Uber’s fares are made possible because the company is significantly underpaying its drivers, a new report argues.

UberX drivers earn well below minimum wage once all hidden costs are taken into account, according to analysis by the Centre for Future Work at the Australia Institute think tank.

Australians earn $14.62 per hour on average driving for the ridesharing company’s most popular and low-cost service, UberX, the report estimated. This rose to more than $18 for those driving in Sydney and Canberra and dropped to under $11 for those in Perth. The earnings are below the basic statutory minimum wage of $18.29 per hour, and well below the award pay for waged workers in the sector, which is around $30 when weighted for penalties.

The analysis was conducted by taking typical urban fares in six cities and deducting driver fees, taxes and vehicle costs. They found the driver was left with only one-third of the takings.

The report’s author, economist Jim Stanford, says Uber’s business model would collapse without the poorly paid labour.

“The low incomes of their drivers are essential to the escalation of Uber’s market value that has made some people fabulously rich,” he said. “The company dresses this up as flexibility but the money is so bad and uncertain that it’s only in an environment that people are desperate that this model can work.”

The cost of regular taxis are on average about 40% higher than UberX fares.

Stanford, who is the Centre for Future Work’s director, said in addition to the low hourly pay, drivers miss out on other protections and entitlements such as superannuation, workers’ compensation and leave entitlements.

Around 80,000 Australians are driving for Uber, which is not yet turning a profit. The Fair Work Commission recently ruled that Uber drivers are not employees but rather independent contractors.

A report in the US recently found some drivers end up losing money after insurance, maintenance and other costs.

Guardian Australia has contacted Uber for comment. David Rohrsheim, the general manager of Uber in Australia, told the ABC’s 7.30 program “earnings change depending on what time people chose to log on”.



“Drivers know this and the smart ones log on at the right times, in the right areas, and earn the big bucks.”

Stanford said it is unreasonable to expect drivers to rely on surges as they have no control over them or advanced knowledge of when they will occur.

Luke McMahon sold his car last week after driving UberX in Sydney for three years because it had become increasingly unprofitable.

“When I started driving it was considerably more lucrative because there were a lot less drivers on the road,” he said. “But there was a noticeable shift over the years as more drivers joined up and the periods of surge became far less frequent.”

After 1,688 trips, the 30-year-old has turned his back on Uber in favour of a more reliable job in retail.

“I stopped because driving those long hours was having a toll on my body and relationships, and my motivation was waning as the potential earnings were dropping.”

He said most people who seek his advice regarding Uber were unaware of the costs involved.

“There are on-road costs, registration, petrol, insurance, tax and GST, and the depreciation on your vehicle is so extreme,” he said. “For me it was really precarious because if I were to have an accident I would lose my main source of income without any safety net.”