When economists work for money, do they get dumber?

Let’s read the article from the Washington Post on Alan Krueger’s research paid for by Uber:

Uber drivers in many of the company’s major markets are making about $6 an hour more than their traditional — and professional — taxi-driver counterparts, according to a rare analysis of internal data the company released Thursday along with Princeton economist Alan Krueger. In Washington, the difference is about $4.60, in San Francisco it’s about $10 and in New York it’s closer to $15.  These gross earnings don’t account for the considerable costs drivers pay to deploy their own cars as modern-day taxis. But Uber argues that these numbers paint a picture of decent work in a shifting economy where tens of thousands of people — nearly half of them with college degrees — have recently found supplemental income and more flexibility doing a job that has long been the domain of immigrants and middle-aged men.  The analysis, drawn from internal figures as well as a survey of about 600 UberX and UberBlack drivers, offers the most extensive look at how fast the company has grown, who’s driving for it and how this work supplements their other employment. Krueger, who previously served as chairman of President Obama’s Council of Economic Advisers, contracted with Uber to write the analysis, along with the company’s head of policy research, Jonathan Hall.  The analysis shows that Uber’s drivers in the United States collectively received $656.8 million in payments from the company in the last three months of 2014 (that translated in October to about $17.79 an hour in Washington, and $30.35 in New York). The taxi earnings in comparison — which reflect net income, not gross earnings — come from Bureau of Labor Statistics Occupational Employment Statistics.

Wait…. Krueger and Hall in their paper compared gross earning of Uber driver with net earnings of taxi drivers and permitted the Washington Post to publish an article with lead sentence, “Uber drivers in many of the company’s major markets are making about $6 an hour more than … taxi-driver counterparts”?  Could that be true that they compared gross with net, or did the reporter take something out of context?  Fortunately the reporter provides the link to the report, and you can verify that is actually what they do.  And they baldly add a caveat: “Nonetheless, the figures [hourly wages] suggest that unless their after – tax costs average more than $6 per hour, the net hourly earnings of Uber’s driver – partners exceed the hourly wage of employed taxi drivers and chauffeurs , on average.”  Could they not have done a back-of-the envelope calculation of the costs?  Suppose you have to drive 15 miles in an hour to earn the $20 per hour they say Uber drivers earn.  That is, you drive about 30 minutes at average speed 30 mph.  Is that reasonable?  I have no idea.  (The Krueger report says drivers average 1.7 trip per hour in San Francisco.)   But 15 miles in a normal car, last year, would cost you $3.00, 3/4 of a gallon of gas maybe?  And auto depreciation is usually something like 10 cents a mile at least… so another $1.5.  So wait, now there is now a pretty small difference.  AAA actually has a little booklet about the cost of driving (fuel, depreciation etc). The lowest estimated cost is 40 cents a mile.  So  $6 if the Uber driver is going 15 miles for the fares in an hour.

Parenthetically and extra-heavy-dose-of-sarcasm: How much did Krueger ask to be paid in return for calling Uber employees “driver-partners”?  Yeah, right, I’m a “learning partner” and not a teacher.  How about this sentence: “These findings relate to a broader, more generalized demand by many individuals for workplace flexibility that favors alternative work schedules, family – oriented leave policies, flextime, and telecommuting arrangements over the standard nine – to – five work schedule in order to support a more family – friendly lifestyle.” The “findings” are that in the Uber world everything is fine.  To me, that sentence has to be worth at least $10,000… I mean, aren’t median wages falling?  But that’s OK, things are now family-friendly… oh wait, nobody lives in families anymore.  So lonely middle-age people friendly?  I’m sorry but as I read the report practically every sentence is begging for sarcasm.  How about this one: “This paper does not purport to have all the answers, but it represents a first step toward understanding the nature of work in the sharing economy by providing new evidence on hours of work, income, and the motivations and backgrounds of participants in an important segment of  the sharing economy.”  Sigh of relief. When I read the early paragraphs I actually thought it was going to have all the answers, because the co-author must be earning like $5m a year and so perhaps he actually has all the answers?  (He gives his work history on the first page, so he kinda tells us…)  Good to know there is still room for more research by the little guys.   Hey, I’m sorry, when you work for a company that calls itself Uber on purpose, you have to earn your compensating differential.

via Now we know how many drivers Uber has — and have a better idea of what they’re making​ – The Washington Post.

About mkevane

Economist at Santa Clara University and Director of Friends of African Village Libraries.
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