Uber and Lyft may pull out of Minneapolis due to driver income

• The Minneapolis City Council is considering an ordinance that would increase pay for Uber and Lyft drivers.
• Supporters say this will ensure drivers earn at least the city’s minimum wage of $15.57 an hour.
• Uber and Lyft have threatened to pull out of the city if the ordinance passes.

Minneapolis is at the center of a debate over two important issues facing the ride-hailing industry. How much do Uber and Lyft drivers make? And what minimum wage should they be guaranteed?

The debate over pay for ride-hailing drivers has raged across the United States over the past year. Several Uber and Lyft drivers told Business Insider that ride-hailing services are less profitable than they used to be, with many citing the rollout of “pay upfront” programs and driver supply as key reasons. This is because of the large number of On Valentine’s Day, some drivers took part in nationwide protests to raise awareness of concerns about driver pay, safety and deactivation.

At the heart of the tension between drivers and ride-hailing companies is a disagreement over how much money drivers actually make. Drivers say Uber and Lyft’s revenue projections include vehicle costs such as gas and maintenance, as well as time spent driving to passengers and downtown, plus time spent between trips. It is argued that this has not been taken into account.

“Workers who rely on Uber and Lyft as their primary source of income typically find it very difficult to make ends meet,” said Erin Hutton, a sociology professor at the University at Buffalo.・Told Insider. “The hidden costs of this work add up, and income is uneven and unstable.”

On March 7, the Minneapolis City Council voted 9-4 to require ride-hailing companies to pay drivers $1.40 per mile and $0.51 per minute when passengers are on board, at least $5 each. passed an ordinance guaranteeing the income of Travel excluding tip. These criteria apply only to intra-city travel.

Minneapolis Mayor Jacob Frey vetoed the ordinance on March 8, arguing for a guaranteed low wage of $1.20 per mile or $0.35 per minute. But the City Council could get the nine votes needed to override the veto, and a vote is expected on the 25th. March 14th.

Uber and Lyft have threatened to pull out of Minneapolis if the ordinance is passed and takes effect by a specified May 1 deadline. Lyft said the city’s proposal would nearly double fares for passengers, which could reduce demand and ultimately make drivers worse off.

In a statement provided to Business Insider, Lyft said, “If passed, this bill would force Lyft to cease operations in Minneapolis, and likely in other parts of the state when it goes into effect.” said.

Uber told BI that if the proposal goes into effect, it would be forced to exit its ride-hailing business in Minneapolis.

“Once this ordinance becomes law, we look forward to working with drivers, passengers, and Congress to bring ride sharing back,” a company spokesperson said.

Will Uber and Lyft really shut down Minneapolis?

Minnesota isn’t the first place. We have taken steps to address drivers’ concerns. New York City, Washington state and California have introduced minimum wages for drivers, and proposals are also being considered in Chicago and Massachusetts. For example, Washington state’s 2022 statewide standards guarantee drivers in Seattle will earn $1.38 per mile, $0.59 per minute, and a minimum trip of $5.17, and the Minneapolis ordinance This is the same number as the proposal.

Uber and Lyft are not leaving markets like Seattle, but the companies say adopting Seattle-like pay levels in Minneapolis is unsustainable for customers and drivers. Both companies argue that Seattle residents are financially better equipped to handle the fare increases. Similarly, due to the high cost of living in Seattle, drivers definitely need higher deposits.

But there may be another reason why Uber and Lyft have pushed back particularly hard in Minneapolis. Washington state law stipulates that drive companies remain independent contractors rather than employees, ensuring the ride-hailing giant won’t be left on the hook for things like health insurance and overtime pay. . Axios reports that Minnesota lawmakers have no interest in including a similar provision.

Alexandria Ravenel, an assistant professor of sociology at the University of North Carolina, told Business Insider that it remains to be seen whether Uber and Lyft will ultimately leave the city if the ordinance passes.

“It’s a common threat that these platforms will exit the market,” she says. “But it turns out that when they finally start paying workers better wages, they’re still OK.”

Sergio Avedian, Uber driver and senior contributor to gig driver advocacy blog and YouTube channel Rideshare representatives told BI they believe Uber and Lyft’s threats are a “bluff.” He said both companies have threatened to exit the market in the past, but only in 2016, when Austin began requiring ride-hailing companies to perform fingerprint background checks on drivers.

Uber and Lyft returned to the market in 2017 when those requirements were relaxed, but Avedian said ride-hailing app Ride Austin was able to operate without issue during that time.

Still, some Minneapolis drivers are concerned about the possibility of losing the ride-hailing companies that have provided many of them with a valuable source of income.

Joe Pearce, an Uber and Lyft driver in Minneapolis, told BI that both of the mayor’s and City Council’s proposals could mean big changes for drivers. But he would be willing to accept a more modest victory if it keeps Uber and Lyft in the city.

“Any driver would say, ‘Yes, please give me $1.40 per mile and $0.51 per minute,'” he says. “But I think at some point you have to be realistic.”

Lauren Balazs, a full-time driver in Minneapolis, told BI she’s worried the City Council’s proposal will hurt her ride-hailing business.

“We’ve done the math and it’s going to increase fares by 70% to 100% and disrupt supply and demand in Minneapolis,” he said. “Needless to say, Uber and Lyft may not be bluffing.”

some organizations They also expressed concern about the impact of fare increases on low-income and disabled people who rely on ride-hailing services.

“This is more multifaceted than a unilateral vote on driver pay,” Sheri Wegner, executive director of ConnectAbility, a nonprofit that provides services to people with disabilities in Minnesota, told the Star Tribune. Told.

The impact of Uber and Lyft’s exit will also affect drivers, as many of them also rely on ride-hailing services as a significant source of income. Some of them plan to use the city’s taxi services as a back-up plan.

Avedian said it’s highly questionable whether the company will ultimately lose its ride-hailing service.

“45 days is a long time. Anything can happen,” he said, referring to the May 1 deadline. “Let the game begin.”

The question of how much drivers actually earn fuels debate

The city council’s ordinance aims to ensure drivers earn at least the city’s minimum wage of $15.57 an hour, after vehicle expenses and other expenses are deducted.

A state-commissioned study released March 8 found that drivers in the Twin Cities metro area earned $13.63 an hour in 2022, excluding expenses. The study estimates that a driver can ensure he receives the city’s minimum wage if the minimum wage is $1.21 per mile and $0.49 per minute.

“The proposal that the City Council put forward was wrong,” Mayor Frey said at a press conference Tuesday. “Their stated position was that this is a way to bring rideshare drivers up to minimum wage. In reality, there is a substantially lower rate that gives drivers minimum wage and also covers their expenses. .”

Uber and Lyft disputed the way the study calculated driving costs. Uber called the study “seriously flawed,” and Lyft said much of the research was “nonsense.”

Uber told BI that in Minnesota it supports a statewide minimum income guarantee of $35 per active hour (the time from pickup to trip completion), excluding operating expenses. Lyft said it supports a statewide guarantee to “operate sustainably and affordably for our riders.” Lyft said in February that the typical U.S. driver earns about $23 per hour of activity, not including expenses. Uber announced in November that the average driver earns $33 per hour, excluding expenses.

In Minneapolis, a debate over minimum wage for ride-hailing drivers has been going on for more than a year. Last May, Minnesota Governor Tim Walz vetoed a bill that would set minimum wage standards for Uber and Lyft drivers. In August, the Minneapolis City Council passed a similar ordinance by a 7-5 vote, but an attempt to override the veto failed.

Last year, Uber and Lyft began paying drivers at least $5 per trip for all trips within Minneapolis. But supporters of the ordinance say it doesn’t go far enough.

Are you a gig worker willing to share your story about pay, schedules, and tips? If so, contact this reporter. jzikula@insider.com.