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 $14.62 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 22 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 report’s author, economist Jim Stanford, says Uber’s business model would collapse without the poorly paid labour.
“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.
David Rohrsheim, the general manager of Uber in Australia, told the ABC’s 7.30 program “earnings change depending on what time people chose to log on”.
“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.
“There are some people at the top of Uber who have become extremely wealthy at the expense of drivers who sign up unaware of the added costs, massive depreciation of assets and the lack of security regarding work: this report is called ‘subsidising billionaires’ and that is exactly what this business model does.
“At the same time we know in the UK that because Uber base themselves in the Netherlands for tax reasons, they can pay less VAT and don’t contribute to the Exchequer as people might imagine they do, despite the fact many of their drivers will have to have their earnings topped up with in work benefits.
“This is why we always recommend people use their local company: it’s still capitalism but without the exploitation.”