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NYC moves to create minimum wage for ride-share drivers

New York City's Taxi and Limousine Commission has proposed rules that would set a minimum hourly wage for drivers at Lyft, Uber, Via and Juno, the major ride-sharing apps in the area. Cities around the world have been struggling to deal with the challenge presented by the apps' business model.

Although the apps offer cheaper rides than taxis, they do so by avoiding many employment costs and regulations that taxis have to comply with. That leaves app-based drivers making wages so low that many qualify for food stamps and Medicaid -- and the competition is driving down wages for taxi drivers, as well.

A study by the Economic Policy Institute used Uber's own data to show that, nationally, Uber drivers make an average of $11.77 per hour after vehicle expenses and Uber's cut. An independent study for the taxi commission indicated roughly the same thing after adjusting for New York City wages.

On top of the low wages, because ride-share drivers are considered independent contractors, they aren't entitled to a guaranteed minimum wage, premium overtime rates, employer-paid payroll taxes, workers' compensation insurance, unemployment insurance or employer-sponsored benefits like health insurance.

Proposal would guarantee a minimum of $17.22 per hour

The taxi commission's plan would require ride-share apps to guarantee New York City drivers a minimum of $17.22 per hour after expenses. If a driver's earnings fell below that level, the company would have to make up the difference, possibly by lowering their current average commission of 10 to 25 percent of the fare.

The proposal would increase the average driver's earnings by approximately 22.5 percent. Some drivers could still make less than $17.22 per hour if their expenses were higher than the allowance.

One possible downside for drivers is that the companies may insist on a higher utilization rate, which is the percentage of time drivers have a passenger in the vehicle. Raising the utilization rate could force drivers to work harder for the same pay. However, one economist hired by the taxi commission estimated that utilization rates would probably increase by only a few percentage points.

A potential downside for the ride-share companies is that drivers could, in theory, decline all rides yet insist upon the $17.22 per hour. Although the companies could easily identify drivers who were gaming the system, in the past they have been reluctant to penalize drivers for declining rides. Such an action could be considered evidence of an employer-employee, as opposed to an independent contractor, relationship.

Although some drivers' groups were supportive, the Taxi Workers Alliance criticized the plan for adopting the basic pay structure of the ride-share companies instead of that of taxi drivers.

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