Uber and Lyft have announced that they’re leaving Minneapolis May 1, 2024 in response to new city rules on driver pay. Uber is clear this will mean no airport pickups or drop offs. Lyft’s statement leaves open some ambiguity about the airport, although if they continue with airport service it may be only for out of towners.
The Minneapolis City Council overrode the mayor’s veto to pass new rideshare rules requiring minimum driver pay of $1.40 per mile and $0.51 per minute while transporting passengers; guaranteeing a minimum pay of $5 per ride; and requiring pass-through of at least 80% of cancel fees.
This would be pay substantially higher than the local $15.57 minimum wage. The Mayor believes that $0.89 per mile and $0.49 per minute would achieve that level of pay. The per-mile requirement is 57% higher than this.
The path to profitability for Uber and Lyft has always been about depressing wages for gig workers.
If a company can’t afford to pay their drivers a livable wage, maybe that company doesn’t deserve to exist. pic.twitter.com/x3WAASr4K2
— Lee Hepner (@LeeHepner) March 15, 2024
This is a bad take. As the Mayor put it,
Everyone wants to see Uber and Lyft drivers get paid more. But getting a raise doesn’t do a whole lot of good if you lose your job.
People choose to drive Uber/Lyft because it’s more lucrative than their next-best option (sometimes within their scheduling constraints). This critic is dangerously close to saying that if someone can’t otherwise earn a living wage, that they don’t deserve to exist. Shocking.
Uber and Lyft left Austin where I live back in 2016, after the city passed a number of rideshare regulations. Fingerprint-based background checks got most of the coverage, but rules also carved out lucrative rides for festivals and other activities only for taxis. Other services like RideAustin, Fasten, and Wingz picked up the slack after a period in which rides of any kind were difficult to get and thousands of people had been put out of work. The city largely ignored its own rideshare rules to let these services scale. They were generally more expensive and had fewer drivers than Uber and Lyft.
The state of Texas passed its own comprehensive rideshare rules, trumping local efforts, in 2017 and Uber and Lyft returned – mostly squeezing out those companies that had serviced the city while they were gone.
It’s perfectly fair to criticize companies that pretended tipping was going to increase driver wages, when it simply displaced pay from Uber/Lyft. The introduction of tipping simply shifted where driver pay was coming from, it did not increase it which is part of why tipping norms are destructive.
And it’s also fair to critique companies that light VC money on fire, only to learn they eventually have to self-fund. It’s hard to make money selling a service like transportation where there’s a limit to how much passengers will pay, and an amount drivers need to earn, while still earning a margin.
These aren’t massively profitable companies. Lyft’s operating margin has ranged from -79.26% in Q3 2022 to -34.97% in Q1 2023. Lyft famously issued a mistaken press release, overstating expected margin growth. Their adjusted profit margin as a percentage of bookings is expected to be 2.1% this year, up from 1.6% in 2023. And then there’s Uber:
Is this "exploitation" in the room with us? https://t.co/dA1dXGnkDQ pic.twitter.com/xQaVf0TVli
— Max Weber (@max_oikonomikos) March 17, 2024
But people who chose to drive for Uber and Lyft, no matter how much you criticize those companies, were better off for having done so compared to their next best alternative. Deferring to the actual decisions people make in their lives is grossly underrated. The Minneapolis city rule means consumers and drivers take an L, while cab companies win (and do not appear to be subject to these new rules).
One more reason why my corporate relocation specialist friends in the Dallas metro area are now actively recruiting Minneapolis companies to move here. Just like Caterpillar, Toyota and others have smartly done. Minneapolis is a has-been town, at least when it comes to business and investment capital.
DFWSteve,
Some are saying the US is a has-been country as China and thereafter India gear up to get ahead courtesy of the US while “too much” of the US seems to support Banana Republic characters like Tr ump for President even after all his drama and destructive ways. Maybe Minneapolis is a harbinger of the nation just as much as those clown governors in Florida and Texas.
Retired Gambler,
Slavery and racism is what I noted. Now you can go back to the drawing board with your attempt to downplay the legacy of slavery and racism in the US as it still impacts the country.
@GU Wonder – Slavery and racism mainly impact those that are looking for a convenient excuse. There are many successful black people so it can be done. Too many want a handout and claim victimhood.
Also your comment about Minneapolis being a model for America in the future. If so God help us all. America needs to stay free with minimal government involvement in our lives or businesses. It should be a country where anyone can succeed or fail without government holding back the successful or giving handouts to the parasites of society.
In other new Minneapolis taxi drivers rejoice with a 30% rate rise on May 1
I would ask these drivers who are coincidentally in the same minimal-education-required pool as flight attendants the same question that I’d ask flight attendants: Who has a gun to your head and is forcing you to be employed by these horrible, racist, trabsphobic etc. companies for “slavery” wages?
Quit. And. Get. A. Better. Job.
Unless you really are that dumb.
@Regis, precisely. But not everyone lost. The taxi companies were able to regain some passengers because the ride hailing costs are so high.
Is there anything that Minneapolis doesn’t want to defund?
If this increases the use of mass transit in the area, that is great.
The initial main losers of this ware:
the Uber/Lyft drivers whose income-generating opportunities are being cut by Uber/Lyft;
the businesses which get increased traffic and revenue from being served customers via Uber or Lyft;
and the quasi-suburban types whose costs to get into the city will rise.
Who is really to blame for Uber and Lyft’s exit from MSP? Uber and Lyft, as Uber/Lyft want to try to put pressure on those who would dare to challenge them by way of legal/regulatory demands. And in the process Uber and Lyft are showing the world that they are willing to screw over the communities they supposedly serve and the contract drivers in order to try to send a message to others who may also dare to take them on via the standard, lawful means applicable in a land of liberty where elections still matter.
Retired Gambler is speaking as if racism has no political and economic implications on the opportunities and health and social disposition of disadvantaged minorities. Someone needs to check Retired Gambler’s “white privilege”, so let’s wish that there is reincarnation and that the next birth for Retired Gambler would be as an African-American born in the ‘hood with all the “advantages” of being born into poverty while subjected to racism even when going to school, the store or trying to get a taxi or Uber/Lyft,.
Thank you for this amazing blog !
Minneapolis has a fantastic public transit and Greenway system. Those using lyft/Uber are doing so for convenience and can pay for it. Those giving rides deserve to be paid fairly and let’s be honest most working for Uber (sorry, working for themselves) really are not operating at the intellectual level where we expect them to notice the awful deal they’re getting. That’s why we have worker protection laws.
A lot of assumptions about the people that drive for Uber/Lyft and for some reason flight attendants are included. You do not know their story and why they may be in the positions they’re in. Many simply moonlight trying to make ends meet while working another job. Nobody wants to pay a liveable wage so to simply say “get another job it’s your own fault” is ridiculous. You simply do not know. A friend of mine had to Doordash morning until night due to a work injury and he does alarm installations but was not allowed to return to work until fully healed. And he wasn’t making his full pay while on STD. You do not know so do not assume.
I wish more companies would push back against these statist localities (and states). Too often they just sit back and take it.