Moneybox

Finally, NYC Is Doing Right by Lyft and Uber Drivers

An Uber/Lyft ride-hailing vehicle in New York City.
Spencer Platt/Getty Images

Did you ever wonder how much your Uber driver is making? Or how it is that so many drivers are always available whenever you need them? Well, New York City’s Taxi and Limousine Commission (TLC) had those same questions, and it commissioned a report to find out the answers. The results led them to take a bold and desperately needed step earlier this week, when New York City became the first city in the country to take action to protect workers shortchanged by the rough players in the gig economy. Specifically, the TLC set an earnings floor—sort of a minimum wage—for drivers for Uber, Lyft, and two other major app-based transportation companies (Gett/Juno and Via). The TLC estimates that 96 percent of drivers will receive a raise of almost $10,000 per year.

This raise is long overdue. The TLC-commissioned report, which came out in July, demonstrates the urgent need for action: Drivers’ median hourly take-home pay was found to be $14.25—below the citywide $15 minimum wage that takes effect at the end of this month—and they receive no overtime or benefits of any kind. Their income levels are so low that 40 percent receive Medicaid, and 16 percent have no health insurance at all. Nearly 20 percent of drivers receive food stamps, almost twice the rate of the overall local workforce. Most drivers bought their cars specifically for this job, and the company doesn’t pay for any of the costs associated with driving. And driving is the primary job for the majority of workers.

You might be wondering, why did the TLC need to set an earnings requirement when there’s already a state minimum wage? Amazingly, Uber, Lyft, and other app-based companies don’t consider their workforce subject to that law because they don’t treat their thousands of drivers as employees. Instead, they treat them as independent contractors, which is a problem because all of our workplace laws—minimum wage, overtime, anti-discrimination, safety and health laws, and others—cover employees and not independent contractors.

In fact, companies in many industries have begun to overuse the “independent contractor” designation for the same work that used to be done by employees. This trend is incredibly harmful because it deprives workers of important protections. It’s unfair to law-abiding businesses that hire employees and, as a result, have a hard time competing, and it’s bad for public coffers since the companies evade tax, unemployment insurance, and workers’ compensation obligations.

In the case of Uber and other app-based companies, the independent contractor designation is nonsensical: Does anyone really think each and every driver is actually an independent business on wheels, and it’s just super coincidental that they all came up with the exact same idea? The company often points to flexibility as evidence of drivers’ independence, but plenty of employees work flexible hours.

By engaging in the fiction that their workers are stand-alone entrepreneurs, Uber and similar companies have avoided the obligations that generally come with employing human beings, the most basic of which is to pay them an amount of money a person could possibly live on.

And this is where the TLC boldly stepped in. The agency sidestepped the question of employee status—it doesn’t have jurisdiction over that—and used power it unquestionably has to set a minimum pay requirement for drivers of $17.22 per hour, plus expenses. (This is the independent contractor equivalent of $15 per hour.)

This is the first time any city in this country has set a minimum pay rate for Uber, Lyft, and peers. Stated more baldly, this is the first time a city has required these app-based companies to comport with the most basic element of decency for a business in a civilized society: paying enough so your workforce can eat.

In this regard, New York is a bulwark against an ugly national trend: Uber has successfully pushed for laws in many states that favor the company’s approach of treating its workforce like independent contractors. More cities should follow New York City’s lead and set a minimum pay level for app-based drivers.

Uber and Lyft have responded, predictably, with ominous predictions of skyrocketing fares. But the TLC-commissioned report found that the companies’ business models rely upon having a large number of constantly unoccupied vehicles driving around; the pay-floor formula reduces the company’s incentive to do this, so the TLC estimates that the new rules are likely to lead only to a modest fare increase (50 to 75 cents per ride) and a slightly longer wait time (10 to 12 seconds).

That’s a pretty limited change for passengers, but very meaningful for drivers. And as TLC Chairperson Meera Joshi told me over email, “Don’t discount human empathy; most passengers are happy to wait a bit more and even pay a bit more if it means the person behind the wheel is able to sustain themselves and their family.”

Even after the pay floor, there’s still more to do. One obvious next step would be to guarantee that drivers will receive a certain percentage of the passenger fare. In fact, there is some precedent for this: New York’s employment agency law, which regulates job placement agencies, limits the fees that agencies can charge job-seekers for placing them in jobs. For an unskilled worker, the limit is 10 percent of the first month’s wage, which means that the worker must receive 90 percent of wages paid. This seems reasonable; after all, this person is the one doing the actual work.

And ultimately, drivers need the ability to collectively bargain, as was drivers in Seattle attempted to do, and drivers’ employment status needs to be resolved.

In the meantime, New York City is leading the way in cutting through the companies’ hype and demanding that drivers—without whom Uber and Lyft would not exist—should at least get a minimum level of pay at the end of the day. The companies may holler, but in the end, this bold step still places on these companies only a fraction of the responsibilities every other employer has. Even after this rule takes effect, the corner bodega will still have to do far more for its three or four employees than Uber does for its thousands of drivers. If the bodega on the corner can pay workers $15 per hour, it’s hard to believe that Uber can’t.