Monday, February 12, 2018

Why do women Uber drivers earn 7% less per hour than men?

A recent episode of the podcast Freakonomics highlighted a paper by five economists that ferrets out the underlying reasons why male Uber drivers earn an average of 7% more per hour than female Uber drivers. Because Uber drivers are part of the "gig" economy and enjoy great flexibility in setting their work schedules, the substantial size of the pay gap was surprising. The authors attributed none of the gap to the algorithm by which the company compensates drivers, which is gender-blind, nor to customer discrimination, since riders don't prefer drivers of a particular sex. Rather, the authors concluded that the pay gap could be explained by three factors: men tend to drive more lucrative routes, such as to and from airports (20% of the gap); men work longer and therefore know more about how to make money on the platform (30% of the gap); and men drive about 2% faster than women and are able to complete more trips (50% of the gap).

Of course, the Uber study does not show that a wage differential between men and women can never be attributable to any extent to sex discrimination. Instead, it illustrates that, even in the absence of sex discrimination, women can still earn less than men. As explained by Stanford economist Rebecca Diamond:
I think this is showing that the gender pay gap is not likely to go away completely anytime soon. Unless somehow, things in our broader society really change, about how men and women are making choices about their broader lives, than just the labor market. But it's not also a worry that the labor market is not functioning correctly. It makes sense to compensate people who are doing more productive work. It makes sense to pay people more if they work more hours. I mean, I don't think those are things that we would ever consider thinking should be changed because that they're a problem. Those are just real reasons that productivity can differ between men and women. And we should compensate people based on productivity.
Outside the gig economy, the longer hours typically worked by men are also likely to translate into both an experience advantage and higher hourly wages. Although such wage premiums may contribute to a gender wage gap, they also reflect a societal consensus that hourly wage rates should rise as employees devote a higher proportion of their time to work. 

As it turns out, Uber has since adopted a compensation model that allows riders to tip drivers, and riders tend to tip women more than men. Whether we should be applauding tipping as a solution to the Uber pay gap is questionable, however, to my mind, given that customer tips can reflect sexism, racism, and other biases -- the very thing we are trying to eradicate.

This blog reflects the views solely of its author. It is not intended, and should not be regarded, as legal advice on how to analyze any particular set of facts.