Economists Explain Uber Driver Gender Pay Gap

A recent episode of the Freakonomics podcast explained and debunked the gender pay gap between male and female Uber drivers.

The episode titled “What Can Uber Teach Us About the Gender Pay Gap?”  examined the wage disparity between male and female Uber drivers. What was discovered corroborates multiples other studies relating to the pay gap, that a number of factors contribute to the wage disparity — not just gender. The podcast featured three guests, John List, the chairman of the University of Chicago economics department, Rebecca Diamond from the Stanford Graduate School of Business, and Jonathan Hall from the public policy and economics team at Uber, who discussed the issue with host Stephen Dubner.

One of the first areas discussed was the location and timing decisions of male and female Uber drivers. Men seemed to drive to higher rated areas at surge times while women choose not to.

DUBNER: Okay. So I want to get into what are the factors. In the paper, you write that there are three. Number one?

LIST: So after reaching the dead end of discrimination doesn’t seem to be a determinant, we then decided to ask, “Well, what about where and when?” So what I’m thinking about here is time of day, day of week, and where in Chicago they actually drive. And here, we had some success. So what we find is that after you explore the where’s and when’s, we find that we can explain roughly 20 percent of the gender pay gap by choices over where to drive and when to drive.

DIAMOND: And an important contributor to the gap is particularly where the rides started. So different neighborhoods are going to differ in the types of rides that you’re going to get, and also potentially the frequency of rides you’re going to get called for. So men and women tend to target different neighborhoods of where they’re driving, and men are targeting more lucrative pay areas than women.

DUBNER: And does that have to do with, like, at 3:00 in the morning on Saturday, and I want to go out to where all the bars are, and there might be a surge? Or is it more — I don’t know, early-morning airport trips? Can you characterize the nature of those most lucrative trips, that men seem to be doing a little better at?

LIST: So what is more important than when you drive, is exactly which trips or routes do you tend to focus on. So one particularly salient example here is that airport trips tend to be the most profitable trips on the Uber platform. So what you have is that men tend to complete more airport trips than women complete.

Another factor is the number of female Uber drivers that stop driving for the company after a period of time. Men typically tend to continue working as an Uber driver for longer. This leads to a lack of experience amongst female Uber drivers which results in decreased earning potential.

List: When you look at the attrition rates, it is true that women do fall off the platform more. But they’re also earning less. So it’s not clear whether it’s because of preferences for not liking to drive as much as men like to drive, or if it’s simply an earnings effect.

DUBNER: Right.

LIST: It’s likely the combination of both those two.

DUBNER: Yeah, but does this higher female attrition rate mean that the average female is likely to be less experienced than the average male driver, and therefore will earn less. Yeah?

LIST: No, that’s right. When you look at experience, really men are more experienced than women because of two primary reasons. One, women drop off the platform more often than men. But, two, even for those who are on the platform for the same amount of time, since the average man drives about 50 percent more trips per week than the average woman, you still have the experience effect for those who have been on the platform the same number of months.

DIAMOND: So at any given day or time, the men driving for Uber have a higher level of experience under their belt than women, and that plays an important role in compensation

HALL: And that explains about 30 percent of the pay gap that we measure.

It was also discovered that in general, men tend to drive faster than women which also increased their earning potential as they could complete more Uber rides than their female counterparts.

DUBNER: Okay, a third of the gap can be explained by returns to experience. You said about 20 percent of the gap can be explained by time and location of work. But that leaves almost half that can be explained by the third factor. What is that?

LIST: That’s right. So after we account for experience now we’re left scratching our heads. So, we’re thinking, “Well, we’ve tried discrimination. We’ve done where, when. We’ve done experience. What possibly could it be?” What we notice in the data is that men are actually completing more trips per hour than women. So this is sort of a eureka moment.

DUBNER: They’re driving faster, aren’t they?

HALL: Yeah. So the third factor, which explains the remaining 50 percent of the gap, is speed.

DIAMOND: So men happen to just drive a little bit faster, and because driving a little bit faster gets you to finish your trips that much quicker, and get on to the next trip, you can fit more trips in an hour, and you end up with a higher amount of pay.

The full podcast can be found here.