New Study Finds Uber and Lyft Could Pay Drivers More

A new report out of Berkeley says that Uber and Lyft can afford to pay drivers more, based on data gathered from New York City’s minimum wage standard. However, there’s more to the story than just ‘paying drivers more.’ Senior RSG contributor Paula Gibbins looks into this study and shares driver sentiment below.

For years, drivers have been upset over the ever decreasing rate cards, meaning more work for less earnings overall. According to a recent report, this is not necessary.

In fact, the argument that Uber and Lyft have used, saying they can’t pay drivers more without raising the rates riders pay, is being put into question.


New York City’s Minimum Wage Standard

When New York City regulators passed a minimum wage in 2018, and put in place in February 2019, it was assumed that rates for riders would skyrocket in order to meet this minimum wage requirement.

For reference, the New York Taxi and Limousine Commission (TLC) minimum wage requirement is $17.22 per hour after expenses for NYC drivers, one of the first wage floors for drivers in the country.

At the time, both Uber and Lyft disagreed with the ruling. While they said they weren’t opposed to minimum wages, they did say the TLC requirements could lead to fewer rides and less take-home pay for drivers, as well as slower trips for passengers.

A report released on Tuesday, Dec. 8, 2020 shows the decrease in earnings did not come to pass. Instead, it shows driver pay was raised without any significant fare increases for riders.

In a study of 500 million trips from 2018 and 2019, the data showed drivers’ pay increased approximately 9%, or $1.33 per trip, for those rides completed in 2019, after the minimum wage was in place.

Driver Response

Of course, there are upsides and downsides to this scenario where a minimum wage is in place. One downside for drivers is that Uber and Lyft started to limit when drivers were able to log into their apps, based on the current demand in the area of the city they were trying to log in from. The regulation also ended up limiting how many drivers could sign up for the platform at any given time.

As we covered in a previous article, Lyft sent drivers the following messages about limiting the number of drivers on the road and giving certain drivers priority to drive over others – basically, incentivizing drivers to take all rides to maintain a high acceptance rate and be ‘allowed’ to drive. Uber sent out something similar to NYC drivers.

The main upside then being the increase in pay/guaranteed minimum wage for drivers.

Predictably, Uber and Lyft dispute the claims of the report. A Lyft representative stated, “This biased study ignores the real impact of these rules: supply controls resulting in ten thousand New Yorkers with no access to earning opportunities on our platform at all, plus a 25% price increase that hurts low income riders.”

An Uber spokesperson also claims that fares for riders did in fact increase and stated, “In just the first year of the rule’s implementation fares increased, tens of thousands of drivers lost reliable access to the app and there were massive driver protests against the law.”

According to drivers we spoke to, they stated the hassles they have to go through in New York City for ‘slightly more than minimum wage’ is ‘not worth it.’ Unfortunately, due to COVID, demand for rides has dropped in NYC, leading some drivers unable to log on because, without demand, drivers can’t log on – even to wait for rides.

One driver we spoke to said his fellow driver friends now do delivery work, instead, and make $300 per day for 6 to 10 hours. As he notes, ‘why drive people?’

Due to COVID, it’s hard to actually measure the impact of this minimum wage change on drivers right now. If demand for rides rebounds in 2021, the findings of this study may hold that drivers are, overall, better off.

However, as of now, the precipitous decline in demand for rides coupled with restrictions on the number of drivers allowed to drive has, from drivers we’ve spoken to in NYC, led many to leave driving altogether.

Drivers, do you think Uber and Lyft could raise driver pay without impacting what riders pay? Would you be willing to sign up for shifts to drive if it meant you were guaranteed to make minimum wage or more?

-Paula @ RSG