new report supports minimum pay for app-based drivers in new york city

Dispelling gig economy misconceptions, study shows huge majority of NYC app-drivers work full-time, struggle to provide for their families

85% earn less than $15 / hour

By improving efficiency, ride-share companies could absorb cost without increasing fares

Move would put money back into drivers’ pockets, and NYC economy

A new report, An Earnings Standard for New York City’s App-based Drivers: Economic Analysis and Policy Assessment, highlights the need for and the effects of a minimum driver pay standard for drivers affiliated with Uber, Lyft, Via, and Juno in New York City.

New York City and Berkeley, Calif., June 26, 2018 – App-based ride-hailing companies have grown rapidly in New York City and across the U.S. over the past five years, yet the full-time New York City drivers who provide 80 percent of the rides are struggling just to get by.

A new report, An Earnings Standard for New York City’s App-based Drivers: Economic Analysis and Policy Assessment, highlights the need for and the effects of the Taxi and Limousine’s Commission’s proposed minimum driver pay standard, which would apply to drivers affiliated with Uber, Lyft, Via, and Juno in New York City. Economists from the Center for New York City Affairs at The New School and the Center on Wage and Employment Dynamics at the University of California, Berkeley prepared the report for The New York City Taxi and Limousine Commission (TLC).

The study found that 85 percent of app-based drivers earn below the proposed minimum pay level, after allowing for vehicle and related expenses. The TLC’s proposal would result in 14 percent average increase in gross pay and a 22.5 percent increase in net pay.

“The data are clear: drivers in NYC’s rapidly growing gig economy are struggling,” said James A. Parrott, co-author of the report and Fiscal Policy Director of the Center for New York City Affairs at The New School. “The proposed wage standard would be life-changing for one of NYC’s fastest growing workforces, and a plus to the city’s overall economy.”

Key findings

• The TLC policy would increase driver net pay by $6,345 per year for the 85 percent of drivers now paid below the proposed standard.

• About 80 percent of all app-based rides in New York City are provided by full-time drivers.

• Over 90 percent of drivers are immigrants. 80 percent acquired their vehicle to enter the industry and would risk losing their investment if they switched to working in another industry.

• The companies in the industry attract riders by offering short wait times, which requires a large pool of available drivers. This practice lowers driver utilization (the percent of a driver’s time with a passenger in the car), thereby reducing driver pay per hour.

• The TLC policy would correct some of the inefficiencies and inequities in the app industry by ensuring that drivers’ expenses are covered, rewarding improved driver utilization, rewarding drivers who provide shared rides, and by reducing growth in the number of app-based drivers.

• The industry could absorb the remaining cost of the policy by lowering its high markups over costs and better managing the number of new drivers in their networks. Average passenger wait times would increase by less than 20 seconds.

The complete report may be accessed on the Center for New York City Affairs website.

Economists from the Center for New York City Affairs at The New School and the Center on Wage and Employment Dynamics at the University of California, Berkeley prepared the report for The New York City Taxi and Limousine Commission (TLC).  

The TLC’s proposed policy calls for a minimum pay standard of $17.22 an hour, which is the independent contractor equivalent of $15 an hour for employees, plus paid time off.

The state minimum wage in New York City will increase to $15 per hour on December 31, 2018. City policy mandates that all employees receive five paid sick days, and New York State recently instituted a paid family leave benefit for private employees.

The TLC pay standard would be the first in the U.S. to apply to independent contractors.

The report authors found that by improving efficiency, ride-share companies could absorb the cost without raising fares.

“The TLC policy will better align the companies’ interests with the interests of drivers,” said professor Michael Reich, co-author of the report and Co-Chair of the Center for Wage and Employment Dynamics at the University of California, Berkeley. “Half of the pay increase could be absorbed by giving drivers about two and half more minutes of passenger trips per hour. The companies could easily absorb the rest with a minimal or zero fare adjustment.”

The researchers drew upon extensive data for 60,000 app drivers from all four companies on rides,  driver pay, and hours, as well as a driver survey of vehicle ownership and costs. They found evidence of low driver pay, inefficient use of drivers during their working hours and high company markups over operating costs in New York City.  

The policy recommendations drew praise from leading academics.

"This report makes a cogent justification for public intervention," said Professor David Weil, Wage and Hour Administrator at the U.S. Department of Labor under President Obama and now Dean of the Heller School of Social Policy and Management at Brandeis University.

Founded in 1919, The New School was born out of principles of academic freedom, tolerance, and experimentation. Committed to social engagement, The New School today remains in the vanguard of innovation in higher education, with more than 10,000 undergraduate and graduate students challenging the status quo in design and the social sciences, liberal arts, management, the arts, and media. The New School welcomes thousands of adult learners annually for continuing education courses and calendar of lectures, screenings, readings, and concerts. Through its online learning portals, research institutes, and international partnerships, The New School maintains a global presence.

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