Watch Drive Forward's Webinar on Mayor Durkan's Harmful Earnings Standard

If you don't want to see a New York City style system here in Seattle, please take a moment and e-mail Mayor Durkan and the Seattle City Council!

Mayor Durkan's Fare Share Plan Will Harm Many Drivers

Seattle Mayor Jenny Durkan has proposed an ordinance that will create a minimum earnings standard for rideshare drivers. While Drive Forward has supported the creation of such an earning standard, what is being proposed by the Mayor is a system that harmed drivers in New York City. This earnings standard based on a report by economist James A Parrott and Michael Reich, commissioned by the City of Seattle though a legally questionable, no-bid single-source contract, is a virtual carbon copy of a 2018 report by the same economists for New York City. This 2018 report was the basis for their harmful earning standard system they want to impose on Seattle's drivers.  Here are the key provisions of the Parrott and Reich/NYC system:

  • Established per minute and per mile rates based on minimum wage and a reasonable amount for driver expenses
  • Created a “Utilization Rate” or the percentage of driver overall on-app time vs. on-app wait time
  • Applied the Utilization Rate to the per minute and per mile rates so drivers are compensated for time spent and miles driven during on-app wait time
  • Applied the Utilization Rate adjusted per minute and per mile rates on a per trip basis to create the minimum earnings standard formula
  • Recalculated the Utilization Rate every quarter and applied the result to the formula
NYC Pay Formula with utilization rate
NYC Pay Formula With Utilization Rate

 

On paper this minimum earnings standard seems reasonable, drivers would earn more as the companies are incentivized with lower payment rates to keep drivers busy.  However, the theory does not match “on the road” reality.  To meet the higher payment rates caused by the utilization rate the companies will increase rider prices which means fewer rides.  Fewer ride for the same number of drivers means more wait time, decreasing the utilization rate. When the utilization rate decreases the payment rate to drivers increase, causing rider prices to increase and rides to decrease again, and so on. This is a classic negative feedback loop that will not end with out intervention.

Utilization Rate Negative Feedback Loop

 

When this system was introduced in New York City to avoid the negative feedback loop that is bad for riders and drivers alike, the companies were forced by these rules to control the utilization rate by restricting the supply of drivers on-app.  This took the form of:

  • Limiting which drivers had guaranteed access to the app to high-volume drivers
    • Uber required 425 trips per month and a 4.8 minimum rating
    • Lyft required 180 trips per month and a 90% acceptance rate.
  • Uber introduced scheduled hours for other lower volume drivers
    • Each driver could schedule only 11 hours of unrestricted access to the app
    • Drivers with 285-424 rides and a 4.8 rating or above could access the schedule on Wednesdays for the following week
    • Drivers with 165-284 rides and a 4.8 rating or above could access the schedule on Thursdays for the following week
    • All other drivers did not get access to the schedule until Friday for the following week
  • Both Uber and Lyft allowed drivers to TRY to sign on anytime but would not allow then to if there was not enough rider demand in the companies’ opinion.
  • Both Uber and Lyft would automatically sign-out drivers if demand lessened or they ended a trip in a low demand area.
  • Airport waiting queues were caped based on demand
UBER & Lyft Driver Access Restrictions

 

According to a Vice.com news report, because of New York City instituting the utilization rate and the companies’ driver restrictions

  • 16,000 drivers lost their jobs
  • Drivers report sleeping in their cars just to give enough rides to maintain guaranteed access to the apps
  • Drivers are now working more hours for less money and many of those hours are spent just trying to get online!
  • If you fall below the 425 monthly trip requirement it is nearly impossible to get back above it
  • Frequently, no scheduled hours are left by the time the Thursday reservations open to those drivers.

Drivers in NYC became so fed up with this system they began to protest and succeeded in shutting down the Brooklyn Bridge for hours.  Because of pressure brought by drivers, the NYC Taxi and Limousine Commission, the body that regulates rideshare in NYC, suspended the use of the utilization rate in the minimum earnings standard as it caused so much harm to drivers.

Drive Forward supports a rideshare earnings standard, but not one that does so much harm to drivers.  We have called for an earnings floor to be set that no driver can fall below at the equivalent of $27.50 per hour of on-trip time. This would ensure that no driver will fall below Seattle’s highest-in-the-country minimum wage, allow driver who hustle and earn more to keep it, and not cause the companies impose app restriction as there are no utilization rate measurements.

Under this Parrott and Reich/NYC system the most harm will be done to the part-time or low-volume drivers, most of whom will likely lose all guaranteed access to the app.  The tragedy is, according to a study issued in July 2020 by Cornell University, 71% of Seattle Drivers work less than 20 hours per week.  Only 15% of Seattle Drivers work 32+ hours per week, the legal definition of full-time in Washington State.  Mayor Durkan is claiming the earnings standard is a 30% raise for drivers, but if you can’t access the app to give a ride, 30% of Zero is still Zero.

If you do not want this system and all its consequences to come to Seattle, please contact Mayor Jenny Durkan and the Seattle City Council and tell them not to adopt this harmful earnings standard!

 

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