08 Mar Subsidising Billionaires: Uber’s business model relies on underpaying drivers
Analysis from Uber in Australia has shown that the company’s business model is dependent on underpaying its drivers.
According to analysis by the Centre for Future Work in Australia called ‘Subsidising Billionaires’, UberX drivers earn well below minimum wage once all the hidden costs are taken into account.
They say that Uber’s cheaper fares are made possible because the company is significantly underpaying its drivers.
Australians earn $12.62 per hour on average driving for the ridesharing company’s most popular and low-cost service, UberX, the report estimated. This rose to more than $18 for those driving in Sydney and Canberra and dropped to under $11 for those in Perth. The numbers were based on gross revenues generated by a typical urban fare (traveling 10km and taking 18 minutes to complete) according to UberX’s published rate schedule.
According to the calculations by the think tank, after deducting Uber’s various fees, net taxes, and the costs of providing and maintaining the vehicle, the driver is left with an average of just $8.29 from that fare (barely one-third of the gross revenue they collect).
The statutory minimum wage in Australia is $18.29 an hour and the average wage for workers in the sector averages at about $30 an hour for those working under Australia’s Passenger Vehicle Transportation Award.
In their opinion, the underpayment of UberX drivers in Australia constitutes a subsidy paid by them to the company amounting to hundreds of millions of dollars per year; and this underpayment of drivers (in Australia and elsewhere) has been essential to the dramatic expansion of Uber’s market value (most recently estimated at almost $50 billion U.S.).
“The low incomes of their drivers are essential to the escalation of Uber’s market value that has made some people fabulously rich,” he said. “The company dresses this up as flexibility but the money is so bad and uncertain that it’s only in an environment that people are desperate that this model can work.”
The cost of regular taxis are on average about 40% higher than UberX fares.
Stanford, who is the Centre for Future Work’s director, said in addition to the low hourly pay, drivers miss out on other protections and entitlements such as superannuation, workers’ compensation and leave entitlements.
“Drivers know this and the smart ones log on at the right times, in the right areas, and earn the big bucks.”
CEO of zoom.taxi Matthew Kendall said this attitude “underlines the callous attitude Uber has towards its drivers which is more akin to a 19th century mill owner than a 21st century company.”
“Saying that drivers should play the market not only shows its opinions of passengers who use the company but completely undermines the flexibility which many people operating in the gig economy need.