Is Pay Inequity Pervasive in the Gig Economy? Not So Fast…

For many years, men have earned more than their similarly situated women counterparts. This statement is no surprise. In 2016, the National Bureau of Economic Research released a white paper suggesting that women earn only 89 cents for every dollar a man earns. This is nothing new in the traditional workplace model. However, is this statistic applicable to the gig economy? 

According to a recent study entitled “Gender Earnings Gap in the Gig Economy: Evidence From Over a Million Rideshare Drivers,” female Uber drivers were found to earn 7 percent less per hour than their male counterparts. The study examined data from more than 1.8 million drivers and 740 million Uber trips in the United States from January 2015 to March 2017.

This finding may have come as a surprise to those who believe the gig economy work model will eliminate the gender pay disparity. Upon a closer examination, however, it appears that this divide is not necessarily evidence of systemic or even unconscious bias on the part of the company or even on the part of consumers using the ride-sharing service.

In order to fully understand this theory, it is important to realize the mechanism Uber uses to pay its drivers. Uber pays its drivers based on a formula, which considers a number of factors, including: the length of the ride, how long the ride takes to complete, and on occasion, the “surger” multiplier where demand can push up rates. The fare a driver earns is determined by a gender-blind algorithm. 

According to the study, there are three explanations for pay inequity, none of which suggest any intentional discriminatory animus:

(1) location of pickups;
(2) driver experience; and
(3) driving speed.

The study found that men, on average, choose to drive in locations with higher surge and lower wait times. This contributes to men earning more per hour than women drivers. According to the study, this difference accounts for a little less than one-third of the pay gap.

Experience accounts for another third (or so) of the earnings gap. Drivers who have taken more than 2,500 trips earn an average of $3 more per hour than those with fewer than 100 trips. According to the study, men work more hours driving for Uber each week. Also, 77 percent of women quit driving for Uber after 6 months, compared to 65percent of male drivers. 

Finally, according to the study, men drive 2.2 percent faster than women. This data is consistent with information gathered from the National Highway Travel Survey. This difference in speed accounts for close to one-half of the pay gap.

This eye-opening study leads to three important takeways:

1. Pay inequity does not always suggest intentional discriminatory animus. There can be a number of factors that lead to the result that are not the result of any gender-driven policies or practices.
2. However, gig companies should revisit pay inequity data periodically to determine if pay inequality is an issue (preferably with the assistance of counsel in order to maintain the privilege over the self-audit). If so, they need to carefully determine why it is an issue.
3. As the law continues evolving, it is likely that on-demand workers will begin receiving employment protections on par with traditional W2 employees, creating even more of an incentive for companies to get a handle on pay gaps now.