Ensuring a Level Playing Field for Rideshare
blog.lyft.com
blog.lyft.com
While it's true that higher-utilization apps (like Uber) will have to pay their drivers less, this puts drivers in a position of power and Lyft in a position of higher driver demand. I think this is a good thing both for drivers and consumers. Drivers get to arbitrage working for either Uber or Lyft -- depending on the utilization/pay scale -- while being protected financially by the TLC's policies.
Lyft can cry wolf all it wants, but it's not as "small a player" as it makes itself out to be. By the way, this also protects new players in the space. These rules only apply to businesses doing, on average, 10,000 dispatches a day.
[1] https://www.chauffeurdriven.com/news-features/in-this-issue/...
So it’s even worse than applying a single rate to all and tacitly advatanging larger players. It’s actively basing that advantage on largeness.
Imagine if utilization was like a credit rating and the TLC wants laws that ensure good credit ratings among operators. So they incentivize reaching a good credit rating.
One option could be to say, hey if you get a credit rating about 700, that is good for the people, so you get a tax break or something.
Instead they are saying, hey if the size of your business already makes it easier for you to build a high credit rating, then you get even more tax breaks than others do, giving you even more advantage over them.
This is not about the 10k/day part at all, only about how if Uber’s position as current market leader leads Uber to already lead on raw utilization rate, then the new law automatically rewards Uber with a labor price break more than the price break Lyft would get, and more still than Via or Juno.
Because my comment was related to that. Not all related things had to be squarely about the 10k/day item. My reply, which was very related to the parent comments, just wasn’t about the 10k/day part.
It’s not necessary for a reply to focus on or discuss precisely the 10k/day item in order to be related and merit being a reply in this subthread.
If the goal is to better society, in this case to better NYC congestion, then wouldn’t it make sense to incentivize companies to meet a single standardized level of utilization that is related to traffic patterns and congestion analysis?
In what way is a custom utilization rate based price good for the city? It would seem to build in a margin advantage to which ever company is already the volume leader, even if that company’s actual utilization in real terms is not at a level that meets society’s goals.
It feels honestly very much like Uber pulled strings for regulatory capture.
> In a recent talk at Columbia University, entrepreneur Steve Blank, along with Bradley Tusk, Uber's first head of policy, and Evan Burfield, author of Regulatory Hacking, discussed how some of the most exciting unicorns of the last 10 years have been launched in heavily regulated markets—and why they think that trend will only accelerate.
> ...
> Tusk—who'd made a career in New York politics working for Chuck Schumer and Michael Bloomberg—was experienced with these regulators. He leveraged his knowledge of NYC politics, along with Uber's massive user base, in what he gleefully described as “a vicious f$&@ing campaign” to flip the city council and halt regulation blocking Uber.
In—app tipping is the worst thing that ever happened to ride share services.
Honestly, I don't mind not getting tipped by the old man or single mother going home with a few bags from the grocery store, I know they're broke. On the other hand, I appreciate it when the businesswoman headed to the airport gives me a bigger tip than I expected, I know she can afford it.
Would I rather make a flat extra $7 an hour? Yeah, probably overall. But allowing tipping (in an environment where it's been a tradition for generations) costs the company nothing and results in more income for underpaid drivers. If it's that or simply make less money, well, it may not be the perfect shining ideal of How Things Should Be Done, but I'll take it.
That’s why having tipping be part of the app is so ass backwards. The pricing shown to the customer is what the customer agreed to pay. Some fraction of that goes to the driver and that amount should be enough to be a viable source of income. Banking on an expected X% bonus that’s not listed in the price presented to the customer for the system to be able to operate is disingenuous.
> Honestly, I don't mind not getting tipped by the old man or single mother going home with a few bags from the grocery store, I know they're broke. On the other hand, I appreciate it when the businesswoman headed to the airport gives me a bigger tip than I expected, I know she can afford it.
And if she doesn’t tip do you feel sleighted?
> Would I rather make a flat extra $7 an hour? Yeah, probably overall. But allowing tipping (in an environment where it's been a tradition for generations) costs the company nothing and results in more income for underpaid drivers. If it's that or simply make less money, well, it may not be the perfect shining ideal of How Things Should Be Done, but I'll take it.
Tipping for drivers has always been possible, in cash, outside of the world of the app. Having it total external prevents “expected tip” shenanigans for min wage calculations like goes on in the food service industry. That also has the advantage of being off the books for the drivers (let’s be honest, none of them are claiming taxes on a fiver given in cash by a passenger).
I have never, and will never, used the space on the bill, or in app. I want my tip to go to the person who provided the excellent service alone, not to be shared with their employer or every other server in the restaurant. Providing a line item for tips probably reduces my chances of tipping at all.
Something something higher Utilization Uber? I read it twice but it’s still a little muddy to me. Are they arguing that since Uber drivers have higher utilization, Uber has to pay less minimum wage padding - so they get an advantage? Isn’t that fair? Or is this more complex than I’m hoping?
Lyft here is not opposing a plan to ensure drivers make a minimum wage nor opposing a plan to incentivize companies to increase their utilization rate, which is a measure of how much productive traffic they add to the city instead of unproductive traffic.
On the first issue, Lyft is saying that the specific implementation of a minimum wage policy is going to hurt drivers by lessening ride demand overall. Their reasoning is that the policy mandates the wagechange must apply individually to every single ride, rather than applying in aggregate to each driver over longer time spans like a week.
If Lyft can compete through price changes on a ride by ride basis, yet still ensure that at an aggregate level the driver meets or exceeds the wage requirement, this gives Lyft more levers they can pull to keep prices lower for customers and/or strategically decide which types of traffic patterns ought to be paying higher prices that subsidize the wage requirement.
The current policy disallows this type of “smart pricing” and instead insists that all rides must raise in price, which is likely to lead to decreased demand overall, especially for short rides that are less problematic in terms of return-trip utilization risks.
This issue had little to do with Uber except maybe that Uber had greater capitalization to ride out more losses while this law kills off competitors. But Uber drivers could be just as negatively affected as any other drivers from the specific way that a wage requirement is being carried out.
The other issue is very different, it is about rewards given to companies based on the company’s demonstrated utilization rate, which is in part a function of the amount of ride liquidity that company has, which is basically a proxy for market share.
Lyft is asking, hey, if the goal here is to reduce unproductive traffic in line with some studies on traffic congestion, etc., then why is there an individually-calculated reward on a company by company basis that is partly calculated using a proxy for market share? How does that solve the city congestion problem?
For example, let’s say that the city did some research and knows that if companies operate with utilization rate of 60% or higher, this is “good,” and they want companies to have a financial incentive to reach that.
One way would be to offer a price break, freedom to pay drivers less than the new minimum wage requirement, as a reward for hitting the utilization mark.
Instead of that, the law is choosing a formula not based on something like that 60% number from studies or other factors. Instead, it is saying, hey so Uber had a utilization rate of 45% (pretty bad for the city, way less than 60%), but their 45% number (partly due to their market share) is better than say Lyft’s utilization at 40% or something.
In that case, Uber would get more price break than Lyft, because 45% is higher than 40%, despite neither one hitting the mark necessary at 60%.
Worse yet, because Uber’s ability to engineer 45% utilization is largely just because Uber happens to have a larger volume of ride inventory, the reward had nothing to do with proactive policy on Uber’s part, but is instead literally codify the idea of “the rich get richer.”
Many alternatives make more sense in terms of helping the city and preserving fair competition, for example:
- basing price breaks on city-wide utilization target levels that apply to everyone.
- basing price breaks on the amount utilization increases over time, so that the people making the biggest improvements get the biggest rewards.
I guess what I'm asking is: why doesn't a regulation Just say "drivers should all have decent working hours (enough working hours, shifts not too long or short etc) and they should be paid at least the minimum wage for each of those hours regardless of whether they are driving or not.".
Once you drop off the rider, you’re less likely to immediately pick up a new rider in that random outlying area, so there’s some “return trip” extra cost built for everybody, in terms of paying the driver to get back to a place with a lot of passengers, the driver spending time to get there, and society bearing a zero utilization period for the driver to get back.
As a result, this typically makes prices for these rides go up to reflect all these built-in costs. And naturally this reaches some equilibrium that reflects what people in the outlying area are really willing to pay for the convenience, and somewhat weighted by the natural demand for rides there.
But one criticism of Uber has been using investor capital to artificially reduce those costs down to levels totally unsustainable in terms of the actual demand and built-in costs. Essentially taking a loss to artificially over-service those areas, leading to huge increase of zero-utilization return trips and huge losses to cab companies that don’t have investor cash injections to artificially suppress the real prices in an attempt to win monopoly market share like Uber is trying to do.
This is just one issue, and there are many more involving ride supply, driver pay, smart pricing, business pricing, etc.
All these things combine to create a really complicated situation for the TLC to genuinely ensure that drivers are paid fairly and companies like Uber don’t just use investor cash injections to skyrocket unproductive “rides in waiting” floating around to artificially make rides more available for market capture.
As a result, very simple policies that do not dig into operating details are unlikely to succeed at all and would be easily gamed, especially for larger operators.
This would seem at first glance to either be a case of predatory pricing, or it is not?
I still don’t see the why regulators shouldn’t separate the issue of minimum wage from the other issues (competition etc). Even if the regulation means killing Uber’s competitors, isn’t it the right decision to impose a minimum wage? Is there a similar debate about e.g what a minimum wage does to small vs large actors in retail?
If Uber uses a dominating market position unfairly or uses predatory pricing with investor money that should be addressed, but if Uber needs to “pad” their drivers wages $2 per hour and Lyft needs to pad $4 to reach minimum level due to Uber being able to use its size to get higher utilization, then that seems like competition as it should work?
I appreciate your attempt to explain why and how this is complicated - and I apologize for being thick here.
The problem is that Uber’s higher utilization is an arbitrary metric, and if we’re picking arbitrary metrics, why would we pick one that intrinsically entrenches the current market leader?
Just because Uber’s utilization might be higher than Lyft’s, that doesn’t mean either one of them is operating with a satisfactory utilization or an unsatisfactory one. What if Uber operated at 99% utilization, and Lyft at 95%. At that point, offering any financial incentive based on ranked utilization would be a huge waste of taxpayer money.
Meanwhile, if Uber and Lyft are at 15% and 10% utilization, it’s equally a waste to reward because those are such bad numbers that society is enduring major congestion costs.
Here’s an analogy. Suppose in the US that the government decided sports teams are a morally bad influence on society due to executive and athlete behavior.
As a result, they will reduce your team’s roster size unless you donate money to charity.
Suppose they were to “unlock” one new roster spot for every $1 million of charity donation. That seems possibly fair. Teams can each decide if it’s worth it, and it’s a flat fee affordable even by the least financially well-backed teams.
But instead suppose they tallied up all the donatioms to charity and ranked each team. The top team gets all roster spots, the next team gets most of them, and so on down to the teams that did not donate, which get no roster spots unlocked.
What’s the problem with the second model? It seems like a nice auction sort of way to do it, and that’s fair right?
Well one problem is that the whole point was to raise money for charity to offset ethical problems, and the auction method does not necessarily cause much donation to happen, only enough to be the winner, say. The winning team might have only donated $500k total, but they are still rewarded like they did something awesome. Society loses out.
The second problem is that it intrinsically favors teams with more money. They can buy the roster spots just based on their size, regardless of whether it is addressing the underlying ethical problem. For big teams it’s just a cost of doing business and the players can keep on doing cocaine in the hotel room, who cares. But for the small teams, even if they want to reform the underlying problem, they may not be able to afford to unlock roster spots, which reinforces that they won’t make as much money from winnings, which keeps them unable to buy future roster spots, and so on.
The utilization reward policy is like this in many ways. It doesn’t reward based on absolute levels of utilization or improvement of utilization... it intrinsically rewards based on your ranked utilization, which just reinforces the market share of existing operators.
How the different market actors are affected (whether it strengthens the incumbent) and how it affects congestion etc shouldn’t even be a concern! Road congestion is one thing. Competition is a separate thing. Minimum wages is a third thing. I don’t see any reason why regulation needs to consider any 2 at the same time. Predatory pricing is (often) illegal, congestion should mean raising congestion fees, min wages should be simple. Am I oversimplifying it?
If a $15 min wage was imposed in other parts of the market such as retail, who would care if WalMart was unfairly benefiting from it and would there be suggestions that regulation should be using a more complex metric so smaller retailers would be allowed to dodge the min wage requirement somewhat?
Yes! In fact, in NYC there is already a huge backlash against the minimum wage increase stating that it unfairly hurts small businesses (who are forced to fire people and/or cut benefits since they cannot meet basic operating revenue requirements if they keep the same amount of staff and also have to pay them the higher wage).
Many proposals have been suggested that there should be offsetting tax breaks given to small businesses because the minimum wage unfairly hurts them more than larger chains.
A theme I see in all of your replies is something like “just do X” where X is enforcing a minimum wage or incentivizing rideshare utilization.
But it is way, way more complicated than that. If you “just raise the minimum wage” it can actually turn out to hurt workers overall, if the resulting price increases passed on to consumers cause demand to drop, or if businesses have to fire some workers and require overtime from a smaller staff, etc.
It’s the same with rideshare policies and many other things. If you “just do X” without understanding the economic ripple effects of X, you might end up hurting the very people that X was supposed to help.