Manzo: Data-driven job quality for Chicago-area gig drivers

It is no secret that Uber and Lyft drivers in the Chicago area face serious safety issues, from crashes to crime, and that their pay rates are generally low.

But while ride-share companies advertise new initiatives to address safety concerns, they often mislead potential drivers about typical earnings - while lobbying against policies that would improve pay and working conditions.

So called "gig work" is transforming our economy in real time. According to the World Economic Forum, the sector has more than doubled in size since 2018, with its workforce growing at 15 times the rate of traditional employment between 2000 and 2020.

Ride-sharing apps like Uber and Lyft each have been major contributors to the rise of gig work. Yet, there still is no law or court determination that has clarified the status of app-based drivers. This ambiguity has allowed gig employers to treat their workers as "independent contractors" instead of as employees.

As a result, states and cities have been left to decide whether to bring minimum labor standards to the gig economy.

In April 2023, the city of Chicago contracted with a global management consulting firm, Crowe LLP, to conduct a "data-driven analysis" of Chicago's ride-share industry. One of the most eye-popping claims in the study was that two-thirds of "full-time" Uber and Lyft drivers earned $21 to $30 per hour in net pay after expenses. Uber has cited these rates in online campaigns to recruit new drivers.

But there were major problems with this study. The biggest being it did not account for drivers' "time spent waiting for passengers without earning money." Chicago-area drivers only spend 55% of their time with passengers. The remainder is spent waiting for requests, driving from drop-offs to busy areas with empty back seats, or fueling up and cleaning vehicles.

The study overstated earnings per hour by failing to include almost half of drivers' hours worked and underestimating gas and wear-and-tear expenses.

A second issue was, despite reporting net pay for "full-time" drivers, the study said fewer than 6% were full-time based on hours spent with passengers. This is an odd criterion. It would be like only considering time that restaurant servers spend physically interacting with customers as worthy of pay even though they must wait for customers to arrive and for orders to be ready and consumed, or like only paying firefighters when they are responding to fires or emergencies and not while they are on call at fire stations.

The consultants also didn't seem to consult with actual drivers.

Researchers from the Illinois Economic Policy Institute and the Project for Middle Class Renewal at the University of Illinois at Urbana-Champaign surveyed 502 app-based drivers in the Chicago area in 2022 and found that a majority work more than 35 hours per week for ride-share companies. They lack access to workers' compensation and a high share (13%) do not have health insurance; yet 40% have suffered an injury or illness while driving and 79% feel unsafe once a month while driving.

With all hours worked and miles traveled accounted for, including those alone without passengers, many drivers earn less than minimum wage. A 2022 analysis of 22 million ride-share trips revealed Chicago area Uber and Lyft drivers average just $12.72 per hour after expenses.

State and local policies have been proposed to combat lower-than-advertised pay and significant safety risks under drivers' current treatment as independent contractors.

A 2022 Illinois Future of Work Task Force report recommended "integrating ... gig workers into existing and new benefits frameworks," launching discussions in Springfield about classifying drivers as employees or expanding access to the workers' comp and unemployment insurance systems.

And in Chicago, the Rideshare Living Wage and Safety Ordinance has been reintroduced. If passed, the ordinance would raise driver wages, guarantee a minimum pay per ride, include an annual inflationary adjustment, cap ride-share companies' cut of the fare, and require passenger verification to protect drivers.

These changes would improve job quality in the gig economy, allowing Uber, Lyft, and other companies to transparently - and accurately - publicize that they offer competitive wages and safe working conditions to attract new drivers.

Frank Manzo IV is an economist at the nonpartisan Illinois Economic Policy Institute.