New York approves nation's first minimum wage for Uber, Lyft drivers

New York City’s Taxi and Limousine Commission voted Tuesday to set a minimum wage for Uber and Lyft drivers, marking the first time a government in the U.S. has imposed wage rules on ride-hailing companies.

Under the new rules, which go into effect in January, companies are required to pay drivers $26.51 an hour in gross pay, or $17.22 after expenses. That’s slightly higher than the $15 minimum wage that the city requires all employers to adhere to by the end of next year, but is considered equivalent because drivers are independent contractors. About 85 percent of ride-hailing drivers currently make less than the minimum, according to an independent analysis commissioned by the TLC. For those drivers, the new wages will amount to an average annual pay raise of more than $6,300.

Related: Uber drivers win victory on unemployment insurance

Uber drivers have become a stand-in for a new kind of American worker, seen alternatively as micro-entrepreneurs with more flexibility than traditional wage-earners, or as powerless workers exposed to the full brutality of the free market. Putting a floor under their earnings adds a level of financial security that has been notably lacking from the gig economy. But while New York is home to the largest pool of ride-hailing drivers in the country, it’s also an anomaly in several key ways that could keep the TLC’s rules from spreading to other cities.

According to Uber, 80 percent of drivers in its 20 biggest markets work fewer than 35 hours a week, and more than half of its drivers shuttle passengers around for fewer than 15 hours a week. In New York, 60 percent of the drivers are full-time. Those drivers provide more than 80 percent of the total rides in the city. Ride-hailing drivers also hold commercial drivers licenses, in contrast to many other large cities. This gives New York’s TLC more power to regulate ride-hailing than most cities.

New York’s driving population is also unusually well-organized. Two groups — the New York Taxi Workers Alliance and the Independent Drivers Guild — had been pushing the TLC to implement wage rules, following campaigns to force ride-hailing companies to allow tipping and to cap the number of ride-hailing vehicles operating in the city. “New York City is once again passing landmark regulation to protect workers in the unruly gig economy,” said Bhairavi Desai, the executive director of NYTWA, in an emailed statement.

Both Uber and Lyft have said they’re in favor of a living wage for drivers, but opposed the TLC’s rules. The companies argued that determining a minimum wage in each ride, rather than over the course of a week, neglected to account for bonuses and other incentives it offers to drivers. An Uber spokeswoman predicted the TLC’s actions would result in higher fares and patchier service outside of Manhattan. “These rules would be a step backward for New Yorkers, and we urge the TLC to reconsider them,” said a spokesman for Lyft.

According to a report published in July by James Parrott and Michael Reich for the TLC, the new wage requirements will create an incentive for companies to increase the number of trips that each driver takes per hour. If they do, this would lead to longer waiting times. It would also mean fewer cars circling the streets without riders, which could help alleviate congestion. Parrott and Reich predicted the impact on both wait times and congestion would be minor.

Read more: 

• Uber drivers dealt a blow in quest for better pay and benefits
• Gig work, data privacy and other workplace trends to watch
• Contractors overlooked in Google’s sexual harassment policy overhaul

Copyright 2018 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.