Big Bucks Or Big Bust?

Big Bucks Or Big Bust?

Is the New Drivers’ Minimum Wage A Good Thing?

Okay, by now, you surely know about the new wage rise for professional drivers in NYC. This is a rule laid down by the Taxi and Limousine Commission and it demands a minimum hourly pay rate for Uber, Lyft and drivers of other ride-hailing services that is equivalent to $17.22 per hour. The increase comes into force this month and it will affect around 70,000 drivers.

The Independent Drivers Guild says the new rate will boost wages by approximately five bucks an hour, or around $9,600 a year. That’s a big chunk of change in an industry where workers spend long hours behind the wheel to support their families. An extra ten grand a year must help, and it’s seen as a welcome change in favour of the little guy.

Or is it? Is there is another side to the story – namely, if wages go up, what comes down?

The answer to this is given, rather expectedly, by the ride-hailing services themselves. The biggest of them, Uber and Lyft, are both saying that providing extra compensation to drivers will cause fares to rise, limit business competition and increase traffic congestion. These suggestions indicate that drivers may end up being sorry for what they wished for as rides dwindle, operators unaffected by the TLC rule undercut rates and more drivers must stay longer behind the wheel, clogging the streets. Tails I win, heads you lose? Maybe. But, most likely, not.

Let’s consider the Uber/Lyft arguments. Will fares have to rise to pay the extra $5 an hour or will the companies have to accept a smaller profit on the bottom line? Either way, it seems unlikely that it will affect drivers.

The fare increase is based on earnings per hour, not per ride. When the number of rides per hour that a busy driver can provide in NYC is factored into the $5 wage rise, it becomes clear that any fare increase per ride will be small – far too small to bother the average New Yorker trying to get home in the rain.

What about the statement that the wage rise will stifle business competition? Will it? The TLC rule does not affect smaller players and they will be able to operate outside the new minimum wage law, meaning they can set lower rates. This may be true, but it does not recognize the key factor in the demand for ride-hailing services – which is convenience.

Riders use services like Uber and Lyft because they’re quick, plentiful and better than public transport. The fare rate is a secondary consideration. A difference of one or two bucks per ride seems unlikely to dent demand. There is no advantage for the minnows here.

Finally, what about the congestion angle? In New York? Are you kidding There’s been congestion here since the horse and buggy. If TLC thought paying drivers more per hour would reduce this, they were wrong. If Uber and Lyft think paying drivers more will increase this, they are wrong. Drivers will work the hours they can, as long as they can.

The conclusion is that this is just an overdue recognition of the need to pay drivers something like a living wage. Nobody should have to work an 80 hours week just to make ends meet. The wage increase is good news.

Sure, it’s not big bucks, but fortunately, it’s not a big bust either.