Minnesota's recent agreement with Uber and Lyft for ride-hailing services comes with implications. The pact ensures higher pay for drivers of both companies, marking a significant development in the state's regulatory landscape.
LOS ANGELES, CALIFORNIA—AUGUST 20: On August 20, 2020, an Uber driver participated in a car rally by Uber and Lyft drivers calling for basic employment rights at Los Angeles International Airport (LAX) amid the COVID-19 pandemic in Los Angeles, California. An appeals court granted Lyft and Uber an emergency stay from needing to classify drivers as employees, allowing ride-sharing services to continue after a threatened shutdown in California. (Photo: Mario Tama/Getty Images)
A Turning Point for Minnesota Ride-Hailing
Drivers for Uber and Lyft operating in Minnesota are poised to receive increased earnings following a recent agreement between the state and the two leading ride-hailing companies.
This development stems from new legislation that not only provides certain safeguards for drivers but also imposes constraints on state governance.
Pending Governor Tim Walz's anticipated endorsement, TechCrunch reported that the bill mandates that effective January 1, 2025, drivers must receive a minimum of $1.28 per mile and $0.31 per minute.
These rates align to some extent with the recommendations outlined in a state-commissioned study on driver remuneration, which proposed rates ranging between $0.89 and $1.207 per mile and $0.487 per minute.
Concluding a protracted saga spanning several months, the newly enacted bill marks the resolution of tensions between Uber, Lyft, and the state of Minnesota, which saw repeated threats of withdrawal from the ride-hailing companies.
However, it is unlikely that this legislation will quell the ongoing debates about determining wages for gig economy workers.
Moreover, it does not unequivocally favor any single stakeholder, presenting a web of compromises that offer concessions to various parties involved, albeit potentially leaving riders overlooked in the process.
In a statement, Josh Gold, Uber's senior director of public policy, expressed the company's satisfaction with the prospect of maintaining operations in Minnesota.
However, Gold noted that despite the pricing flexibility granted, Uber remains of the opinion that the rates prescribed by the deal are excessively elevated.
Gold pointed out that both riders and drivers would feel the effects of the rate increase, coupled with a subsequent drop in demand. Uber and Lyft have frequently used this dilemma to argue against pay raises or additional protections.
Examining the Balance Between Pay Raises, Rider Expenses
While their position has its validity, it fails to acknowledge the benefits of higher pay and the significance of other safeguards detailed in the legislation, including vehicle insurance and compensation for work-related injuries.
Funding for such protections inevitably needs to come from somewhere. In New York City, Uber and Lyft are mandated to contribute to the Black Car Fund, ensuring drivers have access to worker's compensation. However, the 2.75% surcharge on each fare is borne by the rider.
Concerns over potential increases in rider expenses were a key factor in Governor Walz's veto of an earlier iteration of the bill. At that time, Walz argued that it would have positioned Minnesota as one of the costliest states for ride-hailing services.
