Choices and Consequences

Inspired by a Freakonomics podcast: What Can Uber Teach Us About the Gender Pay Gap?

In a nutshell; choices have consequences.

The gender pay gap gets a lot of attention. Many theories try to explain why it exists. While many spend time speculating and theorizing about it, the folks at Uber have gathered data that provides new insights. People who value fair pay, including working parents, are likely to find this info pretty interesting. (And those who want to dig deeper into the data can listen to the Freakonomics podcast: What Can Uber Teach Us About the Gender Pay Gap?)

Some believe that the gender pay gap could be reduced if workers had more flexible work hours. Uber offers its drivers total flexibility when it comes to hours worked.

Some assert that those who control pay have unconscious (or conscious) biases that result in men being paid more than women for the same work. Uber pays drivers using a gender-blind formula based on the length of a ride in miles and minutes. Additionally, the fare (which determines pay) may include "multipliers" based on customer demand at any given time. Uber's pay structure is based solely on services provided, and it's non-negotiable.

Some think that hiring can be a biased process, and we agree. At Uber work is assigned via an undeniably gender-blind process.

This means that Uber is able to provide driver pay data that is virtually devoid of gender biases. As you might imagine, researchers were eager to sift through this data. And, for a variety of reasons, they expected women Uber drivers to out-earn men by just a little or at the very least to earn the same amount as men on an hourly basis. But guess what? That's not happening.

The data shows that men make about 7% more per hour (on average) for doing the exact same job. And remember, this is in a setting where work assignments are made by a gender-blind algorithm, and the pay structure is tied directly to output and is non-negotiable. Interestingly, this 7% pay gap aligns with gender pay gaps uncovered by other studies within other work environments. 

So how do they explain this?! Before jumping to the answer, it's worth noting that the volume of data available for analysis was huge; 25M driver-weeks across 196 US cities over 22 months (June 2015 - March 2017). It included  >1.8M drivers and >740M Uber trips.

As the researchers dug deep into the data, here's what they found: 

• Men and women Uber drivers make different choices about when they drive and which routes they choose. These choices impact the value of the trips and therefore their pay. (e.g. Men drive more late night hours which pay well and women drive more Sunday afternoons which pay well.)  The choices they make account for ~20% of the gap. These choices hint at a deeper issue too.
• Driver experience influences choices. Large returns can result when drivers apply the experience they gain on the job. Basically, the more you drive, the more you learn and the more you earn. Experience helps drivers get better at figuring out where and when to drive and then how to strategically accept or cancel rides to maximize income. Men and women appear to learn at the same rate, but men spend more time driving, so they are able to figure out how to maximize their income faster. This accounts for another ~30% of the gap. 
• Finally, men complete more trips per hour than women. This is because they drive slightly (~2%) faster. And Uber feedback indicates that riders value faster rides. This choice accounts for the final ~50% of the gap. (Interestingly, studies show that, on average, men also drive slightly faster than women even when they aren't Uber drivers, although women have more crashes. But men have more fatal crashes, so it isn't clear whether men or women tend to be  the safer drivers on average.)

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So while women have every opportunity to earn just as much as men when they're Uber drivers, the choices they make are lowering their average income slightly. In a nutshell, choices have consequences.

This info is compelling for working parents because it makes it really clear that career choices always have consequences. A decision to opt out of the workforce, for even a relatively short period of time like a year, can have lasting consequences. Usually we understand that and are happy to live with the consequences. But sometimes people don't understand that even a short "break" from the workforce in the early years of a career will result in unexpected and significant consequences (not to mention frustrations) down the road.

Working while raising kids is hard, but this data shows that those who figure how to make it work are more likely to find themselves satisfied over the long run if equal pay is important to them. We probably shouldn't be surprised to learn that Uber and the researchers have just confirmed that experience matters and hard work pays off.

​Freakonomics has been called “the most readable economics blog in the universe”. Learn more about this story via the podcast: What Can Uber Teach Us About the Gender Pay Gap? ​

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