Will New York City’s Cap On Uber And Lyft Vehicles Increase Ride Prices?

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Will New York City’s Cap On Uber And Lyft Vehicles Increase Ride Prices?

Ridesharing apps claim the new ruling will be bad for customers


August 11, 2018


Is your Uber ride about to get more expensive?

The New York City Council approved a measure on Wednesday that will cap the number of ride-hail vehicles in the city and create a minimum wage for drivers. Uber claimed the change would lead to “substantially higher prices” and longer wait times, but driver advocates say the bill is good for drivers and city traffic.

“Apps have flooded the streets with more drivers than there is work, destroying the ability of drivers to make a living and clogging streets,” said Moira Muntz, spokeswoman for the Independent Drivers Guild, a union representing more than 65,000 professional drivers for apps like Uber, Lyft, Via and Juno in New York City.

The city government plans to cap the number of cars for one year while it studies how rideshare apps affect traffic and the environment. The measure was opposed by The New York Times and The Wall Street Journal editorial boards as well as civil rights leaders including Reverend Al Sharpton, who said without ride-hailing apps non-white riders in New York City have trouble hailing cabs.

With the city’s subway system suffering regular delays and undergoing maintenance work many New Yorkers have turned to rideshare apps to get to the office, opponents of the ruling argue. “There will be some backlash from riders who have a hard time moving around New York,” said Jamie Court, president of consumer advocacy group Consumer Watchdog.

Uber and Lyft could pay drivers 22.5% more without raising prices for riders, a report commissioned by New York City concluded. The report said prices may increase for consumers under the new measures, but did not say by how much, and also showed that wait times under the cap would increase by 6% or 18 seconds per ride.

With more than 60,000-plus Uber vehicles on the road in NYC, there should still be enough cars to reach consumer demand, said Harry Campbell, author of The Rideshare Guide. In fact, as drivers in the Big Apple have struggled to fill rides at all times in recent months, the cap could help them earn more and increase their utilization rate, he noted.

“NYC is the biggest transportation market in the world with millions of rides a day provided by for-hire drivers, but as we’ve seen with the explosion in popularity of rideshare services too much of a good thing can be bad,” he said.

The New York City report — prepared by James A. Parrott, an economist the Center for New York City Affairs at the New School and Michael Reich, professor of economics the University of California, Berkeley — includes a minimum wage of $17.22 per hour for drivers. Uber and Lyft have also said that fares could go up under the new regulation.

The vast majority of drivers (90%) are immigrants and more than half provide the bulk of their family income to support children, the NYC report found.”Driver pay is low, despite rapid industry growth and high pricing mark-ups, because companies depend upon having a large ready pool of available drivers,” it said.

A spokeswoman for Lyft told MarketWatch the company supports a “livable wage for all drivers.” In NYC, Lyft drivers earn $24.14 per hour on average, before expenses: 40% of drivers qualify for Medicaid and 16% have no health insurance. And 18% have incomes so low they qualify for federal nutrition assistance, nearly twice the rate of New York City workers overall.

These sweeping cuts to transportation will bring New Yorkers back to an era of struggling to get a ride, particularly for communities of color and in the outer boroughs,” Lyft told MarketWatch in a statement.

“The city’s 12-month pause on new vehicle licenses will threaten one of the few reliable transportation options while doing nothing to fix the subways or ease congestion,” a spokesman from Uber said. (In December, the European Union ruled that Uber must be regulated like any other taxi service and comply with minimum wage standards.)

Muntz said the Driver’s Guild believes Uber fought this legislation because, approaching an IPO, the company is focused on short-term growth. “These companies have gotten away with treating their workers as disposable for years, but now that New York City has acted to rein them in, they know others will follow,” she said.

The measure is one of the first to rein in Uber’s massive growth, Court added. “This is a step towards controlling this very disruptive company that can be helpful in terms of getting rides, but doesn’t want to play by long-established rules — and is driving taxi drivers out of business,” he said. “It’s going to be a rocky process of finding a balance.”

Consumer Watchdog
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