workers from that kind of exploitation.”
Berkley’s research using “the best data available” suggests that all drivers spend on average 33% or 1/3 of their time idle between trip passenger trip requests.
It would take a lot of work for me to keep track of my “waiting” time over a long enough period to have a relatively useful dataset and even then, a dataset showing the experiences of one driver has limited value toward understanding the experiences of an average rideshare driver.
I believe in the past two or more years it’s very rare I’m waiting more than a few minutes between trips and common that I’m going seamlessly from one trip to the next trip for hours at a time. This is especially true after 4 p.m. weekdays and throughout the day during the weekends.
That’s my story, my anecdote, so it would be irresponsible for me to suggest that my perceived experience driving in Denver, Colorado would be true for other drivers… even other drivers in Denver.
But let’s think about what the referenced article is saying is the first “loophole” in the California ballot initiative… that it does not provide for any pay or vehicle expense reimbursement when a driver is between trips… and comparing this to a retail or fast food job the article is saying this would not be fair to rideshare drivers.
I agree it would be arguably not fair for an employee-driver to be paid for anything less than all of their work time… but for an independent contractor-driver I’d argue that it wouldn’t be “fair” to force Uber, Lyft, etc. to pay drivers for doing nothing… more importantly when drivers are not generating any revenue.
For a deeper dive into understanding an employee-driver vs. independent contractor-driver check out my blog post: Do Lyft and Uber Drivers Own a Business?
Just a few years ago I was a part-time cashier at a big box retail store and when I didn’t have customer orders to ring-up my supervisor assigned busy work to fill my time. At a minimum I was expected to be standing in front of my line, smiling and looking for the next customer ready to checkout and pay for their purchases.
It’s been a long time since I’ve worked in food service but as a full-time hours rideshare driver I eat at a lot of fast food restaurants - it is easy to see that in a well-run fast food restaurant when there are not customers at the ordering counter, cashiers are sweeping, mopping, cleaning, taking out the trash, etc.
The point is when a company pays a guaranteed hourly wage it is likely they will find “busy work” to fill a worker’s time… we’ve all seen this phrase on a job description: “Other duties as directed…”
The TNCs (transportation network company) can’t assign idle drivers meaningful “busy work” and they are never going to agree to pay drivers for sitting empty… they could someday be forced to by law… but will never willingly offer to pay drivers for doing nothing… more specifically the TNCs are never going to pay drivers when they are not actively generating revenue without making massive changes in what it means to be a rideshare driver.
This point is key to understanding why with the current 100% freedom drivers have in the gig economy, drivers are not employees, they are definitely independent contractors. If rideshare drivers ever become employees with guaranteed pay for every minute they are working, there will be drastic changes… most importantly drivers will have limited ability to choose when they work.
That’s what it means to be an employee, right? Employees are scheduled to work when the company guaranteeing they are paid for every minute they are on the clock want them to work.
Vehicle Expense Reimbursement
In the referenced article’s “loophole” number two:
“Multiplying the Internal Revenue Service mileage reimbursement rate of 58 cents a mile…”
The IRS vehicle mileage deduction is exactly that… a deduction. It is not meant to define how much it costs for the average driver to own and operate a vehicle.
Using the step-by-step math presented in my book Driving for Uber and Lyft - How Much Can Drivers Earn? I know that my approximate cost for owning and operating my 2006 Toyota Prius that currently has almost 300,000 miles on the odometer is $0.25 cents per mile.
It is without a doubt possible to have a rideshare driving vehicle that costs more than $0.58 cents a mile to own and operate but for most drivers the number will not be this high.
In the California ballot initiative, the expenses reimbursement number is $0.30 per “engaged” mile which more than covers my Toyota Prius purchased used with 98,000 miles on the odometer.
Using the step-by-step math in Driving for Uber and Lyft - How Much Can Drivers Earn? the estimated expenses for my Prius were less (about $0.18 cents per mile) when my Prius had less miles on the odometer.
Now with almost 300,000 miles on the odometer I’m more likely to have expensive repairs which is why my number is now approximately $0.25 cents per mile.
The point is $0.30 per mile is probably a reasonable average for a driver making logical business choices about the vehicle they use for rideshare driving.
“App-Based Drivers and Services” Ballot Initiative
For the rest of this blog we’ll be digging into the contents of the proposed California ballot initiative because as I said at the beginning of this blog post I want to understand Uber, Lyft, and Doordash’s thinking how they would improve the pay and benefits afforded to gig economy drivers.
Feel free to read the referenced article’s three other “loopholes” remembering that the point of the article is to argue that the California ballot initiative is unfair for drivers. To believe the initiative’s proposed changes are unfair you have to believe that rideshare drivers should be traditional employees not independent contractors.
Read the full contents of the “App-Based Drivers and Services” ballot initiative for details.
This quote from the initiative summarizes the contents … the initiative has five key points:
“These benefits and protections include a [1] healthcare subsidy consistent with the average contributions required under the Affordable Care Act (ACA); [2] a new minimum earnings guarantee tied to one hundred twenty percent (120%) of minimum wage with no maximum; [3] compensation for vehicle expenses; [4] occupational accident insurance to cover on-the-job injuries; and [5] protection against discrimination and sexual harassment.”
Let’s start with the initiative’s contents on earnings, people who follow my blog and other writings know that I always stress this reality:
As a rideshare driver what matters most is earnings, everything else is secondary. If drivers didn’t need/want income they would not be transporting passengers in their personal vehicles.
I provided a link to the full text of the initiative, for this blog I will be pulling out the most important points and restating them in plain English text for easier understanding.
Ballot Initiative Important Points
- Guaranteed earnings will be calculated over each “earnings period” (or pay period currently 7 days long)
This means the guaranteed earnings will be averaged over each pay period or as defined in the initiative each “earnings period.”
It makes sense to average a driver’s earnings out over a period of time because on a long trip a driver will earn more for their time compared to a series of short trips.
A driver might earn over $35 during one hour of a rideshare driving shift then less than $10 the next hour. The average earnings for this two-hour example is $22.50 per hour.
- The “earnings floor” (guaranteed earnings per hour) does not mean drivers cannot earn more than the guaranteed amount
This point made me happy, I’ve been concerned that if the TNCs are forced by government regulations to pay a guaranteed hourly wage that number might be the most a driver could earn per hour of their time.
Two days last week I worked 8-hour shifts and averaged over $35 per hour for the entire shift. I would not like losing out on great earnings days because my hourly earnings was capped by government regulations.
- If a driver earns less that the “earnings floor” during each “earnings period” the TNC will make up the difference
For example, if a driver worked 20 hours during an “earnings period” and the “earnings floor” guaranteed they would earn at least $312 for 20 hours the TNC will add the appropriate amount to the driver’s pay for the “earnings period” to bring the driver’s total pay up to the “earnings floor” amount.
- Drivers will received in full any tips/gratuities passengers pay through the TNC application
Wouldn’t think this one would have to be spelled out but given what we learned recently with Doordash drivers tips being used to supplement Doordash pay guarantees the ballot initiative makes it very clear drivers will receive in full all tips paid by passengers.
- “Earnings floor” is defined as drivers earning at least 120% of the state or city mandated minimum wage for workers
Some California cities have minimum wages higher that the state’s minimum wage number, drivers will receive at least 120% of the highest guarantee minimum in the city where they do most of their driving.
- “Net earnings” is also defined, let’s look at the quote from the initiative:
“Net earnings means all earnings received by an app-based driver in an earnings period… [it] does not include gratuities, tolls, cleaning fees, airport fees, or other customer pass-throughs… the amount [net earnings] may include incentives or other bonuses.”
Okay really not as “slippery” as it might sound on first read… it’s saying a driver’s guaranteed earnings, “earnings floor”, might include pay earned through driver incentives or bonus offers.
In other words, the incentive and bonuses earnings are included in the total a driver earned during an “earnings period” and would not be payment over and above the guaranteed earnings.
To be really clear, this means incentives and bonuses would not be paid in addition to the guaranteed 120% of the local minimum wage they would instead be included in the driver’s “net earnings” for the “earning period.”
As we saw earlier it is possible for a driver to earn more than the “earnings floor” during a pay period and with independent contractor drivers (free to work when/where they want) incentives and bonus meant to motivate drivers to (as example) complete more passenger trips or drive at specific days/times will continue to be important.
- Drivers will receive $0.30 cents per “engaged mile” for expenses on top of the guaranteed 120% of the local minimum wage
“Engaged mile” means mileage from the point where a driver accepts a passenger trip request to the point where the driver delivers the passenger to their destination.
As I said earlier the TNCs are never going to willing pay drivers anything for sitting empty or driving to a spot where the driver thinks they might get their next passenger trip request. This will frustrate some active drivers who complain about trips that take them far from “the action” or their individual home base.
A couple of months ago I took passengers from Denver International Airport to Avon, Colorado home of the Beaver Creek ski resort. The trip was over 100 miles and because of what we call “weekend warrior” traffic (people going to the mountains for the weekend) the trip took over three hours.
When I dropped the passengers at their destination, I was over two hours from the outskirts of Denver which meant driving empty back toward the city and not earning any additional income.
If I were covered by something similar to the California ballot initiative, I would still not receive any income for my time or mileage on the return trip.
I have no problem with this scenario because I earned $136 for 5-6 hours of my time (these passengers did not tip me… “rich” people are rarely good tippers) and put about 225 miles on my Prius.
My net income for the trip (after estimated expenses) was $15-$16 per hour (similar to what I earn staying in the Denver metro area) and even though I wasn’t surprised to receive no tip from the obviously financially well-off couple a long trip like this one usually comes with a nice tip.
I’ll probably say “yes” to the next long trip request even though it’s always my right as an independent contractor driver to say “no” for any reason except the legal definition of discrimination.
On the way back to Denver I thought about the trip and realized that in almost 14,000 lifetime trips I’ve taken people up to the mountains maybe 6 times… it is always my goal to not get caught up thinking negatively about things that rarely happen.
Moving on now to the ballot initiative’s proposal for “Benefits” and reminding you that the value of digging into this California initiative is it gives us insights into gig economy leaders Uber, Lyft, and Doordash thinking about possible changes in Uber driver employment status.
- “Healthcare Subsidy” tided to provisions in the ACA (Affordable Care Act)
This language in this section of the initiative is very complicated, no surprise given it’s talking about a health insurance benefit.
My belief is it’s unlikely the “healthcare subsidy” will add up to much in an environment where really “good” employer-subsidized health insurance typically comes with an annual deductible over $5,000 and I’m hearing from my friends still working full-time in the tech industry an annual deductible as high as $10,000 is not unheard of…
The deductible with “good” employer-subsidized health insurance coverage means the first $5,000 or more comes out of the employee’s pocket.
It’s very unlikely the healthcare benefit in the proposed California ballot initiative, called “Healthcare Subsidy”, will add up to anything meaningful for part-time hours rideshare drivers and likely not much for full-time drivers either.
When talking about Uber driver employment status and related issues, healthcare coverage is a “lightning rod” and it make sense the ballot initiative covers this point even though the actual benefit is not anything to get excited about.
- Insurance coverage in the case of a driver being injured while on the job
Again, the language in this section of the initiative is very complicated, (I provided a link feel free to read it for yourself) but providing the addition of what is essentially workman’s compensation insurance would be a welcome and very important benefit.
The Future and Uber Driver Employment Status
In summary for this blog the California ballot initiative sponsored and funded jointly by Uber, Lyft, and Doordash gives us some insight into what may be coming in the future for all gig economy drivers in all parts of the United States and possibly other parts of the world.
I’d caution active drivers and people thinking about being a rideshare driver or gig economy delivery driver against waiting for government regulations to appear to be improving the earnings and “job” benefits of what can be a really good way to supplement your income without over-scheduling your life.
My advice is to focus on the here and now… rideshare driving can be an excellent way to supplement your income and for some people be your primary income but expecting government regulations and/or ballot initiatives to turn rideshare driving into a “sure thing” is not a productive way to think.
With respect to drivers (including myself) rideshare driving is not a high-skills job… the primary skill required is the ability to drive a car something almost every adult in the United States can do now.
Expecting pay and benefits for being a rideshare driver similar to what a software developer, nurse, medical assistance, or other work that requires specific skill sets not possessed by almost everyone is a sure path to frustration.
In my book How to Be a Lyft and Uber Driver – The Unofficial Driver’s Manual I’ve detailed how to maximize income and minimize (or eliminate) stress.
My goal with this book is to arm a new or existing driver with the knowledge of a driver with over 2,500 lifetime trips which as reported by Stanford University means increased income of at least 14%. (The Stanford University study had access to data provided by Uber.)
How to Be a Lyft and Uber Driver – The Unofficial Driver’s Manual is the perfect guide for now and the future… the way driver’s earn changes over time and this book will help every driver make the best choices for every situation now and well into the future regardless of how Uber changes driver employment status.