Recently, the Minneapolis City Council voted to override Mayor Frey’s veto and require the apps to increase driver wages, causing Uber and Lyft to release statements saying they’d revoke their services in the area.
by Joey Erickson
March 15, 2024
Photo courtesy of Shutterstock
For many, especially younger Minnesotans, it’s hard to remember the days of flitting around the metro without ridesharing companies Uber and Lyft, which have offered app-based pickups and rides in the Twin Cities for around a decade. But now, it could become a reality: Uber and Lyft are both threatening to pull their services from Minneapolis (and, potentially, the metro), effective May 1, after the Minneapolis City Council overturned Mayor Frey’s veto on an ordinance that would pay drivers a minimum of $1.40 per mile and 51 cents per minute, along with other driver protections.
The issue has been slowly simmering ever since the spring of 2023, when a similar bill went to the state level asking for minimum wage and protections for rideshare drivers. It was vetoed by Governor Tim Walz, who argued it was “not the right bill to achieve these goals.”
Uber and Lyft are the only two licensed ridesharing apps in the state of Minnesota. If the companies follow up on their word and cease all operations in Minneapolis, and potentially surrounding areas, the lives of many Minnesotans could be affected. Where does the city stand on this issue, and what does the future look like?
What’s the current payment plan for Uber and Lyft drivers?
For Uber and Lyft, wages can be broken down into three categories: fares, promotions, and tips. Base earnings are determined by how long and how far a driver has to travel for a scheduled ride. The farther the destination, the higher the price tag. Occasionally, promotions will pop up for a driver, allowing them to make more earnings than usual. This usually happens during busy hours when more people need rides (users may recognize this as surge pricing), or in areas offering a promotion to customers. And drivers take home 100 percent of tips, which riders can add right through the app after a trip, with no cut for Uber or Lyft themselves.
According to a yearlong study into driver pay and protections released last week by the Minnesota Department of Labor and Industry, Uber and Lyft drivers in Minneapolis earned an average of $29.64 hourly in 2022. However, after expenses, such as maintenance, repairs, and gas, which drivers must pay themselves, net hourly earnings dropped to $13.63, nearly two dollars below the Minneapolis minimum hourly wage of $15.57.
What’s the new proposed plan?
Under the new ordinance, drivers would receive a minimum pay of $1.40 per mile, plus 51 cents per minute driving. Drivers would also be guaranteed 80 percent of fees from canceled rides. This would make Minneapolis drivers some of the highest paid drivers in the U.S.
Mayor Frey vetoed this plan, instead offering a counterproposal, setting the minimum wage for drivers at $1.20 per mile, plus 35 cents a minute.
How would this ordinance impact drivers and riders if it passed?
According to Uber and Lyft officials, raising the wage of drivers so suddenly and so highly would have nothing but negative effects on riders. In a letter addressed to the city council and mayor, Lyft stated that the proposed per-mile, per-minute rate would result in the drivers receiving around $50 an hour, rather than the $15.57 hourly minimum wage they’re shooting for.
As a result, fees for riders would skyrocket, according to the company, and ridesharing would become a luxury for those who could afford it. This move would also harm low-income earners, as well as those living with disabilities without an affordable means of transportation, it says.
In turn, this increase in ride fees due to inflated wages could actually lead to a decrease in ride demand overall, resulting in decreased earnings from drivers in the area.
In response to the City Council voting to pass the city ordinance, Uber greeted Star Tribune readers one morning with an ad banner on the top of the screen, reading: “Tell the Minneapolis City Council: Stand with working families. Protect ridesharing in the Twin Cities.”
“This purportedly pro-driver ordinance is actually anti-working family,” Lyft chief operating officer Jeremy Bird wrote in a letter to the city council.
How have other states and metro areas tackled this problem?
It’s not just Minneapolis that’s gotten into conflicts and disagreements with rideshare services in the last decade.
In 2016, both Uber and Lyft removed their services from Austin, Texas, after a state law was passed requiring fingerprint-based background checks on drivers. A year later, however, the companies both returned to the city. Several Minneapolis council members have cited this event in their arguments against the ridesharing companies, claiming that Uber and Lyft are once again just bluffing. However, Uber and Lyft only resumed services in Austin after the state Legislature passed a new law that rendered the old one requiring fingerprints ineffective.
Except for in Portland, Uber and Lyft are banned in the entire state of Oregon, due to a state law claiming personal vehicles cannot be used as taxis. The law has been questioned several times, and legislation to legalize ridesharing has been brought to court repeatedly, but no word has been made on whether the ban will be lifted anytime soon.
Other cities have reached wage agreements, too: In January 2021, Seattle passed an ordinance ensuring that Uber and Lyft drivers are paid for all of their working time and compensated for all work-related expenses. Drivers are paid $1.33 per mile plus 57 cents per minute. For all trips, including if the customer or driver cancels, the driver must be paid a $5 minimum. And in November of 2023, New York passed a statewide agreement providing Uber drivers with minimum earnings of at least $26 per hour during working time while picking up or dropping off a rider. In New York City, drivers will now receive one hour of paid sick leave for every 30 hours spent driving, at a rate of $17 an hour. In the rest of the state, drivers will also be granted one hour of paid sick leave for every 30 hours spent driving, except at the rate of $26 an hour.
What’s the latest, and where do we go from here?
On March 7, the Minneapolis City Council approved a plan in a 9-4 vote that pays drivers $1.40 per mile and 51 cents per minute. Mayor Frey vetoed the plan the next day, as he promised to do, and set a special meeting with the City Council for Thursday, March 14, to vote on whether to uphold or override the veto.
On March 14, the City Council voted to override Frey’s veto, with a vote of 10-3. The ordinance will move ahead, effective May 1. This also means that Uber and Lyft may follow through with their word to cease operations in the city of Minneapolis (Uber has also said it will cease services in the entire Twin Cities area), if the wages stated in the ordinance stay as is.
May 1 is still a month and a half away, so there’s time for adjustments to be made if needed. It’s possible that the state could pre-empt the ordinance by collaborating with Uber and Lyft and coming to a mutual statewide agreement on fair wages, but this would require the state Legislature, as well as Governor Tim Walz, to act and respond before May 1.
According to Mayor Frey, the companies should’ve been consulted while the ordinance was being initially crafted.
“I don’t care about their bottom line,” Frey said of the rideshare companies, in a statement to MPR. “I do care about having this service in the city, I do care about getting drivers paid more money, and I do care that the service itself is actually affordable for the people who need it.”
If Uber and Lyft do decide to pull out their services on May 1, the date would also act as the first day that any other rideshare companies could be licensed in Minneapolis. However, none have begun the process of filing for a license as of yet.
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