Technology Companies

NYC Sets a $17.22 Minimum Wage for Uber and Lyft Drivers

The New York City’s Taxi and Limousine Commission approved new rules yesterday that are designed to set a minimum wage of $17.22 an hour for Uber and Lyft drivers.

Last August, New York’s City Council also set a cap on new vehicle licenses for ride-hail services. The purpose of these measures is to regulate the competition ride-hail services present to traditional taxi companies and ensure a minimum wage for drivers.

New Yorkers are willing to pay a little more and wait a little longer so the people transporting them are able to provide for themselves and their families.”

“This first-time regulation to form a floor for app driver earnings and give a modest first raise is a long time in the making,” said Bhairavi Desai, executive director of the Taxi Workers Alliance in a statement.

“It’s the first real attempt anywhere to stop app driver pay cuts, which is an Uber and Lyft business practice at the heart of poverty wages.”

Jim Conigliaro Jr., founder of the Independent Drivers Guild, said in a statement. “All workers deserve the protection of a fair, livable wage and we are proud to be setting the new bar for contractor workers’ rights in America.

The Taxi and Limousine Commission claims these changes will increase the annual earnings by $10,000 a year. This remains to be seen. According to a study by the TLC, the majority of drivers earn $11.90 an hour. However, according to Uber, the median hourly rate (as of October 2018) for Uber drivers in New York City was $23.40 an hour ($468.00 a week) based on 20 hours a week. In contrast, the national median hourly wage for Uber drivers was $15.68. These measures would have certainly had more of an effect on the bottom line of drivers in areas with lower rates.

[These measures] will lead to higher than necessary fare increases for riders while missing an opportunity to deal with congestion in Manhattan’s central business district.”

Competing pricing models

Lyft and Uber argued it should be the market that determines fares based on the time of the day and demand for rides. In theory, this model reduces congestion. Drivers are rewarded with higher fees when there is a high demand. However, rates plummet when there isn’t.

Uber’s director of public affairs, Jason Post, said the new rules will lead to unnecessarily high fare increases for riders and fail to deal with traffic congestion in Manhattan’s central business district.”

In a statement, Lyft said these new rules “will undermine competition by allowing certain companies to pay drivers lower wages.” It called the new system “a step backward for New Yorkers.”

It’s not that ride-hailing companies are advocating a pure offer and demand model on principle. Uber also uses a route-based pricing that predicts what passengers are willing to pay based on the income level of their neighborhoods. Passengers from a wealthier part of a city, for instance, can expect to pay more whether they are traveling to or from a wealthier or poorer part of town.

According to the taxi commission chairman, Meera Joshi, these pricing models are missing the point. New Yorkers, she believes, “are willing to pay a little more and wait a little longer so the people transporting them are able to provide for themselves and their families.”