Economy

Uber Raises Prices in New York City, Citing New Minimum Wage Law

February 04, 2019 04:52·
A driver holds a phone with the Lyft app

A driver holds a phone with the Lyft app

Juno and Lyft say the minimum wage of $17.22 (after expenses) that was approved by the city council in December will make it impossible for their companies to compete with Uber, which still has the upper hand in most of the country including NY, the US' largest ride-hailing market. Additionally, Juno believes that even while spreading the utilization rate across all companies a driver is logged into, the utilization rate will still result in Uber being able to pay drivers less than Juno is required to pay.

Ride-hailing drivers in New York City are set to get a legally-guaranteed minimum wage on Friday, but new lawsuits filed Wednesday from two Uber competitors could put a wrinkle in their raise.

The companies, both Uber competitors, say the rule is "inherently flawed and fundamentally unfair".

Lyft claimed in court papers that the way the rule ties minimum pay to how often drivers have a rider in their vehicle gives "an automatic and perpetual advantage" to Uber, the largest company in the industry.

The TLC was given authority to set a minimum wage for ride-hailing drivers in August 2018 as part of a package of legislation that also set a cap on ride-hailing vehicles in New York City.

Lyft will not abide by the taxi commission's new pay rules, but explained that it will still increase driver pay in NYC, just with its own formula.

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The city's ruling on for-hire vehicle driver wages said Uber, Lyft, Gett/Juno and Via account for 75% of the ride-sharing business in New York City, with the overall trips booming from 42 million in 2015 to almost 159 million trips in 2017.

This week Lyft and Juno filed a lawsuit to challenge and delay the wage hikes. "They've failed repeatedly, and the TLC should not assist them in their efforts". Essentially, the method used to calculate the new driver rates entails a "roaming charge" where riders are paying higher prices in order to compensate drivers for their time on the road without a passenger.

After a one-hour hearing Wednesday afternoon in Manhattan, Judge Andrea Masley said that beginning when the rule takes effect, Lyft and Juno may instead pay into escrow the difference between the amount paid to their drivers and the $17.22 minimum. New York City also requires taxis to have special, expensive licenses called medallions, and increased competition from ride-hailing has seen the value of these medallions plummet, even pushing some heavily indebted drivers to commit suicide. The number is based on drivers' miles traveled plus time driving, which is then divided by "utilization rate".

However, Uber and Via, which also operate in New York City, will not participate. They complain that Uber and Lyft have come to dominate the market without having to follow the rules that apply to taxis. He said keeping the raise out of those drivers' pockets would backfire on the companies by creating a "competitive advantage for Uber". The company did not immediately respond to a request for comment.

Mayor Bill de Blasio tweeted that the lawsuit was "unconscionable", arguing that "the overwhelming majority of these companies' drivers earn less than minimum wage". Lyft, which is smaller with services only in the United States and Canada, seems to be focusing on being a stable company with ride-hailing as its core business.

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