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.