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Last week, I posted about the attempt by the Minneapolis City Council to set higher pay for Uber and Lyft drivers, and the threat by the rideshare companies to withdraw from Minneapolis or from Minnesota as a whole if the law was enacted. The dispute seems settled, at least for now, and I thought some readers might like to know the denouement of the story.

The governor of Minnesota is a Democrat and the Minnesota state legislature is Democrat-controlled, and thus was ideologically sympathetic to an attempt to raise the wages of rideshare drivers. However, unlike the Minneapolis City Council, the state-level politicians were open to evidence and even compromise. Rather than stand by and watch the Minneapolis City Council play brinksmanship games with the ride-share companies, the state legislature blocked the city from setting its own rules and passed rules of its own. For perspective, here’s a chart comparing the recent proposal from a story by Max Nesterak in Minnesota Reformer (May 21, 2024, “Here’s what’s in the bill regulating Uber and Lyft driver pay and labor standards”).

As I discussed in the previous post, rideshare drivers are paid based on a per-mile and a per-minute fee schedule when they are driving customers. The proposals in the chart appear in chronological order. Thus, last year Uber reached agreement with a group called the Minnesota Rideshare Drivers Association, which does not represent all drivers, for a rate of $1.17/mile and $0.34 per minute. Based on existing trip patterns, this would have raised driver earnings by 11%. This agreement was rejected by state legislators, who passed legislation that would have raised earnings 67%–only to see it vetoed by the governor.

This March, the Minneapolis City Council entered the picture with a proposed fee schedule that would increase driver earnings by 45%. Literally the next day, a report from the Minnesota state Department of Labor and Industry (apparently conducted by economists James Parrott of The New School and Michael Reich of the University of California, Berkeley) calculated that if the goal was to assure drivers reached the minimum wage, substantially lower per-mile and per-minute charges were appropriate. The mayor of Minneapolis chimed in with his own proposal. The bill that passed the state legislature is in the bottom row of the table: $1.28/mile and $0.31/minute.

A few thought here:

1) The ultimate compromise is extremely close to the per-minute and per-mile charges that Uber had agreed to last year, as well as close to the results from the state-level study for assuring that drivers would earn the minimum wage. The much higher pay levels proposed in state legislation last year, as well as by the Minneapolis City Council, failed to pass.

2) One way to get a flavor for these number is to take a fairly common and representative trip and see what it would cost under these rules. A news story from the local Star Tribune newspaper calculated: “The deal means that for a 10-mile, 15-minute ride, a driver would make $17.45. The rates proposed by DFL leaders earlier this month would have netted drivers $20.05 for the same trip, and the original Minneapolis ordinance would have given drivers $21.75.”

3) The estimates of how much the new pay schedule will raise driver pay are probably unreliable. As I noted in my previous post, they are based on the earlier data using actual trips per driver. However, higher pay for drivers will tend to attract more drivers, which means drivers will need to wait longer for a fare. Higher fares will also discourage some customers. To some extent, this rise in supply of drivers and drop in demand for rides will combine to offset some, perhaps most, of how the pay schedule would otherwise affect drivers.

4) Now that the issue of having the government set pay for rideshare drivers is on the table, it’s not going away. As Nesterak writes: “[Minneapolis] City Council members blasted [Governor] Walz for that part of the agreement, saying he caved to multi-billion dollar corporations. They also took credit for the deal.” Similarly, supporters of the bill at the state legislature claimed the bill as only a partial success and promised to keep negotiating for higher per-mile and per-minute charges in the future.

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