UBER: CHANGING DRIVER PAY WILL INCREASE RIDE COSTS
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 taxi commission has the power to adopt the rules without the support of Mayor Bill de Blasio or the City Council, but the mayor said he prefers to address the driver pay problem through the City Council.
Cities around the world are grappling with how to regulate the company. Seattle was the first city to approve a law allowing Uber and app drivers to unionize, but the measure has faced a legal challenge. The mayor of Honolulu recently vetoed a bill to cap price increases by Uber during busy periods. In London, Uber recently won back its license to operate after agreeing to stricter government oversight.
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.
“This is an important step in addressing one of the many pressing challenges that face the for-hire and taxi industries today,” said the taxi commissioner, Meera Joshi.
Uber responded that it had major concerns over the proposal. Alix Anfang, a spokeswoman, said in a statement that the company worried that it would hurt “riders through substantially increased prices and reduced service.”
Drivers across the for-hire vehicle and taxi businesses say they are not making enough to pay their bills or support their families.
The study is a rare glimpse inside New York City’s booming ride-hail industry. It found that about 40 percent of drivers have incomes so low that they qualify for Medicaid and about 18 percent qualify for food stamps. Some drivers bought vehicles, enticed by claims that they could make as much as $5,000 during their first month of driving, and now feel trapped.
New York City is considering a broader series of regulations for Uber, including a cap on vehicles, as debate has intensified not only over pay but about worsening traffic from the flood of for-hire cars.
The city’s taxi commission hired two independent economists to study its pay proposal, which has not yet been formally introduced. Joshi, who has said she wants wages to be raised, said the findings would inform the new policies being considered by her commission and the City Council. Though the commission can adopt the rules on its own, Joshi was appointed by de Blasio and is likely to defer to him.
De Blasio’s office said the city would not “move in any direction until we review the report and the mayor makes a decision” but that the mayor supported a “comprehensive package” to address the challenges facing the taxi and for-hire vehicle industry.
De Blasio and other elected officials might be reluctant to start another bruising battle with Uber, which launched an aggressive attack against the mayor in 2015 when he tried to cap its vehicles.
A minimum wage of $17.22 an hour after expenses would increase driver earnings by about 22.5 percent on average, or $6,345 per year, for those who would get increases under the proposal, according to the study by the independent economists. The proposal aims to bring pay in line with the $15 minimum wage that the state is moving toward while considering the challenges the drivers face as independent contractors. The study’s findings and recommendations did not focus on yellow cabdrivers.
In New York, the taxi commission sets rules for taxis and private companies that offer for-hire rides. In the past, the commission has approved regulations to establish a lease cap on what taxi garages can charge drivers and to require companies like Uber to offer more wheelchair-accessible vehicles.
Some drivers would still make substantially less than $17.22 per hour because their expenses are much higher than the allowance.
Behind the proposed hourly minimum wage is a sophisticated arrangement designed to make the entire app-based system more efficient. Its centerpiece is an incentive for the app companies to increase their so-called utilization rates — that is, the portion of each hour in which drivers are ferrying a passenger.
The authors say this incentive would address a key inefficiency of the current system, which is that companies like Uber and Lyft lure too many drivers onto the road as a way to lower wait times for passengers. This oversupply depresses wages, since drivers can only earn money when they have a passenger in their car.
The study, which relied primarily on data collected from the companies by the taxi commission, was written by James Parrott, of the Center for New York City Affairs at the New School, and Professor Michael Reich, of the University of California at Berkeley.
Zubin Soleimany, a lawyer for the Taxi Workers Alliance, a group that supports professional drivers, criticized the proposal for accepting the general pay structure of the app industry, which, he said, has created a race to the bottom that hurts both app drivers and taxi drivers. His group prefers requiring the apps to charge the regulated taxi fare at a minimum, and giving drivers a guaranteed percentage of that fare.
The Independent Drivers Guild, another group that represents drivers, had a more positive reaction, saying that establishing a minimum pay rate was the most important step to help drivers.
The proposal has at least two potentially significant flaws. Soleimany said app drivers could end up having to work harder over time for the same amount of money. As drivers work a greater portion of each hour, the amounts they earn per-mile and per-minute decrease, leaving them potentially no better off financially.
But in an interview, Reich said his calculations showed that the utilization rate — the measure of busyness — was only likely to increase by a few percentage points, meaning drivers would be working only somewhat harder (about 2.5 minutes per hour on average in a plausible scenario) for significantly more pay (about 22.5 percent more per hour on average).
“We think they’ll see this as a good deal,” Reich said.
A second problem is the potential for gaming the new system.
Because drivers must be paid $17.22 per hour regardless of whether or not they earn that amount by transporting passengers, they could choose to simply decline rides and collect the minimum wage while remaining idle.
Reich said the app companies are able to identify app drivers who decline too many rides. But the companies are loath to penalize drivers, whom they classify as contractors, for declining rides because that would imply an employment relationship.