Uber, Lyft to stop operations in Minneapolis over minimum wage law | Hacker News Reader

Uber, Lyft to stop operations in Minneapolis over minimum wage law

reuters.com

42 pointsmfiguiere94 comments

I suggest reading the report by the Minnesota Department of Labor [0].

Some interesting pulls from the summary:

> Census data and the driver survey indicate the majority of Minnesota TNC drivers are male immigrants and predominantly Black or African American non-Hispanic workers with less than a four-year college degree; many live in low-income households (up to 200% of the federal poverty level) and, relative to all Minnesota workers, are disproportionately reliant on public assistance.

> Nearly half (45 percent) of those driving for Uber and Lyft are relatively casual drivers averaging fewer than 10 hours per week and providing only 11 percent of all trips. The focus here is on the committed, non-casual driver since they are more likely to rely on TNC driving as a primary source of income and provide the majority of trips.

> Median earnings for all Twin Cities metro area drivers were $50.04 on a gross passenger time (P3) basis, $29.64 on a gross working hours basis (P1+P2+P3), and $13.63 on a net, after-expense working hours basis. Twenty-five percent of drivers had net, after-expense hourly earnings of $10.54 or less, and 25 percent of drivers had net after-expense hourly earnings of $17.51 or more.

> The Minnesota per minute rate is designed to compensate drivers at the equivalent of the minimum wage, plus the employer share of federal Social Security and Medicare payroll tax: ($15.57 Minneapolis minimum wage plus $1.28 in payroll tax in the Twin Cities metro area, and $10.85 state minimum wage plus $0.89 in payroll tax for the Greater Minnesota counties). The Minnesota base per mile rate provides for the 63.8 cents per mile cost of acquiring, operating, and maintaining a vehicle based on Minnesota-specific costs from early 2024.

> Applying the 2024 base rate pay standard per minute and per mile rates to the hours worked and miles driven during 2022 indicates that average pay per trip for Twin Cities drivers would rise by about 10 percent under the base pay standard, and by about 17 percent on average for Greater Minnesota drivers.

0: https://dli.mn.gov/sites/default/files/pdf/TNC_driver_earnin...

>> are disproportionately reliant on public assistance.

Whenever workers for a company are disproportionately reliant on public assistance, it means that the management has figured out a scam to get rest of the taxpayers to subsidize their business.

The taxpayers make up the difference between what is paid vs a living wage which would be required for those workers to sustainably work for the corp, and the management/shareholders pocket the difference.

Absolutely. Companies like Walmart and McDonald's take advantage of this.

https://www.worldhunger.org/report-walmart-workers-cost-taxp...

So what is your solution? We can clearly see from this whole article companies will just leave the market if you artificially force pay too high.

If they don't have that job at Walmart are they suddenly going to get one that means they don't need government assistance?

If your business can't survive paying employees a living wage, you're closer to slavery than you are to a proper economic model - i.e. your business is unsustainable.

If your cost of raw materials is too high, you can't just stiff your suppliers or steal from them. Why should labor be any different?

Labor/Employment requires two willing parties don't diminish slavery by claiming paying lower then a living wage is close to it; that's beyond bullshit and you know it.

You also avoided answering the question. What happens to these people now? You took away their job and now their quality of life is going to be even lower are you happy?

Increase taxes and put in place real social safety nets vs the Rube Goldberg machine of government subsidizing shareholders and businesses through underpaid labor? Perhaps an option some may not be a fan of, but an option as gig work and other industries relying on disadvantaged labor continues to be ground down by regulators.

> Rube Goldberg machine of government subsidizing shareholders and businesses through underpaid labor?

You have it backwards here the government is forcing shareholders/businesses to subsidize labor. But in general yes I agree we should have some degree of a universal basic income and the government should get out of the minimum wage game.

Everyone gets enough to live; find someone willing to pay you if you want luxuries.

Companies leaving because they have an unsustainable business model isn't an argument for paying people less than a living wage. It's an argument for those businesses leaving or going bankrupt.

Solution 1: Reset the minimum wage the way it was originally designed (by 1950s Republicans), so that it pays a livable wage for one man working 40 hours to support a family of 4 above the poverty line. This is what built the middle class.

Solution 2: Tax any and all automation sufficiently to pay a Universal Basic Income above the poverty level so that people have options and do not need to work unless an employer makes it worth their while to undertake the commute, etc. Actual minimum wages may be lower, but the corp taxes will be higher.

Either way, we are the wealthiest society in the history of the planet. We CAN afford to treat everyone with dignity, which includes providing for their basic needs of food, housing, healthcare. Allowing some to exploit others in a coercive semi-slavery arrangement should not be an option.

Moreover, history shows that when distribution is required to be sufficient to build and maintain a robust middle class, the wealthy also get wealthier (because they have a base of customers). Massive economic inequality leads to overall lower growth, and a smaller pie for even the wealthy. It's a commons problem, and the wealthy aren't smart enough to solve it (although Henry Ford made a start with his idea that every one of his employees should be able to afford one of his cars — same principle)

I've always thought there should be a tax of some multiple of the dollar value of public assistance employees receive from every employer (so if a worker has multiple jobs and still takes public assistance, each employer would be liable for some multiple of the whole amount).

Government should know who is receiving public assistance, but keep it anonymous for the purposes of levying the tax, so employers can't retaliate/discriminate against those on public assistance.

If employers had to pay $10 in tax for every dollar an employee receives in public assistance, I suspect it would be cheaper to pay workers a living wage.

What would this do that a minimum wage wouldn't do?

IDK but since legislating fair wages seems to not be feasible, this is something else to try.

Not necessarily.

The barrier to earning income by working for Uber/Lyft is much lower than other jobs. Workers are not fungible. Some people make better employees than others. Those who are already on public assistance are more likely to be less reliable/capable.

If these folks could get a job with higher wages, wouldn't they already be doing that? Especially considering the freedom from forced scheduling that driving provides.

What is the other option. Welfare exists as is and is just part of the social services offered by the government. For a lot of poor people there isn't a job that will offer them a living wage because they don't have skills yet to demand that. Bad jobs are ways to show that you have the skills to be on time come in everyday ect. Bad jobs allow people to build skills at low risk to the employer so they can demand higher wages over time.

Not everyone can work a full time job and the government shouldn't get in peoples way of earning money however they see fit.

Companies like Walmart and McDonald's take advantage of government assistance by not paying their employees enough to live on. And before you say that only teenagers should be working these minimum wage jobs - there aren't enough teens to work these jobs, especially during school hours. If you're employing people, you need to pay them enough - and if they can't live on the wages you pay, the company should foot the bill for the welfare, not the rest of the economy.

Companies pay what people will accept and what they can offer for a job. It has nothing to do with welfare. In fact if there was no welfare do you think people would demand more or less to work? My guess is much less.

This race-to-the-bottom leads to what's essentially slavery. That's why we should not allow companies to pay such abusively low wages.

It's not abuse. Your imposing your standards on other people without their concent. People should be able to make whatever arrangements they find mutually beneficial. Uninvolved third parties shouldn't have a veto power over how people work.

I'm glad we've decided on the solution of them now having no job and still requiring public assistance..... What a great morally superior decision we've made on their behalf I'm sure they'll thank us.

“Wage theft” what? It’s very transparent what you are getting paid and what the deal is when you drive for uber or lyft.

Argue all you want for thinking that law makers should be setting special wages for specific industries. Personally i think they should stay out of it but man i would be mad as someone living in the city that these services are no longer available.

If you think you're mad as a consumer, imagine all the Uber/Lyft drivers who no longer have any income because the government has made it uneconomical for their employer to do business in their city.

If they can't pay even minimum wage, it was already uneconomical and being subsidized by government welfare.

How is that true? Plenty of people work minimum wage jobs that aren't subsidized by government welfare.

If someone has a roommate or a partner or a parent or a child that supports them?

There are some jobs that are only economically viable at a certain wage, and anything beyond that makes it not economically viable. So those jobs won't exist.

Exactly, if you can't afford to pay a living wage you have a bad business model, which is exactly what the comment you responded to was pointing out.

Incorrect. McDonalds might calculate that for every hour someone sweeps in front of their store, they make $7 in profit. If someone is willing to do that for $6 an hour, they will pay. If minimum wage is $8 an hour, they will leave the dirt and leaves there.

That has nothing to do with having an economically viable business model.

Please do not engage on HN if you are unable to understand basic economics. This is not a place to argue something this trivial.

They offer a service and you can choose to drive for them. This in a lot of cases helps people make extra money or hold them over. But you think it’s better to let the government remove this option?

I just can’t get onboard with this thinking. I understand it for W2 jobs but for freelance and pick your own hours it does not make sense.

Exploiting underpaid workers is not a service. Even if they are in tough situation with few better options.

Cool talking point.

This would make more sense if people didn't need to work to continue living. As it stands, if people get into a dire enough situation they will be forced to take work on whatever terms the company wants to offer. The reason these laws exist is to protect workers from being forced into terrible situations for a company's benefit.

Of course, the service is voluntary, but for many people the options are "work for pennies or live on the street" -- that's hardly an unforced choice. Why should the state subsidize Uber's profits, given that the state will be the one to support people who end up in poverty?

Tax labor correctly then, so that it reflects how much the government wellfare will need to subsidize.

Simplistic feel-good minimum wage laws are creating unemployment. This is a perfect example.

Uber and Lyft can easily afford to pay their workers the minimum wage, it would however hurt their record profits and set a precedence that they would need to pay a living wage across all cities. Amazingly all other businesses in this city are already able to afford the minimum wage. This is a perfect example of a company tossing some of the lowest income members of society literally to the street rather than pay them a living wage. Thank god we have minimum wage laws.

Can you help me out with the money here? I was curious, so I went and looked.

https://investor.uber.com/news-events/news/press-release-det...

It looks like they made approximately 1.4 billion, with a gross bookings of around 37.5 billion. That would _seem_ to mean that drivers would get an increase of approximately 3% of the full booking price if Uber was a nonprofit?

Best I could find is that there are about 5.4 million drivers worldwide. So if Uber's profit was distributed evenly, each would get about $264/quarter? Without knowing hours driven, I'm not sure what all that boils down to. I suspect it doesn't factor in idle time, without rides.

Can you talk a little bit about how you came up with "easily afford to pay their workers minimum wage"?

A lot of people assume that just because a company has a lot of money that they can freely give away that money to their employees. We've seen this before, Starbucks for example, billion dollar company they have plenty of money to give their employees. No one really takes into account all of the expenses, and what that actually would look like.

So maybe stop subsidizing wages with government welfare, and labor will automatically gravitate away and uber/lyft won't find enough drivers and be forced to hike wages to find drivers.

Or maybe it's a splash of reality for those businesses that have relied on undercompensated labor and VC money to acquire market share.

Not really. They haven’t been doing that for a few years now.

They are just going to leave the market if it becomes unprofitable. I see people complaining all the time about ride prices so the consumer doesn’t want this and im sure the people driving aren’t happy to lose the income as well.

Who is winning here?

It's not unprofitable, it's them posturing that they will refuse to lower their profit margins. Do you honestly think they can't afford to pay their employees the bare minimum that literally every other business in the city is paying? No they can easily afford it but if they do pay their workers fairly it sets a precedent that would slightly lower profits the "growth at the expense of everything" mindset.

Presumably those other businesses are able to generate more revenue per employee. Otherwise, they'd go out of business (which happens all the time), as Uber and Lyft are doing here. What do you believe their profit margins are? Uber's latest investor update says theirs was ~2.9% last year, though that number probably requires a decent amount of familiarity with the business to interpret.

I can't imagine investors would be very happy about them choosing to posture instead of making money with their investment if that's what they were doing.

Obviously investors want better margins. Treasuries are paying 4-5% guaranteed, so why invest in Uber to make 3%?

that is the dirty truth. All of those feel-good minimum wage laws are in fact stealing wages from those workers. Those workers were OK to work for those wages before the law. Now they have nothing.

The result is now higher unemployment and use of tax-dollar to subsidize those people.

Yes. More people should take note that there's always unintended consequences with price controls. It usually makes things much worse.

Reminds me of: https://www.lenconnect.com/story/opinion/columns/2013/09/23/...

Or, since the overall demand for transportation hasn't changed, jobs shift over time to ones with less exploitative terms.

this is the traditional belief, but all the empirical research on this shows that it is not true.

https://www.umass.edu/news/article/umass-amherst-economists-... https://www.economist.com/finance-and-economics/2021/01/30/w...

_All_ of it? Damn. That's wild.

Those workers often had no other choice other than to get exploited to scrape by, and now businesses who will refuse to pay a living wage have thrown them to the street. It's clearly economically viable for them to pay the bare minimum, but they will literally cease business than accept slightly lower profit margins.

Yeah, to be clear – I obviously want people to be compensated well for their work, but the path to that isn't as easy as passing a law. And I wish that wasn't the case, but it is, and ultimately this is the consequence of pretending otherwise.

But having laws still works better than to just hope that no greedy businessmen would ever want to exoit workers.

They are okay with it at first because they don't realize they're going to wear out their cars. Then when the car is in the shop for a week, and they can't work, they're not only paying for expensive repairs, but also not making any income at the same time. There is a reason the turnover is high with Uber and Lyft, and it's not because the pay is good.

I think I'm more angry about employers feeling so entitled to labor that they would rather close their doors and fire everyone than pay them even remotely fairly

Do you have a view on child labour laws?

I was working at 14 in Florida. What do you consider to be child labor?

I have lots of views they likely don’t line up with yours because most people don’t see how the low end of the economy actually works.

I’m sure you’d agree - the devil is in the detail. A kid working for some pocket money after school or at the weekend is one thing.

A kid dropping out of school at a young age or being pressured to work is another, and symptomatic of other problems.

They were literally caught red-handed doing this in New York. https://ny1.com/nyc/manhattan/traffic_and_transit/2024/01/19...

If it weren't an oligopoly I'd be less inclined to endorse government interference in wage setting. I'd frankly rather the twin cities just spin up their own rideshare marketplace, they have a great carshare system[0], would love to see them expand into rideshare too.

[0]: https://eviecarshare.com/

I saw what it took to build both Uber and Lyft. I know that the government will bot be able to reproduce it in any way unless you are fine with a terrible user experience and times where no rides are available

In other words, the corrupt and awful taxi and medallion scam, all over again. I wonder how much the incumbent taxi industry had to do with this. If you want to push up competition, convince the government to force your competition, to pay their employees more than you do.

I'm specifically comparing with a very successful carshare program in Minneapolis, not getting the federal government to do it. Knee-jerk assumptions that governments are always incompetent is a great way to make them that way.

I would be even more mad if I was driving for Uber in those cities and overnight the government made the decision for me to remove that as an income option.

According to the article, Uber and Lyft made the decision to stop operating, not the government.

It now costs you 100k a year in taxes for your property. You then move and everyone say its your fault because you don’t want to take a loss every year. Do i have this correct?

No, because the actual issue is that Uber’s profit model in Minneapolis required them to pay below the legal minimum wage.

They were just asking for something like minimum wage after expenses and employers portion social security equivalent.

Kind of! In this analogy I’m cheating on my taxes, and everyone tells me it’s my fault when the government makes me pay what I actually owe.

I’d also go to prison, whereas Uber and Lyft just get to say “whoops!” and leave town.

ex post facto laws are illegal just like Uber and Lyft you wouldn't be punished for what happened before they changed the laws.

I’d be furious if the government told my employer they had to pay me overtime, and my employer closed up shop rather than abide by the same rules as everyone else.

This is Uber’s fault, not the government’s fault for enforcing basic employee rights.

So, do you think Minneapolis should pass a second law prohibiting Uber from pulling out of Minneapolis?

Of course not! Uber should be free to not operate in places where they don’t want to obey the local laws.

I agree: of course not.

Moreso that you should be mad at Uber for not following the law, not the state for trying to enforce its laws.

That's exactly how Uber wants you to think. That's what they're doing: making it seem like the law is preventing them from operating (they just don't want to pay reasonable wages) so that the people get mad and vote it out, at which point they can simply continue to pay unlivable wages again.

This is backward. The issue is that in an healthy low unemployment environment, more companies would compete for those workers that would be able to negotiate a higher wage.

There is a ton of research on this and a lot of things I have read around minimum wages is that it might actually hurt workers more than anything.

Once minimum wage laws come in, a company needs to decide to raise prices or stop doing business. Raising price helps inflation and starts that feedback loop. Stop doing business means now the workers are out of a job which is even worse.

The real solution is to create an environment where companies compete to get workers. This was the case not so long ago after covid where most people didn't want to go back to work and some fast food chains had to raise wages to 25$/h

> This is backward.

How so? Your comment refutes something I didn't say. I said that Uber is blaming the law for their own decision to pull out of that market and that this is an intentional/manipulative decision on their part, which seems not to disagree with your comment.

> The real solution is to create an environment where companies compete to get workers.

This will remain impossible while there are far more workers than jobs (that they can work). Every job I apply to already has hundreds of other applicants. I can't get in anywhere, so I have to apply everywhere. Everyone else also does this. Workers have to compete for jobs & employers routinely fuck you over because they know they have leverage.

While it would sure be nice if jobs had to compete for me instead, I need to live today so I need money today and this "healthy low employment environment" will never exist. I have to take the first job I get an offer from because it might be my only job opportunity for years.

It's wage theft, because the law says you owe employees minimum wages by law, and if you aren't paying them that amount, you're stealing the excess from your employees.

The fact that you think you should be allowed to pay people less than the legal requirement is not relevant, the law says you owe people $X, so if you pay them less than X, it is theft.

The problem Lyft and Uber have is the same AirBnB is starting to run into: if your business model is misclassifying things (employees in the lyft/uber case, and hotels in the airbnb case, etc), eventually either (as in NY) court cases will force you to pay what you owe, or as here legislation will be passed to make it so that whatever the company is misclassifying things as, will be covered by the regulations the apply to what they actually are.

Seriously, if your business model is pretending that your specific implementation of X is not the same X covered by existing laws, your implementation will eventually have to comply with the regulations that apply to X.

Its pretty hard to apply min wage intended for w2 to gig work when the laws are treating you as both.

So they have to let the drivers have complete freedom over what they do and what rides they take and when they do it. But also you have to follow min wage laws which apply when?

Im sure Uber and Lyft can redesign the system to work with this model and im sure the consumer will hate the new prices.

Look up "monopsony". Also, it's not at all transparent what cut Uber and Lyft are taking from a ride.

They have taxis in Minneapolis, no? And ones that have apps available as well, as far as I can tell. Couldn't they just pick up the slack?

Good luck!

> man i would be mad as someone living in the city that these services are no longer available.

Before Uber, we had these things cal... oh never mind.

Oo yeah im familiar. They suck. Thanks for the history lesson though!

It’s been shown drunk driving drops with uber because cabs will ignore you outside of a select few cities.

As a college student i had multiple cabs try to scam me or overcharge and this was if they would even show up at all leaving me to walk miles and in one case getting robbed at gun point because of it. But yeah lol its the same as uber.

We know that Uber and Lyft are very much taking advantage of the drivers here.

But there is a big question that I have yet to see answered by any of these laws, but it is possible that all of the articles I have read just conveniently gloss over this part.

My understanding is that to start driving for both of these companies it is a fairly low bar. There isn't any interviewing and basically anyone could do it if you have car (basically, I mean I am sure there are other checks but yeah).

You also don't work set hours, you work when you choose. You may choose to work when there is a lot of demand, but that is still up to you.

So how do these laws cover if there are too many drivers out at a certain time if there isn't demand for them? Is this only paying them for driving people?

Not trying to defend how they pay people, but it always seemed a bit more difficult than just pay them a certain wage or benefits.

Not that I disagree with your first statement, but would you also say that consumers are taking advantage of the drivers?

Technically indirectly by supporting the companies, sure. But there is a disconnect between the drivers and users. What you may think they are being paid and actually paid.

Absolutely. That's one reason why I avoid platforms and use traditional businesses wherever I can (in Europe, so it's probably easier than in the US)

But it's not wrong to blame the platforms either for their miserable business model exploiting the poorer and removing worker rights.

> We know that Uber and Lyft are very much taking advantage of the drivers here.

Are they? There isn't anything quite like these kind of jobs for flexible hours. Want something extra this week drive for a few hours.

Uber and Lyft are playing a deeper game: to stop other locales doing the same thing. They want to scare governments from acting on behalf of their "independent contractors".

You see exactly the same thing with efforts to unionize at Starbucks and Amazon. Both companies will spend millions on union-busting efforts. They will close locations (eg[1]). If you have an idealistic view you may think this is a simple economic decision for the affected locations. It is not. It's to scare people in other places from unionizing out of fear of losing their jobs.

Uber and Lyft absolutely do not want their "independent contractors" being treated as employees or having governments give them basic work conditions and minimum wages. So they will try and use Minneapolis as an example to other cities.

[1]: https://www.wivb.com/news/local-news/starbucks-unionize-clos...

Has Uber or Lyft considered forcing drivers to bake fresh bread in their cars in order to skirt wage laws?

https://apnews.com/article/california-newsom-panera-fast-foo...

Huh, I suppose that will affect my trip in May. Guess I'll be taking taxis instead.

Hopefully the situation has a net positive outcome for the community.

Edit: clarification - I hope the situation is resolved in a way that benefits everyone as much as possible and hurts as few possible.

[dupe]

More discussion over here yesterday: https://news.ycombinator.com/item?id=39711041

Won't this mean that the taxi companies will fill the vacuum?

Hopefully more cities pass laws like this. Minneapolis must be enjoying a reduction in traffic congestion as people move onto public transit.

I wonder how the people who relied on income from driving must be enjoying the reduced traffic.

Its not like self driving cars where not going to take their jobs soon after anyway right? All this rush to push tech forwards isn't for that end?

Yeah it's unfortunate a corporate giant would rather throw them to the street rather than pay them a living wage. It's a good thing to root out exploitation like Uber and Lyft.

And enjoying the dui fatalities.

Reply on news.ycombinator.com