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Uber and Lyft drivers in Seattle could get a raise. Here's what the city proposes

After months of shutdowns that have damaged the ride-hailing industry, Uber says it sees signs of revival.
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Uber and Lyft drivers need a raise, according to Seattle Mayor Jenny Durkan and the union representing drivers.

KUOW has been looking into the mayor's proposal.

Paige Browning spoke with KUOW's Joshua McNichols.

Seattle officials consider pay raise for Uber, Lyft drivers

Seattle officials consider pay raise for Uber, Lyft drivers

The intent is that, after the pandemic is over and customers return, drivers will make minimum wage, even after you consider all their expenses - like car maintenance and health care. Minimum wage is $16.39 per hour.

Both companies saw a 75% drop in business in the first few months of the pandemic. But in places where that have beaten back the pandemic, like New Zealand, ride sharing has come back. So, while this new law could come into effect as early as January, drivers won't experience its full effect until after the pandemic.

Unemployment has helped [drivers adapt] to this drop in business. It's gotten worse since the federal $600 a week disappeared.

Many drivers have shifted to other kinds of gig work. Gloria Rodriguez was driving for Uber and Lyft before the pandemic. But when ridership dropped off, she started driving for Uber Eats.

Rodriguez: “It’s been really helpful. Even though my income has been cut for more than half, it’s been enough funding that I can pay for some bills that I do have, so I don’t get crazy and bag groceries.”

There’s a hierarchy of gig jobs, in this economy. The pandemic temporarily wiped out a big swath of the industry, like ride sharing, and forced those workers to find money elsewhere. Many of them migrated to the gig jobs that are left standing, places like Instacart and Doordash.

But at this moment, Seattle’s government is focused on Uber and Lyft drivers. Because the mayor’s office began work on figuring out how to raise driver pay back before the pandemic, and now the research is in and they’re ready to act. They want to pass a law this fall giving drivers a 30% raise.

The research [on driver pay] was all done before the pandemic. But assuming a healthy ride sharing industry, researchers found that ride sharing drivers earn an average of just under $10 an hour.

Uber and Lyft like to say drivers earn much higher wages than that – because an industry-funded study shows drivers earn 23 dollars an hour.

But the city’s study considered the time drivers spend on the app waiting for a customer to show up as work. (The industry-preferred study considered some of this time work, but not all of it).

And this highlights a fundamental disagreement about the nature of gig work and what it’s fair to ask gig companies to pay for.

In our [non-gig] jobs, we are highly productive most of the time. But there are those moments – maybe when you’re waiting for someone to call you back – or when you decide to take a 15 minute break – when we’re not being productive.

But we still get paid for that time, because we’re employees and it’s understood that the work day is a cycle of productive and less productive time.

But for gig workers, they’re only paid for their moments of highest productivity. That is, when they have a customer in the car.

When they’re sitting in their car, with their Uber and Lyft apps open, waiting for a customer, that’s not considered work. And this is what Seattle hopes to change.

The city pretty much had two options.

They could have tried to reclassify drivers as employees, instead of independent contractors. That’s what California did, and it led to a showdown there – Uber threatened to shut down work in California for a couple of months starting this week, so it can adjust to this new reality.

And now, the New York Times reports that Uber is looking at going to a franchise model in California, to get around the law.

Seattle avoided this particular nest of problems by choosing a different option. It will let Uber and Lyft continue to call their workers independent contractors. But the companies just have to pay those workers more.

Workers will get such a big bump in pay, that it’s as if they were getting paid for their inactive time spent waiting for customers — even though technically they're still only getting paid when they're actually driving customers.

Drivers react

I'm hearing three different responses [from drivers].

An industry backed driver group disapproves, for many of the same reasons Uber and Lyft do.

The majority of drivers I spoke to tell me they support the plan, even though they say it only gives them back some of the pay Uber has taken from them in recent years. They plan to do some lobbying to try to sweeten the deal for drivers a little bit.

And then there's Ahmed Mumin of the Seattle Rideshare Drivers Association, who is calling for a much tougher deal: a 50% pay increase, rather than 30%.

Mumin: “We don’t want minimum wage. We want living wage. And living wage means we need more money to pay the rent, bring food on the table, and to raise our family.”

Uber and Lyft's position

They say it’ll make ride sharing more expensive and less popular, and they're trying to poke holes in the mayor's study.

They say it assumes the companies have an obligation to pay for too many driver expenses, like health insurance, cell phone service, vehicle maintenance, gas, and licensing fees.

They say the plan will force the companies to limit the number of drivers who can get on the app at one time.

They say that's what happened in New York, where drivers won a pay increase.

Uber and Lyft prefer a different study, one that lets companies off the hook for expenses that Seattle's study suggests drivers should be paid for.

For example, Uber and Lyft say they should not have to pay for the health insurance of part-time employees.

However, Seattle's plan would only pay for benefits like those to the extent that drivers are working. For example, a driver working half time would only have half their health insurance expenses paid for. A driver who works only 4 hours a week would only have a tenth of their insurance costs paid for. And those reimbursements are only earned by driving — not by sitting around with the app open.

The companies have some influence on how this works out, because they control the number of workers on the platform at one time.

The city says its wage analysis study is fair, and that the market impact will be minimal.

As for the cost to implement the changes, city analysts say there's a simple solution: Transportation network companies like Uber and Lyft should stop taking so much money from drivers.

Right now, the city says the companies take a 30% commission, on average, from each ride. City analysts say: Why not reduce your commission to 15%?

But that's a non-starter for these companies. They say: No way. We're not even profitable. It's not as simple as just looking at the cost to run a transportation platform alone. We also need that income for research and development.

Uber and Lyft are spending buckets on research related to self-driving cars. And Uber wants to make flying taxis.

How will they pay for all that if they have to reduce their income by half? Their CEOs' TED Talks would become a lot less interesting — that could dampen the enthusiasm of some investors.

The mayor's finalizing her plan and plans to send it to the city council in September.

Then, both sides will lobby the city council to make it better for drivers or better for the companies.

Correction Note: An earlier version of this story described Uber as "barely profitable." As a company, it is not profitable.

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