An interesting question arises from this new report- is it Uber’s wages which are wrong or the minimum wage itself? It has to be one of them after all, but which?
The report is pointing out that many Uber drivers aren’t making much money through the work. Well, OK, that’s their privilege we might think. Or we could insist that everyone’s labour should have some government approved value – that minimum wage argument. Quite how to decide between these two? How about look at what it is that people themselves want through their actions?
The vast majority of Uber and Lyft drivers are earning less than minimum wage and almost a third of them are actually losing money by driving, according to researchers at the Massachusetts Institute of Technology.
A working paper by Stephen M. Zoepf, Stella Chen, Paa Adu and Gonzalo Pozo at MIT’s Center for Energy and Environmental Policy Research says the median pretax profit earned from driving is $3.37 per hour after taking expenses into account. Seventy-four percent of drivers earn less than their state’s minimum wage, the researchers say.
Start by assuming that these numbers are correct. What is the lesson being learned from those facts, this paper?
Results indicate that profit from ride-hail driving
are very low. A Median driver generates $0.59 per mile
of driving, and incurs costs of $0.30 per mile. 30% of
drivers incur expenses exceeding their revenue, or
lose money for every mile they drive. (Figure 1) On an
hourly basis, the median profit is $3.37 per hour and
74% of drivers earn less than the minimum wage in the
state where they operate.
The minimum wage doesn’t apply to the self employed which is lucky really, for if it did no writer would ever get their start. But we can still usefully consider the lesson of this.
That lesson being that the minimum wage is too high. No, it isn’t that Uber’s fees are too low. For, given the free choice those drivers do have they’re doing the work for that money, aren’t they? Their revealed preference – that proof economists prefer of what people do, not what they say – is that they’re willing to do this work for that fee. It’s the government, with the minimum wage insisting that they not be allowed to sell their labour at such a low price, in the way here.
No, really, the minimum wage says you cannot sell your labour, as an employee at least, for less than $7.25 an hour. Yet here we’ve direct and compelling evidence that large numbers of people are willing to sell, or at least rent out, their labour for less than that. So, why is the government standing in their way?
The real lesson from this Uber study is that the minimum wage is too high. It prevents large numbers of people doing what they’d like to do, sell their labour for less than $7.25 an hour. We’ve the proof of this, large numbers of them are doing exactly that when they’re able to, as self-employed Uber drivers. So, lower, or a better solution abolish, the minimum wage so that the people are allowed to do as they wish. You’re not against freedom and liberty, are you?