New York Passes Minimum Wage Law for Uber, Lyft Drivers, Hikes Costs To Riders

What happens when prices are increased by fiat? They go up, usually, and in this case they may increase traffic congestion, too.


Rafael Ben-Ari/Newscom

New York City's Taxi and Limousine Commission (TLC) has never been friendly to Uber, Lyft, and other ridesharing services. The TLC sees a large part of its purpose as propping up the market in taxi medallions, a special license that grants the owner the right to operate a cab in Gotham. As Reason's Jim Epstein documented years ago, the value of those medallions once was more than $1 million. It's not exactly clear what they fetch these days, but it's much, much lower. In August, the city froze the number of drivers allowed to drive for rideshare services, and now the TLC has imposed a wage hike:

The new rules, the first city-wide regulations in the nation, were passed Tuesday and are expected to go into effect in mid-January. They would give drivers for services such as Uber and Lyft a minimum hourly wage of $17.22 after expenses, the commission says.

About 96 percent of the city's 80,000 drivers who work for ride-sharing services would get a raise [of about $10,000 a year], the commission estimated….

The commission's formula factors in drivers' total working time and time spent transporting fares to increase efficiency and reduce the time drivers spend circling busy areas while awaiting fares.

That's going to be complicated enough to figure out, but it's likely that fares will increase. That's what tends to happen when prices are raised by fiat, especially if an employer can't automate its way out of a such an edict.

But it gets better. Not only will prices likely rise, congestion might actually get worse, too.

The formula, which uses a minimum per trip formula, could actually increase congestion because it encourages drivers to take more short rides in Manhattan's central business district, rather than longer ones to other boroughs, the ride-sharing companies say.

More here.

As Christian Britschgi noted for Reason, congestion fell in cities such as San Francisco as ridesharing increased. Also in the mix: New York's subway system is falling apart and major lines are undergoing long shutdowns and delays for repairs. Britschgi has observed that rideshare caps are likely to have the effect of concentrating services in the busiest parts of town, thereby reducing one of the great benefits provided by Uber and Lyft: easy transport options for people living in more far-flung parts of the city, where they have historically been poorly served by traditional cabs.

Uber and Lyft have been nothing short of a godsend for the cities in which they operate (even if they are not above shady behavior, including working with governments to screw over each other and competitors). It's appalling to see such positive disruptors get whittled down by political bosses trying to reassert a status quo that was clearly worse for riders (for a look at how much Uber drivers make, go here).

Watch "Uber and the Great Taxicab Collapse," produced by Jim Epstein for Reason in 2015.