Many people in the United States get paid to drive others in buses, shuttles, limousines, taxis, and, increasingly, their own cars. In just the taxi and limousine industries, more than 300,000 people in the United States worked as drivers in 2012.1 Among the transportation network companies (TNCs), more than 160,000 people in the United States drove cars for Uber alone in 2015 (Hall and Krueger 2015).2 Much of the discussion of ride services in this chapter focuses on Uber, partly because it is the largest TNC, but mainly because there are almost no publicly available data on other similar ride service companies. The discussion addresses earnings, benefits, and payment practices for for-hire drivers, along with the shift in for-hire drivers from predominantly full-time work with taxi services to predominantly part-time work with TNCs.3 Job security and the potential for unionization are also concerns facing drivers, and are addressed as well. The scope of the discussion is limited to taxi and TNC drivers; employment issues related to carsharing, bikesharing, and microtransit are not included.
1 Data from the U.S. Census Bureau’s American Community Survey for the years 2006 to 2010 (data are published for a 5-year average). The census definition includes workers who “drive automobiles, vans, or limousines to transport passengers” and thus is broadly consistent with the industry classification for taxi and limousine services.
2 No data on the number of people driving for other TNCs were available for this study.
3 The census data on taxi and livery driver compensation discussed in this chapter represent earned income that includes tips less such driver expenses as gasoline and lease costs, enabling a direct comparison with TNC drivers’ earned incomes, which may rely less than those of taxi drivers on tips as part of compensation (U.S. Department of Labor 2015).
Labor issues common to driving for hire include pay, benefits and job security, and safety from crime. Pay is generally the foremost issue, whether in the context of traditional cab driving or the new technology-enabled ride services. People who lack a high school diploma or whose English language skills may exclude them from other employment opportunities can often find a job driving a cab.4 (Many drivers, of course, are well educated and fluent in English.) Cab driving also provides relatively easy entry into paid work and can offer the flexibility to enter, leave, and return if desired. The job is typically flexible; drivers can work a few days a week or full-time. They also can generally leave the job at will for extended periods—for example, for a visit to their home country—albeit without pay or benefits, and upon their return can usually find work again. Given the high turnover in the industry, drivers are rarely subject to layoffs in a recession.
Nationally, taxi drivers and chauffeurs working full-time averaged $31,471 in earned income in 2007–2011, or $12.85 an hour.5 Earnings for cab drivers were comparable to those for butchers, laborers, janitors, stock clerks, shipping clerks, and medical assistants. Taxi and limousine drivers rarely have health insurance or other employee benefits, however; this reduces their relative total compensation to the extent that those other jobs include benefits.
Incomes vary substantially, even among full-time cab drivers. The upper quartile of full-time drivers earned $65,427 in 2007–2011, while the bottom quartile earned $11,659. This range is attributable in part to variations among geographic markets. But driver earnings vary considerably even within a market, based in part on driver skill, know-how, and hustle. This variation is illustrated in a report on the Chicago taxi
4 Forty-four percent of taxi and limousine drivers are foreign-born according to the U.S. Census Bureau’s American Community Survey for November 2007, the most recent data available. Among full-time drivers, the percentage foreign-born rises to 53 percent. In New York City, Chicago, and Los Angeles, 65 percent or more of full-time drivers are foreign-born (U.S. Census and American Community Survey 2015).
5 Earnings are for drivers who work full-time, defined as working at least 40 hours a week and 40 weeks a year. Full-time drivers work, on average, 49 hours a week and 50 weeks a year.
industry, with the earnings of some drivers being more than double those of other drivers per hour worked (Nelson\Nygaard Consulting Associates 2014). Overall, income for cab drivers declined by 11 percent in the 2000s, from $35,465 in 1999, adjusted for inflation, after holding steady over the previous two decades (U.S. Census and American Community Survey 2015).
Less is known about compensation for drivers who work for ride service companies. Some of these companies, and Uber in particular, have claimed that drivers can make far more money if affiliated with their company instead of driving a cab. In 2014, Uber cited $90,766 as the median annual income of a driver for UberX in New York City (Uber.com 2014). This claim was widely questioned, and Uber failed to provide a reporter for the online magazine Slate with the name of even one driver with that income level (Griswold 2014). More recently, Uber posted data online showing that incomes of its drivers in New York City and Chicago rose as a result of increased trip volumes even as the company cut fares. Uber also released a report showing driver “earnings” of $16 to $20 per hour for UberX and $20 to $25 per hour for UberBlack in most markets, with variation by city and by the number of hours worked. Reported earnings in New York City and San Francisco exceeded these figures, going as high as $34.32 per hour for some UberBlack drivers in San Francisco (Hall and Krueger 2015).
At first glance, these figures appear to be two to three times greater than the average pay of cab drivers. However, these “bookings” and “earnings” data should for the most part be considered gross and not net earnings, as they must be netted out against many driver expenses. These expenses include driver costs for fuel and for vehicle insurance, maintenance, upkeep, and, importantly, depreciation (as drivers must supply their own vehicle), as well as any taxes such as sales taxes on fare income. As noted above, taxi and limousine driver incomes often vary greatly, and it appears that the same can be said of TNC drivers. Journalists have interviewed TNC drivers who have reported earning as much as $75,000 to $85,000 per year (Anderson 2014; Dallke 2015; Pizarro 2015). The higher earnings tend to be achieved by UberSUV drivers, and are comparable to the earnings of drivers of luxury limousines (TLPA 2013). By comparison, press accounts suggest that when
expenses are taken into account, UberX drivers’ take-home earnings are closer to $12 per hour (Griswold 2014). When Uber recently lowered fares, it guaranteed drivers in selected markets $12.80 per hour (after the company’s 20 percent cut). Once drivers’ expenses had been deducted from that amount, their earnings at this minimum would be well below what an average cab driver earns.
The Washington Post has estimated that an Uber driver who grosses $62,000 annually may have only about $27,600 remaining after paying the company’s commission and the costs of gas, maintenance, health insurance, car insurance, and federal taxes (Weiner 2015). Other reports indicate that 40 hours of driving per week in Dallas could net a driver about $37,000 annually (about $18.50 per hour) (Dickey 2014) and that Chicago drivers net $12.62 per hour (Carney 2015). The Hall and Krueger (2015) study estimates that in six major metropolitan areas, average hourly earnings of UberX drivers exceed those of taxi drivers and chauffeurs by roughly $6, although the authors acknowledge that UberX drivers would have to net out driving expenses from this figure, that these expenses would vary across drivers, and that the drivers’ net earnings would also depend on their tax status.
Many drivers working for technology-enabled ride services report being happy with the job because of its flexibility, its attractiveness relative to their previous job, or the escape from unemployment it can offer. But when Uber cut fares recently, its drivers mounted protests in several major cities, claiming that the fare reductions would yield incomes they could not live on (Kosoff 2014).
Whereas there has been much public discussion of pay and some discussion of job security for TNC drivers, there has been relatively little discussion of benefits. The reason for this is simple: neither the new nor traditional for-hire car transport industries offer much in the way of benefits with the notable exception of limousine companies, which hire drivers as employees and provide benefits. As a rule, traditional taxi drivers do not receive paid leave days, sick leave days, health insurance, retirement benefits, or the like.
Employment conditions for taxi drivers vary substantially. Prior to coverage available through the Affordable Care Act, many drivers lacked health insurance. This was the case for 61 percent of drivers in Los Angeles and approximately half of those in San Francisco (Blasi and Leavitt 2006; Evans et al. 2006) and for about 70 percent of those in Chicago (Corley 2014). In several major jurisdictions in which taxi drivers are classified as independent contractors—including the states of Washington, Colorado, and New York, plus San Francisco and Chicago, among others—they nonetheless receive workers’ compensation (Huet 2015). Uber’s CEO called the Affordable Care Act “huge” for the large number of drivers working for that company (Bhuiyan and Smith 2014). He described the “democratization” of health care as allowing people to have more flexible ways to earn a living. Allowing individuals to obtain subsidized insurance without being reliant on an employer enables independent contractors, such as those working for the ride service companies, to obtain individually the benefits traditionally provided by employers.
As their fee, ride service companies deduct from drivers’ earnings a percentage of the fare (20 percent and up) rather than a flat per-day or per-week lease fee, the common practice in the taxi industry. (The practice in the limousine industry is different; as noted, limousine companies generally hire drivers as employees, who are paid on a commission or hourly wage basis.) Cab drivers must generate enough fare income to pay the lease fee and their gasoline cost for the day before they have any take-home income. On a bad day, the amount left after these expenses can be quite meager, or even negative. Working on commission, as is the case with ride services and some limousine companies, means that a bad day is shared between company and driver. The commission arrangement also enables drivers to readily work part of a day rather than a full day.
Cab drivers, who must pay either a daily or weekly lease for the vehicles they drive, have less flexibility than TNC drivers with respect to hours worked because of the need to work long enough to earn
sufficient fares to cover the fixed cost of the lease. Lease costs include the cost of the company-provided vehicle and its maintenance, insurance, and depreciation, as well as company advertising, overhead, and the provision of dispatch services. These daily or weekly lease payments can be substantial, with the result that drivers bear the brunt of a low-revenue day on the road, or work very long hours to earn income over expenses. In contrast, a higher proportion of the costs that TNC drivers must pay are variable: commission, maintenance, and depreciation costs all depend on the amount of time TNC drivers spend operating their vehicles to carry passengers. This high proportion of variable relative to fixed costs means that TNC drivers cover their costs (at the margin) more quickly and easily relative to cab drivers, making it much easier for them to work part-time and very short shifts if they prefer.
In the United States at the end of 2014, more than 160,000 drivers were actively partnered with Uber (defined as giving more than four rides per month), and during the last quarter of 2014, these drivers received $656.8 million in payments. In March 2015, Uber announced plans to increase the number of drivers in New York from 13,000 to 23,000 (Hawkins 2015). In April 2015, the company announced that its drivers numbered more than 20,000 in the San Francisco Bay area, a figure that had more than doubled from the previous year. While many of these drivers are part-time, that number nonetheless classifies Uber as one of the five largest San Francisco Bay area places to work (Said 2015).
Fully 80 percent of Uber drivers were employed full- or part-time before beginning to drive for the company, and 62 percent are employed either full- or part-time in addition to their driving (Hall and Krueger 2015). Because driving for a TNC is a very flexible work option, and drivers can enter or leave the driver pool at will on a daily basis, many become inactive over time. However, 70 percent of those who started driving for Uber in the first half of 2013 were still active drivers 6 months later. Although the Hall and Krueger (2015) study has a small sample size (601 drivers), Uber would appear to operate
as a bridge to other employment options for some individuals, while for others, it represents a longer-term earnings source.
Thus firms like Uber and Lyft do not simply provide alternative transportation for taxi customers, but also offer alternative employment options for would-be drivers—and in the process make medallion leases less valuable, as described in Chapter 3. And because TNCs collect a proportional fee rather than rent from their drivers, driving for a TNC often involves less financial risk and thus holds more appeal for some drivers. TNCs deduct their fee only when drivers carry passengers, while taxi drivers typically pay fixed daily lease fees to license or medallion holders even if they carry no passengers at all.
Many taxi drivers have shifted to ride service companies, either instead of or in addition to their work for the taxi industry, and cab companies have noted driver shortages as a result. Many cities have reported that the number of available taxi drivers has been shrinking. The San Francisco Cab Drivers Association estimates that one-third of the TNC drivers in the city were originally (or are still) cab drivers (Sovern 2014). New York is facing similar issues, as more than 10 percent of the approximately 50,000 taxi drivers in the city have switched to driving for a TNC (Gartland 2014).
In a time of rapid change in the ride-for-hire industry, the workforce shifting among service providers is a key way for the industry as a whole to adapt to change while also addressing quality-of-service issues for consumers. In that sense, driver movements are a natural, desirable, and important part of this process.
Yet while drivers shifting from taxis to TNCs can advance the process of adaptation and change in the vehicle-for-hire sector, both communities and drivers could well find it problematic if technology-enabled ride service providers came to dominate the industry, particularly if one firm became dominant. For drivers, a major part of the promise of the technology-enabled companies is the potential for better pay and broader choice of work arrangements to suit their preferred compensation and work terms. Replacing one or two dominant cab companies with an equal number of dominant ride service providers would not represent an expansion of employment choices for drivers. Working for Uber, Lyft, and other
ride service companies requires that drivers supply their own car; procure automobile insurance; and deal with the varied business details of entrepreneurship, from paying business taxes to handling accident claims. Not all drivers have the ability or the desire to take on these tasks, and not every driver will want or be able to acquire a vehicle and drive for TNCs; some will prefer the traditional taxi business model.
If TNCs continue to grow, they may make professional driving a less rare occupation, and thus all else being equal, wages for professional driving may fall (however, all else may not be equal—for example, if the demand for rides increases). Drivers for hire were historically limited in number and characterized by unique stores of knowledge; cities capped the number of vehicles, and by virtue of practice and native ability, the drivers had wayfinding capabilities and knowledge of local streets that many other people lacked. As an extreme example, London taxi drivers often train for years by riding mopeds through the city’s dense street network, and then sit for a test of the city’s geography and landmarks that only half of trainees pass (Jabr 2011; Rosen 2014). This human capital has been integral to the quality of service drivers can deliver. As navigational software continues to improve, however, and as for-hire vehicles become less scarce, the value of this human capital is also likely to fall. Uber, for instance, does not require such a navigational knowledge test of its drivers in London, yet has successfully taken market share from London’s taxis. Lyft has made clear its goal of allowing any solo driver to take on a passenger, increasing the efficiency of the transportation system by filling otherwise unoccupied vehicle seats. While reaching this complete level of penetration for providers of shared rides is unlikely, it is entirely possible that the future will see fewer full-time drivers at lower wages.
Another issue raised by TNC drivers and their representatives concerns job security. A key aspect of the business model of ride service companies is the ratings of drivers that customers can assign at the end of each ride. The companies believe that these rating systems
are key to the quality of service their affiliated drivers provide to consumers. It has been noted that such ratings tend to be skewed high, with a large incidence of the highest possible rating (Slee 2013). The ride service companies thus set a high threshold below which drivers are “deactivated,” although Uber has noted that only 2 to 3 percent of its drivers are at risk at any given time (Cook 2015). Even so, drivers may feel insecure, as a relatively small number of very low ratings could result in the loss of their job.
The for-hire driving industry is in general not unionized in the classic sense. There are many reasons for this, including the fact that most of the workforce is classified as independent contractors instead of employees, and the Fair Labor Standards Act does not apply to contractors. In many places, however, drivers have organized into associations advocating for better working conditions and, more recently, a level playing field with ride service companies. For example, the National Taxi Workers Alliance became affiliated with the AFL-CIO in 2011 and now has affiliate member organizations in Philadelphia, Austin, Montgomery County (Maryland), and San Francisco, with additional organizing efforts in Prince George’s County, Maryland, and Chicago (Lazo 2014a). The Washington, D.C., Taxi Operators Association has aligned itself with Teamsters Local 922 and described its concerns about ridesharing services, better representation on the District of Columbia Taxicab Commission, the credit card system, new dome lights, and the taxi paint scheme (Washington, D.C., Taxi Operators Association 2015). The Greater Philadelphia Taxi Association represents the voices of “taxicab medallion owners and operators, dispatchers, taxi companies, and allied industries”—notably not including the drivers themselves (Greater Philadelphia Taxi Association 2015). These and other organizations have increased in number and membership in recent years, in large part as a result of the rapid growth of ride service companies (Lazo 2014a). Taxi drivers want more control over the costs they are asked to bear, including lease costs, credit card processing fees, and outfitting of a vehicle to meet regulatory specifications, along with redress of the perceived unfairness of ride service companies facing fewer regulations and costs (Lazo 2014b).
As of this writing, Uber and Lyft are facing lawsuits from drivers who want to be classified as employees rather than as independent contractors. Because such drivers say the companies exert significant control over their work, set compensation levels, and can terminate them at will (if their ratings fall too low), they believe they should be treated as employees, entitled to the protections that most full-time workers receive (Silverman 2015). In mid-July 2015, the U.S. Department of Labor issued guidance to employers summarizing legal cases interpreting application of the Fair Labor Standards Act to the question of when workers can be classified as contractors rather than employees (Weil 2015). The determination is a complex, multi-pronged test of interacting factors, including whether the work is an integral part of the employer’s business, whether the workers’ managerial skills determine their profit or loss, the workers’ investment relative to that of the employer, whether a worker’s special skill and initiative determine economic independence, whether the relationship is permanent or indefinite, and the nature and degree of the employer’s control. According to the guidance, no single factor is determinative; instead, all the factors are to be weighed in determining whether workers are truly in business for themselves (Weil 2015).
If the lawsuits currently under way are resolved in favor of the drivers, the TNCs will be forced to handle taxes and social security, pay benefits, and reimburse the drivers for such costs as gas and vehicle maintenance. These verdicts could alter the profitability of the companies’ business models and set a precedent for other worker classifications in the shared or on-demand economy. In June 2015, the California Labor Commission ruled that an Uber driver should be classified as an employee instead of an independent contractor; the ruling states that drivers’ services are “integral” to the company’s business model and that Uber is involved in “every aspect of the operation” (Uber v. Berwick 2015). Uber has appealed that decision, which applies only in California and only for a single driver. If the ruling stands through what are certain to be several levels of rulings and appeals, TNC drivers in California will need to be reimbursed for gas, tolls, insurance, employment benefits, workers’ compensation, and
social security (Kirkham et al. 2015). More recently, the Oregon Bureau of Labor and Industries ruled in October 2015 that Uber drivers are employees instead of independent contractors (Njus 2015). Depending on how courts in other states decide, the implications for the business models of TNCs, as well as of taxi companies, most of whose workers are also independent contractors, are substantial.
State and local policy makers concerned about the labor impact of TNCs face an array of unsettled issues. First, the pay, work rules, and job status of traditional taxi and limousine drivers vary widely from place to place. Drivers in some areas are advocating collectively for improved employment conditions, while in other areas, virtually no such labor advocacy is taking place. In this environment, TNCs have created opportunities for part- and full-time employment for many people who previously were under- or unemployed. Driving for Uber, Lyft, and similar companies may be most beneficial for those for whom driving is a part-time or short-term endeavor, or for those requiring a high degree of flexibility with respect to the timing and duration of work. Driving for TNCs may also be beneficial on a long-term basis for self-reliant individuals who can prosper without the supports of traditional employment that range from health insurance to daily social interaction with coworkers. Moreover, as discussed in Chapter 2, there is some indication that TNCs are expanding the market for rides for hire.
Although many people believe that TNCs are threatening the livelihoods of traditional taxi drivers, how this threat will play out remains to be seen. If net income for TNC drivers is consistently below that of taxi drivers, as currently may be the case after netting out expenses, the current shift of drivers from taxi companies to TNCs could reverse, especially as the taxi companies incorporate technologies for summoning drivers and paying for rides that make TNCs so attractive to travelers. At this unsettled point in time, labor markets appear to be adjusting as drivers seek better opportunities for themselves. In addition, as the overall economy and especially unemployment rates fluctuate, the relative attractiveness of driving
for a TNC or traditional taxi operation may change in ways that could impact everything from rates and passenger demand to service availability and quality. In a way, labor issues mirror broader regulatory issues and underline the importance of fairness and equity across vehicle-for-hire sectors. The role of policy makers is to ensure that both taxi and TNC drivers have the opportunity for gainful employment, are subject to fair labor practices, and provide trips to the riding public that meet safety standards. (The safety and security issues raised by TNCs are discussed in the next chapter.)
On the other hand, the outcome of driver lawsuits against TNCs could alter the business models and employment opportunities of these and other firms in the shared economy. At the time of this writing, the California Labor Commission’s ruling that an Uber driver is an employee rather than a contractor is under appeal, and the Oregon Bureau of Labor and Industries has ruled that Uber drivers are employees instead of independent contractors. While these cases are limited in scope, they could lead other states to reconsider the status of TNC drivers and possibly even taxi drivers, who generally also are independent contractors.
|TLPA||Taxicab, Limousine & Paratransit Association|
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