Uber and Lyft Threaten To Exit Minneapolis Over Minimum Wage Motion

Minneapolis is at the heart of heated discussions around two pivotal questions in the ride-hailing industry: How much money do Uber and Lyft drivers make, and what minimum pay should they be guaranteed?

In recent years, the debate on driver pay for ride-hailing services has been getting more attention across the nation. Speaking to Business Insider, many Uber and Lyft drivers said that ride-hailing makes less profit than it previously did, and many emphasized that the reason was due to the release of the “up-front fares” programs and the high supply of drivers.

Tension has been building up between drivers and ride-hailing companies over the disagreement on how much drivers make in profits. Drivers argue that Uber and Lyft’s profit estimates don’t sufficiently take into consideration the vehicle costs, such as fuel and maintenance, as well as the time spent traveling between passengers or relocating to busier zones.

Erin Hatton, a professor of sociology at the University at Buffalo, said, “The workers who rely on Uber and Lyft as their primary source of income typically find it very hard to make ends meet. The hidden costs of this work add up and the income is uneven and unstable.”

The Minneapolis City Council approved an ordinance by a vote of 9 to 4 on March 7. This ordinance requires that ride-hailing companies compensate drivers at a rate of $1.40 per mile and $0.51 per minute while a rider is present in the vehicle. To add to this, the ordinance ensures that drivers earn a minimum of $5 per trip, excluding tips. These standards apply solely to trips within the city.

The mayor of Minneapolis, Jacob Frey, who supported a lower pay of $1.20 per mile and $0.35 per minute, vetoed the ordinance the next day on March 8. However, the council overrode the veto by a vote of 10 to 3 on March 14. The ordinance is “scheduled to go into effect and be implemented on the designated deadline of May 1,” according to Business Insider.

Uber and Lyft have issued ultimatums to withdraw their services from the city once the ordinance takes effect. Lyft has expressed concerns that the city’s proposal would almost double fares for riders, potentially reduce demand, and ultimately negatively impact conditions for drivers.

In a statement given to Business Insider following the override vote, Lyft said, “This ordinance makes our operations unsustainable, and as a result, we are shutting down operations in Minneapolis when the law takes effect on May 1.”

Uber also said before the vote that it would have no choice but to exit its ride-hailing services in the city if the proposal passes. An Uber spokesperson said, “If this ordinance is enacted, we look forward to working with drivers, riders, and the legislature to bring rideshare back.”