In May, Bloomberg reported that the ride-sharing company Uber admitted that it had been underpaying its New York City drivers because it had taken its share of fares before deducting fees rather than after. The company agreed to repay each of its drivers $900. Interestingly, Uber contracts with 50,000 drivers in the city, so it’s a pretty significant employer in town. Ride-sharing services are ascendant in urban life, thanks to smartphones and lack of robust job opportunities. Consequently, this news item contributes to the discussion of just how much money ride-sharing drivers actually earn, and whether there are New York bankruptcy implications.
Surprisingly, clear data on New York City’s Uber drivers (which I’ll stick with because it’s the most well-known ride-sharing company) are not widely available. It’s also a tough industry to examine because so many of its workers participate only part time, which can distort numbers. Then there’s the bragging by Uber’s New York general manager, who claimed that Uber X drivers earn $25 per hour—or that the median driver makes $90,000 annually (yes, these numbers don’t add up). Obviously, something else would need to be going on if Uber can out-compete traditional cabs while promising high pay for drivers.
There are a few investigations on the topic, and while some of them claim Uber workers make poverty wages, they all point to substantial hidden costs for drivers. Here are a few of them:
- Fees. As Uber’s restitution commitment demonstrates, much of the Uber base fare is eaten by taxes and other fees. True, workers in all other industries should not expect to keep all their headline income, but not all workers pay taxes on the fees Uber fares generate.
- Uber’s cut. Uber takes between 20 and 25 percent of the fare, depending on the driver’s experience.
- Self-employment income. Relatedly, Uber drivers are not employees of Uber, and therefore they are independent contractors. As a result, they must pay self-employment taxes to the government that an employer would normally cover.
- Fuel. Some cars are more fuel efficient than others, and urban driving tends to be much costlier than freeway driving. Thus, fuel prices can be much higher than people might expect, especially if they are used to using their cars like most Americans do: driving on a freeway to and from work and parking for free.
- Tolls. New York City drivers would need to be wary of these, but drivers in some cities might not need to worry at all.
- Vehicle costs. Many drivers need to pay their auto loans, but sometimes Uber drivers rent their cars. It’s another example of how drivers for ride-sharing companies should think of their income as business income and not regular pay.
- Cell phone service. Uber requires drivers to have smartphones to use its application. Naturally, drivers will need to pay for this item as well.
- Maintenance and depreciation. This item is probably the toughest factor to correctly estimate for net-income purposes. It’s certain that full-time Uber drivers will wear down their vehicles much more quickly than typical drivers. The type of vehicle—and luck—can be significant. A rugged sedan might last quite a while, but other vehicles might require chronic maintenance checks. There are other factors, oil, tires, windshield-washer fluid, etc. that all come out of the driver’s pay. Passengers don’t rate drivers highly if their cars are dirty.
- Driving costs. A large percentage of New Yorkers don’t even have driver’s licenses because the public transportation is so much cheaper and efficient. Uber drivers, by contrast, must maintain their driver’s licenses and insurance—as well as a Taxi and Limousine Commission (TLC) licenses. These all add to costs.
Many Uber drivers work temporarily between occupations, or as one gig among many. A BuzzFeed article found that most drivers who were not renting their vehicles made more than $20 per hour, but that figure did not include many of the costs listed above. It’s likely that they really went home with much less. Drivers might even make less than the minimum wage. If so, then Uber essentially offers drivers the opportunity to take a payday loan against the future usable value of their vehicles.
The Bloomberg article is here, and the BuzzFeed article is here.
So yes, working for a ride-share company can lead to Uber bankruptcy, if monetary costs like maintenance start mounting. If that characterizes your financial condition, then talking to an experienced New York bankruptcy lawyer can help you assess your options.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.
