By Glenn Fleishman, fortune.com
Uber, Lyft, Via, and Gett/Juno must pay on-demand drivers of their services a minimum of $17.22 an hour after expenses starting in mid-January 2019, the New York City Taxi and Limousine Commission (TLC) announced Dec. 4. The commission claimed this will result in an average nearly $10,000 rise in earnings for 96% of drivers. About 80,000 people regularly drive for ride-sharing firms.
The commission set a formula that will result in a gross hourly rate of up to $28 an hour to cover the average per-mile expenses drivers incur so that a driver’s effective freelance wage should net out to $17.22 an hour. It also factors in trips that lead outside of New York City and lack a passenger on the return leg.
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The formula gets calculated per trip, and involves a “utilization” factor, which measures how many times per hour a driver has a passenger. The TLC said its utilization factor is designed to provide incentives to not have as many idle drivers on the road, which in turn reduces congestion. The formula also adds a bonus for shared rides to make sure drivers who accept those trips aren’t shortchanged.
The TLC noted that wage matches the $15-an-hour minimum wage in New York City plus the extra costs incurred by freelancers in taxes and to compensate for contractors not receiving paid time off. A TLC study found that 85% of drivers currently don’t earn an effective $15-an-hour wage, with expenses factored in.
Drivers who make more keep the additional earnings, and the rules also require more detailed statements from operators about deductions and payments.
Lyft said in statement that “the TLC’s proposed pay rules will undermine competition by allowing certain companies to pay drivers lower wages, and disincentives drivers from giving rides to and from areas outside Manhattan.” The company said the formula will provide the opposite effect from that stated and intended by the TLC, and lead to more congestion as drivers prioritizing shorter trips and congregate in denser areas.
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Uber also critiqued the rules in a statement, claiming that they would lead to “higher than necessary costs for riders” without addressing issues of congestion in Manhattan. The company’s public affairs director, Jason Post, said in the statement that the TLC rules ignore incentives and bonuses that keep a supply of drivers in less-served areas of the city.
The TLC also offered a boon to cab drivers, who have been struck hard by the entry of ride-hailing companies. Taxi fleet operators have been able to charge as much as $11 per shift for credit-card processing. The commission dropped that to $7, which equates to about $1,000 a year for the average fleet driver, based on TLC data.
A freeze on adding new vehicles for ride hailing implemented in August remains in place. That number is fixed at about 80,000 vehicles, and is tied to cars, rather than drivers.