Driving for Uber or Lyft is not a smart way to make money, a new study from MIT shows.
According to the study, the median profit from driving is $3.37 per hour before taxes. That's far below the federal minimum wage of $7.25. In fact, researchers found that 74% of drivers earn less than the minimum wage in their state.
The study relied on self-reported data on revenue, mileage and vehicle choices from more than 1,100 Uber and Lyft drivers and cross-referenced it with maintenance, repairs, fuel and depreciation, using data from the EPA, Edmunds and Kelly Blue Book.
The study found that basically everyone driving for Uber or Lyft is using their car for both business and personal use and that only 20 percent of them are doing the work full-time.
What makes the whole thing work economically? Taxes.
The study's authors point out that drivers are eligible to use the federal Standard Mileage Deduction of 54 cents per mile for tax purposes and that actually driving usually costs 30 cents per mile, meaning ridehailing drivers don't have to claim all of their profits. For example, the average driver would declare taxable profit of $175 rather than the $661 earned.
While Forbes is asking "Why is the press coverage of the gig economy so negative when the people living the gig-life overwhelmingly seem to love it?" venture capitalists like Mark Tluszcz are starting to think maybe it's smarter to not invest in companies like Uber that run what he's called "modern day sweatshops."
Tluszcz was blunt about the results of the study when contacted by TechCrunch.
“It tells us that it’s a shitty place to work,” Tluszcz said. “It tells you that it’s a great place if you’re a company. It’s really a poor place to be an employee or be a worker.”