Can New York Rein in Uber?

Can New York Rein in Uber?

The ride-sharing app has disrupted the entire industry—and left drivers in the lurch.


Want to catch a cab in New York? Chances are, whatever kind of ride you hail, you’re not paying a fair price. That’s because there is no fare, whether you catch a standard metered yellow cab or opt for Uber’s “dynamic pricing,” that doesn’t leave drivers chained to unsustainable, highly volatile wages, aggravated by heavy vehicle expenses and punishing debts.

Now the agency that oversees the city’s for-hire vehicle industry, the TLC, has commissioned a study to explore raising app-based drivers’ wages. The analysis, by James Parrott of the New School’s Center for New York City Affairs and Michael Reich of University of California–Berkeley, outlines a scheme for boosting the lowest-earning drivers to approximately $15 an hour, aligned with the city’s phased-in rising minimum wage—and reactions from workers and the industry have diverged sharply.

Surveys of Uber drivers show the perils of the current system. Nearly one-fifth qualify for food stamps, and four in 10 rely on Medicaid (as independent contractors, drivers typically lack employer-based insurance and other benefits, despite the physical and mental stressors of the job.)

For the 85 percent of drivers earning sub-minimum wages, the plan proposed in the analysis would boost their total earnings per hour to about $17.22, which would, accounting for rest time, meet the $15 level, potentially lifting annual income by more than $6,000. The plan assumes overhead costs of about $20,000 per year (though labor advocates say the real cost tends to be higher).

The assumption is that, if earnings over a period of time dipped below the $17.22 level, Uber would pay the difference. The expectation is that Uber, which currently swallows as much as 25 percent of each customer’s payment, would then be incentivized to take a lesser cut of the fare.

The proposed pricing formula also adjusts rates for group rides with a $1 bonus per ride, encouraging drivers to take shared rides rather than individual sales. According to Parrott, with the premium, “We expect that shared rides will rise to at least 27.5 percent of all rides—so a lot of drivers will benefit from this provision.”

In theory, some workers might work less while collecting the minimum wage, but the analysis assumes that Uber might penalize drivers to discourage “coasting” on the base wage—a controversial form of sanctioning drivers through the app that drivers criticized as overly punitive. The analysis also anticipates a net increase in pick-ups per hour, which would leave some possibly working harder for the same pay. But the analysis assumes car utilization will not intensify significantly, just a few minutes per hour, which would not offset the increase in earnings.

Though it does not directly impact taxi drivers, the economists say the new incentives aim to bring more rideshare drivers, who are mostly immigrants, and full-time workers with limited education, toward a living wage and rational work schedule. In Parrott’s view, the study’s proposal is “fundamentally different from the existing narrative articulated by Uber and Lyft” and “lays a foundation for regulatory action.”

But for Uber’s harshest critics, the proposal stops short of placing meaningful limits on the controversial company. They say market-based pricing and unbridled growth of rideshare fleets are driving the crisis.

In an analysis of the TLC report by the New York Taxi Workers Alliance (NYTWA), staff attorney Zubin Soleimany argues that the pricing scheme relies too heavily on companies to voluntarily reduce their own profit margins. Historically the company has been low-balling driver pay, inflating profits as its fleet has ballooned to more than 70,000 cars citywide: “Basically, the [report] does promote an effective ceiling [that restricts] driver pay,” Soleinany argues, “because the notion that Uber or Lyft would choose to unilaterally raise those rates of driver pay above that required by the regulation is pretty hard to swallow, considering that over the last few years, those companies have consistently, and with deliberation, lowered driver pay.” Under the proposed scheme, he adds, “these drivers continue to earn similar levels, they just have to pay the wage supplement…and there would be little incentive for them to offer more than that out of the goodness of their own heart. There’s been a slow and steady march to lower driver pay over time.”

Overall, the company’s business strategy is based on the convenience of an up-front flat fare. But the price of this consistency for consumers is an unpredictable work flow and hyper-competitive, volatile incomes for drivers. The resulting extreme stress that drivers suffer has been blamed in part for sparking a recent spate of taxi-worker suicides.

The NYTWA, representing mainly cabbies and some rideshare-app drivers, has issued its own plan for a citywide cap on vehicles to manage what they see as the main source of downward pressure on wages. Moreover, the NYTWA wants the city to mandate that Uber drivers’ earnings per ride are pegged to 80 percent of the fare, and impose comprehensive vehicle-financing rules to reduce all drivers’ debts.

But the Independent Driver’s Guild, an Uber-approved worker organization led by the Machinists Guild, has taken a more moderate approach, welcoming the proposal as a first step. Earlier this year the group petitioned the company for a wage increase and a 20 percent cap on commissions.

Uber, meanwhile, wants to veer further toward deregulation, arguing that while it shares the goal of raising driver pay, the proposed scheme risks “shrinking the transportation pie; hurting riders through substantially increased prices and reduced service; and severely limiting the amount of time existing drivers can access the platform.”

The battle over ridesharing could be a harbinger for cities across the United States, Europe and Asia that are now scrambling to curb the chaos and unrest unleashed by Uber’s disruptive expansion. Some cities like Seattle are exploring collective bargaining and cooperative schemes; others are taking legal action against the dominant apps.

Back in New York, Uber has launched an ad blitz opposing pending proposals for a vehicle cap, reprising the propaganda war it waged last time the de Blasio administration sought to cap Uber’s growth. NYTWA Executive Director Bharaiv Desai denounced the company for “creating a race to the bottom that has pushed six hardworking immigrant New Yorkers to suicide.”

With cabbies around the world on an economic crash course, a lot is riding on New York’s quest to rein in Silicon Valley’s runaway profits.

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