Minneapolis Is About To Kill Ride-Sharing

Chasing Seattle's shadow, Minneapolis' new ride-share wage law threatens to derail the gig economy.

Just last month, Seattle's disastrous attempt to enact a minimum wage for app-based food delivery drivers was in the news. The result was $26 coffees, city residents deleting their delivery apps, and drivers themselves seeing their earnings drop by half. Now, the Minneapolis City Council has decided to join the fray in the multifront progressive war against the gig economy—and this time, the outcome could be even worse.

In March, the Minneapolis City Council enacted an ordinance that creates a minimum wage rate for ride-share drivers in the city. It does so via a per-minute and per-mile calculation, which is currently set at $1.40 per mile and $0.51 per minute. It also sets a floor of $5 if the trip is short and otherwise would cost below that level.

The council claims it enacted the ordinance to ensure that ride-share drivers in the city were paid at an amount analogous to the city's $15.57 per hour minimum wage. Even putting aside the traditional economic arguments against the minimum wage—see California's recent fast-food minimum wage law as Exhibit A—the council's logic fails on its own terms. The day after the city council initially passed the ordinance, the state Department of Labor and Industry released a report showing that a lower $0.89 per mile and $0.49 per minute rate would be sufficient to make driver pay equivalent to the $15.57 minimum wage.

As a result, the ordinance was immediately vetoed by Minneapolis' liberal mayor—the second time in two years the mayor has vetoed such a measure from the council—only for the council to then override the veto a week later. While the council did not have access to the state's report for the first vote, it had over a week to review it before the veto-override vote. Incredibly, one city council member even suggested that the state's report somehow convinced her to change her vote from "no" to "yes" on the minimum wage between the initial vote and the override vote.

In response to the council's override, ride-sharing companies like Uber and Lyft have announced they are planning to pull out of the Minneapolis market entirely unless the council reverses course. The ride-share companies originally were set to leave the city on May 1 when the ordinance went into effect, but after a last-minute agreement by the council to delay the ordinance's effective date to July 1, the ride-share companies are in wait-and-see mode.  

If the council refuses to back down by July, it will cause even deeper ramifications for city residents than the higher food prices that Seattleites saw in the wake of their aforementioned minimum wage hike for delivery drivers. The ride-share companies have indicated that while they would support the minimum compensation levels proposed in the state's study, the city's higher rates are cost-prohibitive.

Panic has set in among many lawmakers at the state capital, with some calling for the Legislature to preempt the Minneapolis ordinance. Democratic Gov. Tim Walz, who previously vetoed a statewide version of a minimum wage bill for ride-share drivers, has stated that he is "deeply concerned" about the prospect of losing ride-sharing services in the Twin Cities. 

The concern is well-founded since a ride-share pullout would disproportionately impact the city's senior citizens and disabled residents who often rely on these services to survive. Accordingly, advocates from the Minnesota chapter of the National Federation of the Blind, the Minneapolis Advisory Committee on Aging, and the Minneapolis Advisory Committee on People with Disabilities have all expressed opposition to the ordinance. 

The possibility of losing ride-sharing has also created concern about the potential impact on the city's drunk driving rates. Evidence has linked the availability of ride-sharing to lower incidents of alcohol-impaired driving and alcohol-related car accidents, underscoring just how high the stakes may be.  

Moreover, if the city council's move goes unchecked, deleterious minimum wage hikes will inevitably spread to other parts of the Twin Cities' gig economy. The Minneapolis ordinance is limited to ride-share drivers for now, but if the past is prologue, food delivery drivers are next. 

Seattle first passed a minimum wage rule for ride-share drivers in 2020, only to follow that up with this year's food delivery minimum rate. New York City likewise followed a similar two-step trajectory of locking in minimum rates for ride-share drivers before moving on to food delivery drivers years later. Given that many ride-share drivers double as food delivery drivers—often on the same app—the progressive pressure to expand the minimum wage to delivery may be substantial. 

Also of note, the Minnesota Legislature is considering a bill that would make it more difficult to be classified as an independent contractor in the state, creating yet more foreboding storm clouds on the horizon for gig work.

Despite the fresh lessons from the Seattle food delivery debacle, Minneapolis council members appear oblivious to the on-the-ground reality. Ironically, it was none other than Karl Marx who famously declared that history repeats itself "first as tragedy, second as farce." The city council—which contains several openly socialist members—should pay more heed to its intellectual forefather.