A couple of weeks ago, the Minneapolis City Council passed an ordinance to increase ride-share driver pay to $1.40 per mile, and despite Mayer Jacob Frey’s attempt to veto the measure, the council was quick to override the veto in an overwhelming 10-3 vote.
The decision to increase the driver pay of Uber and Lyft drivers continues the long debate on minimum wage and how a government can influence decisions regarding the minimum wage. More specifically, the debates and struggles on balancing capital, labor, and the government and its intervention. Capital would like for labor costs to be as low as possible, while labor wants wages to be the highest it can be. And finally, politicians are always looking for ways to look as if they are doing the right things, to gain votes. Because of the long ongoing debates and government intervention, citizens not only in Minneapolis but in the entire country working minimum wage must choose between accepting the new wages proposed or finding a different job with different pay.
In a shocking turn, what seemed to be a positive government impact and intervention soon turned out to be the opposite, as in response to the new plans from the council, Uber and Lyft announced that they would stop offering rides in the city starting May 1, 2024. This poses a huge issue as it will lead to over 10,000 drivers losing their jobs, along with the loss of a huge public transportation option for the millions living in the Twin Cities.
The cause for this sudden change is simple, the wage plan that the council proposed is nothing near the actual minimum wage, which would be a point of concern for drivers. However, the primary issue stems from government involvement, and it's that neither the Minneapolis City Council nor the state should be the one setting the minimum wages.
Class connections: In economics, we have recently been talking about the debate on whether or not minimum wage is good for the economy, and how beneficial is it to workers as well. I feel like after reading this article, I feel like a city council or state shouldn’t be the one deciding on the wages of ride-share companies. This is because it's a voluntary job, where drivers from the ride-share companies can benefit from a wage and customers can benefit from an affordable way of fast transportation. On top of that, nobody, let alone the city has any idea how much each driver is making. However, the balance of opportunity cost between drivers and customers as explained earlier would be destroyed if City Council members simply put a “just” and “fair” wage on the drivers.
sources:
https://www.aier.org/article/uber-and-lyft-drive-out-of-the-twin-cities/ https://www.cnn.com/2024/03/15/business/uber-lyft-minneapolis-minimum-wage/index.html
5 comments:
I did some digging, and it seems like this new policy was released before the publication of a report that showed that at a rate of 49 cents per minute and 89 cents per mile, drivers would be making enough for minimum age in the Minneapolis area (accounting for expenses). So it seems like this increase is a big jump in the overall pay (although since Uber and Lyft drivers are independent, they have no other benefits so one could argue that some of this will be covering those).
I think it is a pretty relevant topic to what we've been doing in class, and I agree that in this case, it was probably an overreach on the Minneapolis City Council's part, especially before the report was published. As we've seen in class, as minimum wage increases, unemployment does as well, and this is a very dramatic case of that. While I do think some regulation is necessary, this is probably too much, as we've seen in the dramatic consequences.
https://minnesotareformer.com/2024/03/20/some-facts-about-uber-and-lyft-and-the-effort-to-pay-drivers-a-minimum-wage/
To build on Rachel’s comment, this report finding ($0.49/minute, $0.89/mile to make minimum wage) seems to be why the mayor voted to veto the measure in the first place, calling for people to be embracing data and utilizing the findings from studies that come out. It doesn’t seem unreasonable for a figure that requires a pay of 50% more per mile to be projected to increase rideshare prices and decrease employment.
That said, I generally like to be skeptical of the moral appeals of companies like Uber and Lyft — e.g. think of the poor people out of a job! — when those companies have poured tens to hundreds of millions of dollars in efforts to ensure their workers can be given fewer benefits, as with California’s Proposition 22, where they massively funded the effort to ensure their workers were classified as “independent contractors” not subject to mandated employee benefits, rather than employed workers. Despite the moral arguments of the companies, like how employee benefits will put their jobs at jeopardy, it was - somehow - opposed by most labor groups representing the very workers the proposition addresses.
It’s definitely worth considering that too high minimum wages can adversely impact employment (and the demand for the product because Uber is already expensive enough as it is), and I think going by the figure the report found to be equal to the minimum wage is better than going by the significantly higher one passed, which seems too hasty and too big of a change, but I think it important that rideshare drivers have some decent stability in earnings.
https://www.cnn.com/2024/03/15/business/uber-lyft-minneapolis-minimum-wage/index.html
I think it also highlights the power companies such as Lyft, Uber, Doordash and other companies that allow "self boss" workers as they can in a switch cut off thousands of peoples wages because a city didn't see eye to eye with what they were seeing. The city raising the min wage as we know would cause more unemployment as the companies have to cut back on the amount of workers they are paying. So, I do feel that the city is in the wrong here and I also find it weird that they "passed an ordinance to increase ride-share driver pay to $1.40 per mile" were companies such as Lyft and Uber exploiting the previous $ per mile law? If so then I feel like it would be more appropriate to the cities and the companies work to agree on something where people's jobs are not put at stake.
I think this situation is a striking example of oligopoly power. With only a few rideshare companies dominating the industry, it's easy for Lyft and Uber to band together to prevent increased labor costs, whereas with more sellers in the market for transportation, the effect of them stopping operations in Minneapolis wouldn't be nearly as impactful, both on the workers out of a job and the people out of transportation.
It seems according to the other comments and general knowledge that the pay jump is high for a Minneapolis uber driver. Yet I would assume maybe the company would make negotiations with the ruling or appeal in some sort of way instead of unemploying all of their Minneapolis workers. I agree that putting $1.40 per mile is more confusing to understand, and a bit misleading to what the actual average pay increase would be. After some research I found that uber has a complicated pricing formula and pays depending on which city one is in/ tip/ traffic, etc. Consequently, uber for customers is more expensive in some states and less in others, which is why it's hard to tell just how tough a pay increase would be on Uber. Regardless, putting so many people out of jobs seems unethical and I hope Uber and Lyft reopen their employment in Minneapolis.
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