New York City regulators are moving towards significantly raising wages for drivers who serve Uber, Lyft, and other app-based companies. If this proposal is passed, the rules could make New York the first major American city to impose a minimum wage for ride-hail drivers.
The proposed rules from NYC’s Taxi and Limousine Commission (TLC) seeks to address a main issue of Uber’s business model: Its rides are less expensive and more comfortable than taxis, but many of its drivers are struggling to make a living from their salary.
Endorsed by the New School’s Center for New York City Affairs, the new rules would require companies to pay drivers at least USD 17.22 an hour and if their earnings fall below that, the companies would be required to make up the difference. According to the New York Times, companies can achieve this cost by lowering their commissions, which range from about 10 to 25% of passenger fares on average.
A minimum wage of USD 17.22 an hour after expenses would increase drivers’ earnings about 22.5% on average, or USD 6,345 per year. However, Uber said on Monday that it had major concerns over the proposal. The Company is worried that it would hurt “riders through substantially increased prices and reduced service.”
Zubin Soleimany, a lawyer for the Taxi Workers Alliance, criticized the proposal and believes it will create a race to the bottom that hurts both app drivers and taxi drivers. Mr. Soleimany believes the proposal has two significant flaws. App drivers could end up working harder over time for the same amount of money. Additionally, as drivers work a greater portion each hour, the amounts they earn per-mile and per-minute fall, leaving them no better off financially.
Another problem stated by the NYTimes is that drivers must be paid USD 17.22 an hour regardless of whether or not they choose to transport passengers. Therefore, drivers could choose to decline rides and collect the minimum wage while remaining idle.
In contrast, Professor Michael Reich, of the University of California at Berkeley, said that his calculations showed that the utilization rate was only likely to increase by a few percentage points. This means drivers would be working only a little harder for a significant increased salary.
With all this controversy, hopefully it’ll be sorted out before transit hits the fan next year, but given NYC’s track record to date, ride-hail drivers may be forced to wait.