On September 29, the Seattle City Council approved a minimum pay standard for Uber and Lyft drivers. Effective January 2021 rideshare companies that operate in the city must pay a sum roughly equal to the city’s $16 minimum hourly wage for businesses with more than 500 employees.
The law, passed in a 9-to-0 vote, is part of Seattle’s attempt to regulate gig-economy transportation services. According to Mayor Jenny Durkan, “The pandemic has exposed the fault lines in our systems of worker protections, leaving many frontline workers like gig workers without a safety net.” The new law will ensure a safety net is in place for those workers.
Seattle’s law mirrors the one passed in New York City in 2018. This makes Seattle the second city in the United States to pass a minimum wage law for rideshare drivers. Michael Reich, a labor economist at the University of California, Berkley, was an architect of the New York measure and advised Seattle on its new law. According to Reich, the average driver pay has increased in New York and the overall revenue has risen enough to offset the drop in demand because of higher fares.
The city plans to create a formula for minimum compensation for each trip. This will be a combination of per-minute and per-mile rates that are scaled up by what is known as utilization rate—which refers to the fraction of each hour during which drivers have a passenger in their vehicle. Essentially, a lower utilization rate should correspond to a high per-minute and per-mile rate. This will compensate drivers for being less busy.
In addition to the pay standard, the new law stipulates that companies have to hand over all tips to drivers, that tips are not to be counted toward the minimum wage, and that the companies have to provide protective equipment like masks to drivers—or reimburse them for those costs.
While Uber declined to comment on the city’s decision, Lyft spokesman, CJ Macklin, released the following statement to the New York Times: “The city’s plan is deeply flawed and will actually destroy jobs for thousands of people—as many as 4,000 drivers on Lyft alone—and drive ride-share companies out of Seattle.”
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