Uber, Lyft Cave to Minnesota Legislature on Minimum Wage Standards
After a year long fight, the companies agreed to a $1.28 per mile and 31 cents per minute minimum wage.
Ride-sharing giants Uber and Lyft will stay in Minnesota because the state’s legislature agreed to reduced minimum pay standards.
The companies threatened to leave the state after the Minneapolis City Council passed an ordinance mandating a higher minimum wage for drivers. The two sides fought for a year.
“We have reached an agreement with Uber and Lyft that we will set a state-wide rate that will be $1.28 per mile and 31 cents per minute,” boasted DFL House Majority Leader Jamie Long.
Both companies would have left the state on July 1.
From The Star Tribune:
The agreement supersedes a recent ordinance from the Minneapolis City Council on pay standards and sets minimum rates statewide at $1.28 per mile and 31 cents per minute. If the bill becomes law, the new rates would take effect Jan. 1.
Although the pay rates in the bill were lower than the drivers wanted, they were happy to see a deal come together, said Marianna Brown, vice president of the Minnesota Uber/Lyft Drivers Association.
The ordinance would have required the companies to pay drivers $1.40 per mile and 51 cents per minute.
The companies countered with 89 cents per mile and 49 cents per minute.
The legislation came back with $1.27 per mile and 49 cents per minute.
When the legislature rebuffed the counter, Uber and Lyft threatened to leave Minnesota.
Uber and Lyft again said no.
But they agreed to the $1.28 per mile and 31 cents per minute.
“We have long supported a minimum earnings standard and increasing driver pay in smart, deliberate ways, which is why earlier this year we announced a new commitment where drivers will always make at least 70% of the weekly rider fares after external fees,” stated Lyft. “This legislation builds on those efforts and marks an important compromise that allows Minnesota rideshare drivers to keep earning with Lyft. Through direct engagement with all stakeholders, we have found enough common ground to balance a new pay increase for drivers with what riders can afford to pay and preserve the service. We look forward to continuing to serve both riders and drivers across the state for the foreseeable future.”
Uber released a statement that showed the company isn’t that pleased with the resolution:
“We applaud the tens of thousands of riders & drivers who sent close to 100,000 emails to legislators – your voices were heard. While the coming price increases may hurt riders and drivers alike, we will be able to continue to operate across the State under the compromise brokered by the Governor.”
The companies shouldn’t have threatened to leave Minnesota. The lawmakers called their bluff. Now, the rates apply to all Minnesota drivers, not just the Minneapolis drivers.
The companies even had facts on their side (emphasis mine):
A recent study commissioned by the Minnesota Department of Labor and Industry found that, after factoring in expenses, 50% of Uber and Lyft drivers in the Twin Cities metro area earned $13.63 per hour or less while driving. In the rest of Minnesota, 50% of Uber and Lyft drivers earned $8.12 per hour or less.
Supporters of the original Minneapolis measure had said the city’s rate would ensure that companies pay drivers the equivalent of the city’s minimum wage of $15.57 per hour. However, the study found that a lower rate of $0.89 per mile and $0.49 per minute would meet the $15.57 per hour goal.
I wonder how many states will follow now that they know Uber and Lyft could cave.
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Comments
Anytime the government gets involved with wage issues the only consistent winner is the government who gains more tax revenue. It might be temporary if businesses cut back or go under. But they’re in it for the long haul grabbing what they can, when they can. And politically, they get to play the part of “supporter of the working class” even if many of those workers eventually lose their jobs or hours because of the decisions made.
Well the staff are consistent winners too obviously, and the economy as this increases spending power for a big group of people.
You don’t get economics, do you?
I do actually, and the experiences of both the US and many other countries make your statement a tad silly. The economy adapts to gradual wage prices perfectly well. The main issue in the US is the stalling of annual minimum wage increases that make the eventual increase more of a shock. I’d also point out that you being unable to actually provide a substantive response strongly suggests projection on your part.
No, it just means I didn’t want to write a terribly long response to everything that was wrong in your comment.
And your response to it validates my statement. “annual minimum wage increases” is called “wage control” and provides additional impetus for inflation, eliminating the supposedly beneficial effects of the increases.
It’s communism. And the overwhelming evidence is that it doesn’t work.
If by “the staff” you mean employees, I have to disagree. Perhaps they are helped in the short term, but the bottom line is that when the costs of something increases, demand decreases. To maintain viable profit, Uber in MN will necessarily have to increase prices to support the increased wages. That will make Uber less attractive to customers and will likely decrease demand.
Although the pay per ride for uber drivers may increase, the number of rides will decrease and the end result will be lower overall daily pay…or fewer drivers employed.
Even if that doesn’t happen and demand remains high, the expense to the riders will be higher, so they will have less disposable income to use in other industries so profits (and pay) in those other industries will decrease.
There is a difference between “money” and “wealth”. Money is only an indicator. A communication medium indicating relative values of goods and services. Absolute values of goods and services are wealth. Artificially increasing the value of a good or service relative to others does not change the absolute value of that good or service within the economy and, therefore, the relative value within the total “wealth” pie must be made up somewhere else.
An oversimplification to be sure, but the principle is valid. Arbitrarily mandating the price of goods and services without consideration of the actual value of those goods and services within the economy is nothing more than robbing Peter to pay Paul. Basically another form of redistribution of wealth…i.e. government sanctioned theft…which is, at best, a wash and, more typically, causes a net negative impact overall.
“Uber in MN will necessarily have to increase prices to support the increased wages. That will make Uber less attractive to customers and will likely decrease demand.”
Actually no, not necessarily. Uber will want to remain competitive and therefore there will be a market decision on how much of the cost rise will pass on to the consumer vs absorbing the cost in order to remain competitive. They aren’t a monopoly and therefore the market reaction will be something to be judged. The only situation where the shit hits the fan is if the profit margin becomes too low but there really isn’t any suggestion of that. Its a company that has had a steady increase in profit margin so that doesn’t seem to apply.
“Although the pay per ride for uber drivers may increase, the number of rides will decrease and the end result will be lower overall daily pay…or fewer drivers employed.”
This is speculative and dependant on market conditions. I’m not clear that you can justify this statement.
“Even if that doesn’t happen and demand remains high, the expense to the riders will be higher, so they will have less disposable income to use in other industries so profits (and pay) in those other industries will decrease.”
Your assuming the total cost rise will pass onto the consumer, this is very unlikely
“An oversimplification to be sure, but the principle is valid. Arbitrarily mandating the price of goods and services without consideration of the actual value of those goods and services within the economy is nothing more than robbing Peter to pay Paul.”
No its not, its a means by which the workers get a fair wage without the corporate suits run of with all the money having done fuck all to earn it.
“Actually no, not necessarily. Uber will want to remain competitive and therefore there will be a market decision on how much of the cost rise will pass on to the consumer vs absorbing the cost in order to remain competitive.”
There is no magic involved in economics – “Absorbing” costs don’t make them disappear. “Absorbing” costs means decreasing profit. Decreasing profit means reduced return on investment to investors which in turn means less investment and less value to the company. There are many other implications as well that can negatively impact the health and long term survival of a company.
“This is speculative and dependant on market conditions. I’m not clear that you can justify this statement.”
No more speculative than any of the assumptions made by the people who advocate for minimum wages and decry profits made by companies.
In fact, my speculations are based on proven economic principles borne out by history.
“No its not, its a means by which the workers get a fair wage without the corporate suits run of with all the money having done fuck all to earn it.”
So you’re a socialist. Got it. Your view of economic principles is, therefore, based on fantasy, not the real world.
Uber is not any deal.
A couple of weeks ago, I flew into LaGuardia and needed to get to Brooklyn.
For both my trips to and from Brooklyn, I checked Uber’s pricing and decided to take a taxi.
In both trips, the taxi was less expensive.
But taxis aren’t cool and ultra-techy.
And, at least in that part of the country, are filthy, malodorous, and driven by surly, rude people who will long-haul an out of towner if they think they can get away with it.
Really depends on the airport and the local market. Its much easier to get reservation from trusted taxi service in your home town to take you to the airport for flight departure. However, when you are arrive at different airports, uber service can be superior to the airport taxis waiting to pick up passengers and often use drivers who have difficulty communicating in english, and say the meter just changed to different rate because “reasons” etc.
A lot of taxis use flat rates for airport runs, so it’s unlikely that they’re going to blame the meter or whatever.
The exception would be if the passenger pulled a stunt like “oh, can you stop off at X first? It’s ‘on the way,’ and it’ll only take a ‘minute.’ ” Then, yeah – you can expect a metered ride.
From what I understand, and I could be wrong, many taxi companies are locked into a flat rate for airport trips due to signed agreements with the city. It’s both good and bad, since a taxi passenger is basically held hostage at the airport end if the driver suddenly ‘finds’ an extra $100 on the meter, but it also locks down the drivers to sometimes zero-profit trips if they don’t get a large enough tip.
I’ve only taken a dozen or so Uber trips (because I’m a horrible shut-in) but they’ve all been very crisp, clean, direct from A to B, even with the drivers who can’t speak English (or say they don’t to make me shut up because I’m a horrible blabermouth in the car also). I always tip well on the app, and also keep a $5 tucked in under my watchband to pass to the driver at the destination because what the IRS doesn’t know, won’t hurt either of us.
When I used to do a lot more traveling, I would usually book my airport-to-hotel in advance with a company like Gray Line. You get a private car, they’re waiting for you when you arrive and you have a fixed cost that you’ve already taken care of in advance. IIRC, the last time I went to Prague, the limo service to and from the airport there cost me $50 to and from. The estimate for a taxi was $65 or so and I didn’t really even look at Uber or Lyft because of the amount of info they wanted to sign up,
Lyft and Uber are Uber-left companies who support the very people that foisted this legislation on them.
They deserve it.
But, the drivers and dispatchers do not.
Uber/Lyft drivers will have positive cash flow if the measurement is only the marginal cost of operations (gas oil tires, etc)
Uber / Lyft drivers will almost always have negative income when factoring in all the fixed costs (non variable costs) such as cost of the vehicle, insurance, etc.
If the full time job is Uber Lyft, then the driver will almost always lose money. If the job is strictly part time to pick up a little extra cash, then will be okay since the fixed costs wont change (and hopefully have a full time job elsewhere).
But you just did math and used common sense. That’s not allowed.
You mean the INTERSTATE commerce clause, I assume.
Govt arguably has been arguably overstretching its authority under that umbrella for decades. Not applicable to single-state legislation.
That said, a statewide minimum wage has precedent, and this is just another flavor of that. Also, the mileage part is, imho near adequate to cover the average operating costs of the average motor vehicle over its life time. AAA puts that as $0.72/mile in 2020. Of course, tgat was before Bidenomics near doubled the cost of gas. And jumped everything else. Hopefully the average Uber/Lyft driver will own a car with below average operating costs.
The big question is the $0.31 per minute wage. A 15 minute ride would run $4.81. Which works out to be over $18/hour. Unfortunately, the time actually spent with passenger is only a third of the equation, the driver has to drive empty to the pickup point and empty to go either home or the next pick up point. I’m assuming there’s no mechanism in the law to address that, it being almost impossible to legislate, so that theoretical $18/hr will almost never be achieved.
That said, I’m sure some drivers in some markets will benefit from this. Drivers being able to decline uneconomic pickups. Will be interesting to see what happens to cities near the state border, new wages vs old wages vs what state law applies…..
I would love to see people start to show their fingers to the gov’t and tell them “You have no authority to tell me how much I can pay my employees who have agreed to work for that wage.”
If Uber (or whomever) doesn’t pay you enough for what you think your labor is worth, then go find another employer. If you can'[t find anyone that will pay what you think you deserve, then – barring you finding them conspiring against you – maybe it’s your own evaluation that is akilter.
Govt has very strong constitutional authority under the commerce clause.
Whether the govt is wise to use that constitutional authority in the manner they do is a separate question.
The federal gov’t has some power.
And that power is circumscribed by the “interstate” part of the clause.
And, no, I don’t think the Founders would have seen that as ANY business of the gov’t (at any level – Article 4, Section 4), to regulate wages. Certainly not part of interstate commerce.
Original business model the drivers were independent contractors, and tipping was optional. Many drivers don’t want their wage rate dictated by government.
To the extent drivers don’t know how to properly evaluate their total costs of operating a vehicle, maybe they’re being taken advantage of by the gig companies. But hey, it’s supposed to be a free country. If a potential driver perceives themselves to be better off by driving, should government intervene in this contract between willing parties? Maybe government schools should actually teach critical thinking and personal financial skills so drivers can make good decisions? But those skills might then be used against blowhard politicians in the voting booth, so that’s a nonstarter.
Seems to me that politicians will continue to use gig companies as political targets, and eventually the companies will need to actually walk away from a city or state, then watch what happens when people who use the services can’t get them and drivers are suddenly unemployed.
government control>>>>>blame the companies
socialism>>>na zi run economy
not opinion BUT FACT!!
Minneapolis-St. Paul was over a barrel as the result of the city council’s ordinance and the Uber/Lyft threat. The rideshare companies have pretty much put the taxicabs out of business in MSP; if I recall there are something like 40 registered cabs. The airport would have been a mess. I wouldn’t be surprised if the airport’s main tenant, Delta Airlines, was in the background demanding that something get done to fix the problem.
But the city council knew its ordinance had to be changed and deferred to the legislature to take the easy way out. Notice I didn’t say repeal. There wasn’t any talk of that. Plus the fact it is now statewide is going to make things interesting for rideshare drivers and customers along the state borders, especially the ND/MN cities of Grand Forks-East Grand Forks and Fargo-Moorhead. I’m sure the companies’ management and those looking to replicate what just happened in MN will be paying close attention to how things play out in those places, particularly changes in ride demand, the number of drivers who refuse to cross state lines, and drivers who many curtail or quit driving.
“may”, not “many”