Study: Chicago cabbies earn average of $12/hour

Major study contradicts claims that drivers earn less than minimum wage.

August 28, 2014

WBEZ/Odette Yousef
A new study commissioned by the City of Chicago finds that most cab drivers earn more than the hourly minimum wage.

A city-commissioned study on cabbie incomes has found Chicago’s taxi drivers, on average, earn more than $12 an hour. The report stands in sharp contrast to the argument by many cab drivers that they take home less than the state’s $8.25 hourly minimum wage.

The study, conducted by outside consulting firm Nelson-Nygaard, is more than a year in the making, and is the first truly comprehensive, scientific analysis of how much cabbies make in Chicago.

The study combines data collected from taxi credit card machines with cabbie feedback on a survey, to calculate revenues and costs in the profession. Ultimately, it looked at more than 10.6 million trips by cabs that were equipped with Creative Mobile Technologies taximeters over an eight month period, starting January 2013. A more limited analysis was also done on Verifone credit card machines, which confirmed that earnings calculations between the two technologies were similar.

“We wanted a thorough, complete study,” said Maria Guerra Lapacek, Commissioner of Chicago’s Department of Business Affairs and Consumer Protection. “A scientific look at what was the reality.”

Lapacek said the report validates some of the controversial industry reforms enacted by the city in 2012. “With the study we did learn that about 43 percent of the drivers are making more than $13 an hour,” she noted.

The study found that if cabbies work 50 weeks in a year, full-time drivers who hustle 51 hours each week net an average $111 per day, or $31,397 per year. Extended-time drivers who work 75 hours each week netted $120 a day, or $46,614 per year. Part-time cabbies, who would still have to drive close to a full work week -- at 31 hours a week -- would only net $57 a day, or $15,374 per year.

The averages mask a broad variation in incomes. At the low end of the scale, the study reveals that 20 percent of drivers net less than $30 a day, while at the other end the most productive drivers may be earning upward of $187 in a day.

Additionally, the study found that one-sixth of Chicago taxi drivers are, in fact, not breaking even each day. “It is somewhat puzzling that drivers continue driving a taxi if they are losing money or making nearly nothing,” the report states.

“Because of the city’s low fare, one-sixth of the workforce actually loses money in their chosen profession? That’s a huge problem for the city,” said Michael Persoon, an attorney with law firm Despres, Schwartz and Geoghegan. Persoon is helping to represent Chicago cab driver Melissa Callahan in her federal lawsuit against the city, which claims that she should be considered an employee of the city, and thus entitled to the minimum wage.

In a separate, more limited study that Callahan’s lawyers commissioned, University of Illinois Professor Robert Bruno used data from 689 taxi drivers’ Verifone credit card machines to calculate driver incomes. In contrast to the Nelson-Nygaard study, Bruno found that the drivers netted, on average, $8.11 an hour — less than Illinois’s minimum wage. This has been a critical part of her team’s argument that Chicago should raise taxi fare rates, which have remained unchanged since 2005.

Persoon says the new study does not undermine Callahan’s case.

“What it shows is that there are people who aren’t earning the minimum wage,” he said. The report shows between 30 and 40 percent of drivers are netting less than $8.25 an hour.

The Nelson-Nygaard study also found that by far, the biggest cost for drivers are their vehicle leases — accounting for nearly 40 percent, on average, of gross income. The lease burden increased dramatically for drivers under the 2012 reforms, when the City allowed cab companies to increase the maximum amount they could charge drivers for the use of their vehicles.

“Certainly the lease rates are something we’re looking at,” said Guerra Lapacek, who added that her office plans to announce several changes in the coming weeks to taxi regulations. “We are and have been working on reforms that are going to help with the taxi driver profit.”

Cab drivers, of late, have become increasingly vocal about changes they’d like to see. Despite several attempts over the years to organize, only recently have a significant number of cabbies begun to come together under the umbrella of AFSCME Local 31. The labor group has pushed City Hall to revisit policies pertaining to maximum fines for taxi violations, lease rates, and credit card processing fees, among other issues.

Guerra Lapacek would not say at this time whether she will consider recommending higher fares.

Odette Yousef is WBEZ’s North Side Bureau reporter. Follow her @oyousef and @WBEZoutloud.