New York Caps New Ride-Share Licenses, May Establish Minimum Wage for Drivers

New York Caps New Ride-Share Licenses, May Establish Minimum Wage for Drivers

The New York City Council passed legislation on Wednesday to put a one-year cap on for-hire vehicle licenses and to empower the city government to set a minimum wage for ridesharing drivers, in a crackdown on the largely unregulated growth of platforms like Uber and Lyft, the New York Times reported:

The proposal to cap ride-hail companies led to a clash among interest groups with taxi industry officials saying the companies were dooming their business and Uber mounting a major advertising campaign to make the case that yellow cabs have a history of discriminating against people of color.

Mayor Bill de Blasio and Corey Johnson, the City Council speaker, said the bills will curtail the worsening traffic on the streets and improve low driver wages. … But Uber has warned its riders that the cap could produce higher prices and longer wait times for passengers if the company cannot keep up with the growing demand.

New York is the largest market for Uber in the US, but already regulated ridesharing more stringently than many other American cities. To address concerns about unfair competition from the local taxi industry, New York requires drivers to obtain special licenses from the city’s Taxi and Limousine Commission, along with commercial liability insurance and special plates for their vehicles, which must meet certain eligibility criteria.

The new will not affect Uber and Lyft drivers who are already licensed to operate in the city, but will pause the issuing of new licenses immediately while the city studies the effects of the rise of ridesharing on traffic, driver wages, and the local economy.

Vox writer Alexia Fernández-Campbell explains how rapidly the emerging industry has changed the fabric of the city, and why its critics say these changes are unwelcome. The number of rideshare drivers in New York has grown exponentially in just the past three years, from 12,500 cars affiliated with the four leading apps in January 2015 to 78,000 last month.

If Uber classified its drivers as employees rather than independent contractors, it would be the largest private employer in the city. Many of these drivers, however, are having a very hard time making a living:

In New York City, the unrestricted growth has triggered serious financial strain on the city’s taxi drivers, and has even made it hard for Uber drivers to compete and earn a decent living. This dynamic was thrust into the spotlight recently, with news that six professional drivers in the city have died by suicide over a period of 12 months in 2017-’18,including three taxi drivers who were struggling to make ends meet. …

Economists at the New School and the University of California Berkeley published a report in July with some limited pay data, and they came to some alarming conclusions. For one, they discovered that driving for ride-hailing apps in New York City is not really a part-time job for people who want to earn extra cash. More than half of their drivers are ferrying around passengers on a full-time basis, and about half of all drivers are supporting families with children on that income. Their earnings are so low that 40 percent of drivers qualify for Medicaid, and about 18 percent qualify for food stamps.

The Big Apple has been mulling new regulations on Uber and its competitors for several years now, with a new effort building up steam over the past month. In early July, the Times reported that city regulators were developing a formula that would effectively establish a minimum wage for rideshare drivers:

If a driver’s earnings fall below $17.22 per hour over the course of a week, the companies would be required to make up the difference. The study suggested the companies could absorb this cost partly by lowering their commissions, which range from about 10 to 25 percent of passenger fares on average. The median net hourly earnings in the industry were about $14.25, the study found. …

The New York pay rules would apply to four major car service apps — Uber, Lyft, Via and Juno — all of which provide more than 10,000 trips each day in New York.

The pay floor and other rules were recommended in a report commissioned by the TLC from James Parrott of The New School’s Center for New York City Affairs and Michael Reich of UC Berkeley’s Center on Wage and Employment Dynamics. Last month, Quartz’s Alison Griswold delved into the report’s other recommendations, which include creating “a natural, dynamic cap on drivers based on utilization”:

You can think of utilization as the share of time during which an Uber driver has a rider relative to total hours spent logged into the app, which includes time commuting to and from home, cruising for a fare, or driving to pick up a passenger. Parrott and Reich propose that each company be given a utilization rate, as measured by the TLC in the previous quarter. In 2017, the TLC calculated a 58% utilization rate for Uber and Lyft, 50% for Juno, and 70% for Via.

That then gets plugged into a formula to set a per-trip pay rate based on projected per-minute and per-mile expenses … Uber can still have as many drivers on the road as it wishes. But the less work each of those drivers has, the more Uber has to pay.

The city has instead opted, at least temporarily, for a hard cap on new drivers. Whether and how the report’s recommendations are put into place remains to be seen, now that the commission has received the City Council’s blessing to impose wage standards on the industry.

The gig economy is also facing new regulatory challenges in New York at the state level.A New York State unemployment insurance appeals board ruled last month that three Uber drivers and “similarly situated” workers should be considered full employees for the purposes of eligibility for unemployment benefits. Uber downplayed the significance of the ruling, but labor advocates and employment attorneys said it could set a broader precedent for ride-hail drivers to be classified as employees in New York.

Uber’s latest drama in New York comes just two weeks after the company won an appeal to regain its license to operate in London as a taxi service. In resolving this case, Uber agreed to stricter oversight by transport authorities the UK capital; however, its license was only renewed for 15 months. London is one of Uber’s most lucrative markets outside the US, with 3.6 million riders using the app at least once every three months.