New York’s taxi commission is considering a minimum wage for ride-hail drivers, a move that would help offset the expense of owning and driving a car in the city, allow the equivalent of paid time off and make New York the first city in the country to set minimum pay standards for the industry.
The ideas are presented in a sweeping study prepared for the city’s Taxi and Limousine Commission. The report calls for a $17.22 hourly minimum wage after expenses for Uber, Lyft, Via and Juno drivers, and it argues that the change could be implemented without imposing significant costs or time burdens on riders, drivers or the companies themselves. Eighty-five percent of the city’s ride-hail drivers are making less than the proposed pay floor, which would raise net incomes 22.5 percent — or $6,345 — annually, according to the study.
“The proposed minimum pay standard is designed to cover the drivers’ expenses and still provide the independent contractor equivalent of $15 an hour,” the study says. “Currently, pay for most drivers does not meet this standard.”
The study was prepared for the New York City Taxi and Limousine Commission by James A. Parrott, economic and fiscal policy director of the New School’s Center for New York City Affairs, and economics professor Michael Reich, chairman of the University of California at Berkeley’s Center on Wage and Employment Dynamics.
The authors argue that the pay floor is necessary because driving is a full-time job for the majority of New York’s ride-hail drivers; 60 percent of ride-hailing drivers in New York are full time, the authors say, and those drivers provide 4 out of 5 rides on the platforms in the city. New York has about 80,000 active ride-hailing drivers, the study says; if its drivers were classified as employees, the authors say, Uber would be the city’s largest private-sector employer.
The authors also advocate for a $1-per-pickup “bonus” for shared rides to compensate for the fact that drivers on the lowest end of the earnings scale pick up a disproportionate number of pooled rides.
The study concludes that the operating expenses of owning a vehicle in New York are not sufficiently covered by pay rates. The economists recommended an increase in gross pay to $25.76 per hour to ensure that drivers take home the equivalent of $15 an hour after expenses, including self-employed payroll taxes, plus 90 cents in paid time off.
“The pay standard includes a paid time off component, in consideration of the long hours worked by many drivers, and the beneficial effect paid time off would have on passenger, pedestrian, and driver safety,” the authors write.
Uber sharply criticized the proposal, arguing a wage floor could have broad and substantial impact on the quality of its service: Passenger fares would go up, the company said, the growth in the driver driver pool would level off, and customer wait times would increase.
“We share the goal that all full-time taxi and Uber drivers in NYC should earn a living wage, but the report’s proposals would get there by shrinking the transportation pie; hurting riders through substantially increased prices and reduced service; and severely limiting the amount of time existing drivers can access the platform,” Uber spokesman Josh Gold said in a statement. “We are concerned about the unintended consequences of implementing the findings in this report and believe many of the assumptions made about our industry are over-simplified to the point of flawed.”
Parrott and Reich addressed the impacts of the minimum wage in the study, citing simulation models that showed the pay increase was feasible for Uber — which is profitable in New York City — and “would not perceptibly increase passenger wait times.”
“Passenger fares may not increase at all, although we cannot rule out an increase of about three to five percent,” they wrote. “Rider wait times might increase by an average of about 12 to 15 seconds.”
Lyft argued similarly that the proposal would translate to higher wait times and more congestion as higher fares leave drivers waiting for dispatches. Ride-hailing companies also feared the possibility that drivers would provide less service, rejecting more rides, because they would be guaranteed an hourly wage.
“We have not seen the full report, but the new proposed policy appears to create financial incentives for drivers to provide less service,” Lyft spokeswoman Campbell Matthews said. “As a result, there will be more empty cars, more congestion, longer wait times for passengers, and, over time, less pay for drivers in New York City.
“This would be a bad outcome for all New Yorkers, and Lyft is committed to working with policymakers to find a better solution,” she said.
Lyft said that it disclosed its drivers’ earnings to the taxi commission in mid-June and that they approached the benchmarks set by the study — but did not meet them. A Lyft driver’s median gross pay in New York City in 2018 was $24.14 per hour, the company said, while the net pay was $16.41.
Beyond examining driver pay, the study also provided detailed demographic data on the workforces of Uber, Lyft and other ride-hailing companies. It found the workers were largely immigrants who do not have a four-year degree and face limited job prospects otherwise.
“Workers who entered driving typically faced relatively unattractive labor market options in food preparation, construction, retail sales, and building services — occupations where low pay is the norm or where subcontracting and misclassification of workers as independent contractors is widespread,” the study says. “Thus, many younger immigrant men likely were drawn into [for-hire] driving by the promise of better pay in the app-dispatch industry.”
But ride-hailing companies’ incentive to reduce wait times is directly at odds with drivers’ desire to earn a living, the authors concluded.
“To achieve quick response times, the companies require many idle drivers to be available at any given moment and at many locations,” the authors wrote. “This model creates a gap between the drivers’ desires to maximize their earnings — by maximizing trips per working hour — and the companies’ desire to minimize response times. In other words, the app business model works only if it keeps driver utilization low, which then keeps drivers’ hourly pay low as well.”‘
The study concluded that while Juno has the lowest utilization at 50 percent, Uber and Lyft are not far behind at 58 percent; Via, which launched as a shared ride platform but has come to offer solo rides, had the highest utilization at 70 percent.
“Low utilization means a higher number of drivers and vehicles are cruising while waiting for rides, which reduces hourly compensation for drivers as well as contributes to congestion,” the authors said.
But Uber said the authors failed to take into account that nearly half of drivers are “dual-appers,” meaning they drive with multiple apps. So while a driver may be idling as far as Uber is concerned, they could be dropping off a passenger on Lyft — and their vehicle is still being utilized.
The study comes amid tensions between for-hire drivers, city regulators and app companies. The rise of ride-hailing has taken a particular toll on the taxi industry, where the value of a taxi medallion has dwindled since Uber and Lyft arrived on the scene. Six taxi drivers have died by suicide in recent months as the financial tolls of the shift have set in, according to the New York Taxi Workers Alliance.
The Independent Drivers’ Guild, a group affiliated with the machinists union that represents more than 65,000 New York City drivers, welcomed the findings of the study — though it continued to review the proposal Monday.
“The new study confirms what we’ve been saying for some time — that drivers are in fact struggling and it’s time to act,” guild founder Jim Conigliaro Jr. said in a statement. “We are continuing to analyze the potential proposal, but without a doubt establishing minimum pay rules that raise driver pay is the single most important step the city can take to help these struggling working families and we thank the city for listening to drivers and pursuing it.”