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).
Yet another failed effort by local governments to try to regulate business in hopes they can change America
It will fail because people want what Uber and Lyft provide and they have drivers are willing to work under the system. Trying to push government ideas of what is “fair” when there is a ready market harms everyone.
We need only look at how quickly the US south is growing with license plates from the north to see consumers and businesses understand that consumers and businesses can best figure out what is best for each of them.
Logic stops applying once you swallow the “corporations bad, workers good” pill. It becomes a religion where any contradictory evidence gets twisted into further proving “corporations bad, workers good”.
Another reason that I am highly unimpressed by Minneapolis.
Beside the gig drivers who have lost an opportunity — in no small part also due to Lyft and Uber wanting to ramp up pressure against regulation by “shutting down” in a place — the locality served by the gig drivers will also lose other business and the necessary public traffic to make an area feel safe as a result of the “safety in numbers” aspect. Then there is also the tax revenue aspect as we know Americans tend to be very lousy in keeping up with the obligation to pay use tax in jurisdictions with that for goods purchased from out-of-state for in-state use.
Minneapolis is great for biking and a lot of other outdoor stuff. Not so much the skyscraper-laden downtown business district with its wonderful network of skywalks that are again woefully underused for the intended purpose, but elsewhere in the area. But even the downtown business district is actually way more livable nowadays than it used to be and has higher end housing than it used to have 20 years ago.
Seattle recently implemented similar rules for food delivery drivers. Guess what happened to these drivers and the restaurants that rely on food delivery?
Singapore rightly considered Uber-like companies as part of public transit. Only holier-than-thou urban planners who hate cars like Minneapolis laws like this. When public transit becomes too expensive, people buy their own cars and drive. Taxi drivers should have low pay then move up in life later
Nothing helps workers more than eliminating their jobs.
Agreed with the comments. On a practical note, I wonder how many Uber Riders will simply take the Blue Line Light Rail out of the Airport to the Bloomington Central Station (just 1 stop), which is outside of the city limits of Minneapolis (quite obviously in Bloomington).
How can a companies so boastfully “disruptive” and “innovative” not adapt to fairly basic rules like this?
If they wanted to, they could. They’re pushing their own agenda. (And seems like most other commenters here are buying it.)
Gary’s point is well taken. People don’t drive for Uber and Lyft because it’s fun, but because it’s their best option to make money for the moment. It’s a classic example of unintended consequences. The city council members think ride share users will just happily pay more and all will be roses for the drivers. No, many riders will seek alternatives, and many Uber and Lyft drivers will lose their work. You have to think the taxi and maybe car rental companies have something to do with this.
What do you expect from Minneadishu. The sheople get what they voted for.
Of course the cab drivers are the winner. After all, their union bought and paid the politicians.
This is why we can’t have nice things.
@Scudder – Obviously you never studied economics and have a bias against capitalism. They are leaving because the mandated pay isn’t sustainable for their business model. If they double driver pay that will simply double the cost of the ride. Businesses aren’t charities and you can’t reasonably expect them to eat something like this. As Gary noted they aren’t profitable (even w Uber’s large food delivery service which include Postmates). If the fare goes up people don’t ride. Also as noted taxis can undercut them since they aren’t obligated to pay the higher rates.
Good for Uber and Lyft. Only leverage they have is leave and hope reason prevails and the woke libs running the city lose the next election
In this matter too, Uber and Lyft are playing a public relations game in pursuit of their own petty self-interest not just limited to the MSP area. They aren’t doing this in the best interests of the people who drive for them as contractors.
Ed,
Do you realize racism is self-evident in your comment referring to the city’s Somali population, or is it you just don’t care that it is?
The Somali population of Minneapolis has been an asset to the area and revitalized areas that were much worse just before they become a sizable community in the area.
Uber’s given out about $11 billion in stock compensation to its executives and employees since just 2017. Going back to 2009 when it started, I would guess total stocks comps probably accounts for more than its $30+ billion cumulative losses. They can afford to give more to the non-employees drivers that actually provide the “product.”
Sorry Gary, but your assertion of drivers being with Uber/Lyft due to it being their best economic option relies on people being economically literate. As I am sure you know, this is not the case for a large number, perhaps the majority, of Americans. Uber/Lyft rely on drivers not understanding how little they are actually making/how high there actual expenses are.
The prices as a result in Seattle are so high, I just try to take the Link or express busses when I can. And I hardly ever do food delivery either, although I miss it.
Good on them for getting their money up, but it does result in many people getting priced out
Liberals traditionally misunderstand the market economy. They assume every corporation has bags of money (a la Montgomery Burns) and could easily pay their starving employees more. But the law of demand has not been repealed. If you raise the price of something through regulation, people will demand less of your product. Raise the price of a Chipotle Burrito to pay a mandated minimum wage and Chipotle will hire fewer people. Raise the wages of Uber in Minneapolis and Uber will hire fewer drivers.
I take Uber/Lyft to SFO. I take a taxi home because the area to get a Uber/Lyft ride out of the airport is on the top of the parking complex across from the terminal. Much longer walk. And the rates out of the airport home are the same for all Uber/Lyft/Taxi.
@GUWonder – why do you think it is wrong for Uber and Lyft to look out for their own interests and take any steps, even PR steps, to better their situation. They are in business – they aren’t a charity. I have ZERO problem with any company not caring about employees. I am now retired but was a senior officer of 4 different national companies. Let me tell you – that companies may state they care about employees but that is only if the employees add value. If someone isn’t performing or costs need to be cut employees are let go (as they should be to manage overall profitability). Even employees that are “cared for” are simply the ones that add the most value to the company. BTW this isn’t a dig – it is EXACTLY as it should be in a capitalistic society. Companies have an obligation primarily to shareholders and if that means cutting employees or otherwise not “caring” about them so be it.
@Jake-1 – Nice to see you spend others’ money. Even is a company can “afford” to pay more (BTW I dispute that Uber can and most of the stock grants are underwater), they not only don’t have an obligation to do so but actually that is against the greater goal of maximizing profit (which should be the goal of all publicly traded companies). People that think it is somehow a company’s responsibility to pay a “living wage – whatever that is (my “living wage” is $250,000-$300,000 a year) are deluded. Companies should pay what a job is worth and only enough to attract and retain employees. Anything more than that is wasted. Sorry this is capitalism not socialism
Greed
@GU Wonder
It’s not the Presbyterians that are turning Minneapolis into a sh*t hole.
@Donald – I agree it is greed on the part of the drivers and council. If you talking about greed for companies I quote the immortal words of Gordon Gekko “Greed is good”. Corporate “greed” is what allows companies to flourish, grow and hire more workers.
I love the bleeding heart libs that have no comprehension of economics. Beware of unintended consequences. Classic example is CA raising fast food minimum wage to $20. Companies will cut number of employees and implement technology to manage salary cost. Would you rather have 7 employees making $15 or 5 making $20 (who basically will have to do the work of 7). CA for some reason would prefer that 2 employees be cut, possibly ruined financially and on public assistance. Only in a “compassionate” blue state! SMDH
AC…sure, a company can do whatever it pleases (within the law). The problem is, Uber and Lyft are being disingenuous here, throwing out a gobbledygook in a PR statement. They are leaving Minneapolis because they don’t like the ordinance and don’t want other cities to think they can do the same.
You perspective is one of pure capitalism, which again, is fine, but how do you separate the economy from society at large. Do you care about those who don’t have enough to get by? If so, how do you support improving their lot in life?
Ah yes, another example of government meddling in private enterprise. Now drivers will have no jobs, and travellers will have no rides. No doubt that makes the bureaucrats happy, since all they’re interested in is control.
@AC – lol, your vision of labor relations mirrors the early 1900’s, with 5 year olds operating dangerous machinery and folks being fired after getting their leg chopped off in the assembly line. By the way, most tech cos give out RSUs, which don’t go underwater.
@Jim Baround – I pulled myself up from lower middle class, had my father die (with no insurance) when I was 16, went to a public college because that is where I got an academic scholarship and made it to the top of my field for multiple national companies. I’m all about people worrying about themselves and taking the necessary steps instead of relying on anyone else so NO I really care about those that don’t have enough to get by. There are solutions if people apply themselves and it isn’t my job to support them
From its MSP hub, Delta flies its elite guests to premium destinations, near and far.
@Jake-1 – I was a senior executive and my view is from a corporate standpoint. Those that have a worker centric view are either those that will never make it to corporate management (and are jealous of those that do) or bleeding heart liberals (which is even worse). BTW I am well aware of the difference in options versus restricted stock grants (had both over the course of my career). More companies now issue restricted stock due to mainly the accounting treatment. However, regardless of the form of stock incentive granted issuing that as incentive to motivate employees and then somehow jumping the shark to stating that if a company can do that they can “afford” to pay others is ludicrous. One is a book keeping entry that, worst case, dilutes existing shareholder equity and the other is cash out the door.
I’ve lived in the Twin Cities area for the past 65 years, but you couldn’t pay me enough to even consider living inside the once great city of Minneapolis given the group of avowed Democratic Socialists (widely referred to as the ‘Clown Council’) who are doing their best to destroy the City.
This is yet one more ‘wonderful’ example of what you get when the increasingly progressive voters within a City fall over themselves to elect a cadre of community activists, only to then be surprised when they learn these elected officials have absolutely no concept how to run the economic model of a City that is actually built on a structure of capitalism.
Ironically enough, this same Clown Council managed to also destroy the economic model of the Companies who formerly ran the Taxi services, so get this….within the City just a decade ago we had 1,948 Taxi licenses, and now they managed to whittle it down to just 39, so I’m sure they can handle the current load currently managed by about 10,000 employees that Uber & Lyft currently employ that until May 1st also service the city of Minneapolis in addition to their suburban rides.
@Gary, the pay rates are not “substantially higher than the local $15.57 minimum wage.” They apply only to time with a passenger in a vehicle. Several studies have documented that about half of a drivers time is spent without a passenger, but still working (e.g. driving to passenger, deadhead back, etc.) So, if you simply multiply the per minute x 60, you get an inflated number as a driver has roughly 30 mins per hour without a passenger. Same principle applies to the per mile amount. Further, the rates cover minimum wage + compensation for expenses. I.E. if a driver earns, say $20 an hour, but has $7 in expenses, they are still earning below minimum wage, so the policy adjusts for that. There’s a legitimate debate about the merits of the policy, but its important to frame it with accurate information.
@AC – again, your views on labor is 100+ years outdated. It’s closer to communist China circa 1990’s. We live in a democracy that requires weighing of competing interests. And, whether stock options, RSU’s, ESPP discounts, or higher rates for drivers who provide their single real service, they all get accounted for in GAAP earnings.
You all would vote against any minimum wage arguing it’s anti worker
@thisguy, did you do the math to confirm that it’s not substantially higher? Do you have reason to believe that @Gary is multiplying by 60? I don’t think you’re right about either of these things.
I do find it interesting that they are apparently not passing through 80% of the cancellation fees. This is basically a liquidated damages fee, and it’s the driver who would likely be the most damaged.
The government has gone overboard on this one. I drive for Uber, Lyft and deliver for Doordash without any regulations make on the low side $15 an hour to sometimes $40 in an hour like just last night in Oklahoma City doing a few quick food orders.
This model works best left alone, if our legislature in this state were to enforce such measures it would not doubt be useless to drive for or fail.
Urban planner here! These companies do not have the drivers’ best interest in mind and I’m glad the government in Minneapolis saw fit to come in and set better standards. Uber and Lyft have used VC funding to artificially deflate the prices of rides so people (me included!) have gotten too used to cheaper prices. It’s time for an adjustment. Similar changes have gone into effect in other cities domestically and internationally and Uber has complied. They just don’t want to do it here and are worried it’ll spread elsewhere so are throwing a tantrum.
Politics aside, curious as to why Uber is not serving the airport since it is actually located in St Paul not to mention Minneapolis city limits is a small portion of the metro area. It would be a fairly simple software update to block origins or destinations inside the city limits.
Rick,
Just a slight correction for you in that having lived here in the Twin Cities area my entire life one of the many interesting (and certainly odd) facts about our specific MSP airport is that it is not technically located in ANY city (or even Public School District), as it is multi-use site for military, civil and public use in a geographic space located within the Fort Snelling ‘Unorganized Territory’.
It’s a completely unique parcel of some 2,900+ acres of land perfectly wedged between St. Paul, Minneapolis, Richfield & Bloomington and is also home to the Joint Air Reserve Station, supporting both Air Force Reserve Command and Air National Guard flight operations including the 934th Airlift Wing (934 AW).
What I don’t understand is why Uber and Lyft didn’t try it out? How do you automatically know that it will fail?
One thing I have learned in business is to never believe what customers say, only believe how they behave by what they buy.
I.E., people say they want to eat healthy food. Fast food restaurants have tried it and guess what? People buy unhealthy food because they like it.
I remember a time when taking cabs was very costly and the service was terrible. Uber/Lyft came in and reset those economics. Now they are out and the pendulum is going to swing in reverse.
Finally, besides the cab companies, the real winners here are rental car companies, IMO. Renting a car is going to be expensive in MSP.
Open your eyes,
It’s not the Somalis that have made a mess of American cities. The mess that is in American cities is a direct legacy of the slavery and racism that were the original political sin of the European colonizers of the Americas, their descendants and the European immigrants and others that got on the same racist bandwagon that has most adversely impacted the African-American community not only in cities but also in suburban and rural areas. Let’s not kid anyone: when a political system has long been stacked against a national minority community lacking in the resources to engage in intergenerational wealth transfers above the mean for the nation, then that minority community subject to profound prejudices is in a worse predicament than is the case for the majority community and some minority communities with more resources coming into the country than the most disadvantaged minority.
farnorthtrader said:
Uber/Lyft rely on drivers not understanding how little they are actually making/how high there actual expenses are.
Correct. You can tell which drivers know about depreciation. They are the ones driving cars with 200k miles on them. A modern car will run 300k to 400k miles with proper maintenance.
Interesting that Uber is not doing airport pickups anymore, when MSP is not actually located in Minneapolis — for that matter, it’s not actually part of any city, it’s a separate geographic entity. Borders on Minneapolis (and Saint Paul, Mendota Heights, Eagan, Bloomington, and Richfield), yes, but not located in Minneapolis and all roads out of the airport for the flying public either go into Saint Paul, Bloomington, or Richfield.
@GUWonder – now your “true color” comes out. Quit playing the race card. The only thing slavery did that impacts the current situation is it brought a bunch of Africans to America. Every other minority group has worked hard and integrated within our society except the black culture (American blacks as most recent African immigrants work hard to integrate and succeed). American blacks just want to sit there, play the race card and beg for reparations that will never come.
Sad
This is, to me, a huge threat. Local, left-wing politicians (right-wing would be bad, too, if it occurred) get elected to cities and inject their poorly conceived agenda (showing little understanding of economics). Those unhappy are welcome to move to a suburb. Populists (left and right) are very dangerous, relying not on an understanding of the economics or even having fundamental political beliefs, just wetting their finger to see where the wind is blowing. Detroit was the leader; other cities seem to want to follow.
Rideshare is an industry that was born and flourished outside of government intervention. It should be left that way. I drove for UBER and LYFT here in California for many years, up and until the Sacramento pols decided to get involved. The years without government meddling were the best years financially for both the drivers and public. When the State of California decided to regulate the industry and mandated UBER and LYFT pay all kinds of driver “benefits and protections”, as if the drivers were employees UBER and LYFT, driver pay fell by approximately 50% and the average ride cost almost doubled. EVERYBODY LOST!
I suppose then, that most Uber and Lyft drivers must be press-ganged and coerced into working for these companies if they require the protections the Minneapolis council wishes to enforce.
Funny that, I thought they did it voluntarily.