How Higher Wages for Uber Drivers Could Cut Traffic on NYC Streets

It's up to Mayor de Blasio to follow through on a powerful policy proposal to change the for-hire vehicle industry for the better.

Photo via The New School
Photo via The New School

Companies like Uber have turned driving a vehicle for hire into a desperate struggle to make ends meet, clogging city streets with cars in the process. Now a report commissioned by the NYC Taxi and Limousine Commission is charting a way to advance on both wages and traffic.

Uber’s business model rests not just on flooding streets with cars but on maximizing drivers’ idle time so that passengers can more quickly summon rides. The report, covered by the New York Times and Crain’s NY Business last week, aims to raise wages for drivers at Uber and the other app-based ride services in part by reducing idle time. The effect won’t be strong enough to un-jam New York’s streets, but it could prevent the ride-hail companies from making congestion worse.

Authors James A. Parrott and Michael Reich are veteran economists with long careers advocating for pro-labor policies. Their key recommendation is that the city adopt a per-minute and per-hour earnings formula for app-based drivers. Under this formula, drivers’ compensation for each fare would rise automatically in proportion to the percentage of time in which each company’s drivers had zero passengers in their vehicle in the prior three months.

The policy would incentivize Uber, Lyft, Via, and Gett/Juno — the four companies that dominate the sector — to deploy their dispatch algorithms to maximize the time drivers are on duty with a fare in the car, known as the “driver utilization rate.” That in turn would diminish “cruising” time that squeezes drivers and adds to congestion, resulting in a win for both workers and traffic.

The Parrott-Reich report does not directly address congestion, nor does it cover medallion taxis. But its implications are enormous. Annual revenue from app-based ride services is now $3 billion a year — $2 billion for Uber alone. According to the authors, the four companies together dispatched nearly 600,000 rides per day in the five boroughs in the first quarter of 2018 — twice as many as in 2016 and double the volume for medallion cabs. Although a slight majority of the companies’ rides occur outside the Manhattan “taxi zone,” including in areas underserved by both medallion taxis and transit, drivers’ propensity to wait in the zone to be pinged has contributed to steadily worsening traffic conditions in the Manhattan Central Business District.

Parrott and Reich’s proposed “pay standard” would raise average driver pay after expenses by 22.5 percent, to $17.22 an hour — which for independent contractors equates to a $15/hour minimum wage, according to the authors. The 85 percent of app-based drivers whose pay currently falls below the $17.22/hour standard would take home an additional $6,345 per year, on average. With an estimated 80,000 workers now driving in New York City, largely full-time, for the four companies, the aggregate increase in wages would be on the order of half a billion dollars a year — providing a measurable boost to the city’s economy.

The extra earnings would come from three sources: higher utilization rates, smaller commissions, and higher fares. The report posits a range of scenarios, with a typical outcome entailing a utilization increase from 58 percent to 62 percent, a halving of the 16.6 percent industry-average commission rate, and a 3 percent rise in fares. Passenger wait times would lengthen, since fewer vehicles would be “goal-hanging” or cruising for fares, but only by around 15 seconds per trip.

While ordinarily any proposal trimming commission rates by 50 percent for the likes of Uber and Lyft would be DOA, the Parrott-Reich plan might yet see the light of day. The financial desperation of tens of thousands of for-hire drivers has led to a rash of suicides and can’t be ignored. And while the proposal won’t by itself cure Manhattan traffic gridlock — in fact, it may only keep it from worsening, by leading the companies to suppress hiring growth — it could take Uber and Lyft off the hook for worsening congestion.

Also in the proposal’s favor is the quality of the report. The 89-page volume is extensively researched, and the authors’ progressive credentials are impeccable. Although the NY Taxi Workers Alliance has derided its recommendations as “piecemeal policy that leaves drivers in poverty,” the alliance’s labor allies may embrace what the authors are calling “the first pay standard in the U.S. to apply to independent contractors.” Council Member Brad Lander has already written Intro 890-2018, a bill to implement the Parrott-Reich policy. For its part, Uber has thus far criticized the report only in vague and relatively mild terms, though the company is ramping up an ad campaign to fend off regulation.

Mayor de Blasio should seize the recommendations and run with them. Parrott and Reich, and the mayor’s own Taxi & Limousine Commission, which guided their work, are offering up a smart and powerful mechanism to move away from cowboy capitalism and toward more equitable and rational governance of the city’s streets.

  • DoctorMemory

    …or we could just put a per-mile price on the roads themselves, regardless of what sort of load the vehicle is carrying, and stop pretending that the TLC is in any way a neutral, trustworthy or un-corrupt actor here.

  • Larry Littlefield

    It’s an interesting idea.
    A lot of what has happened in transportation is based on cheap and available labor. Trucks instead of trains for freight, and then taxis and their equivalents instead of buses for transit. One has to believe that sooner or later Uber’s labor pool will dry up. It is based on people thinking they will earn more than they actually do.

  • DoctorMemory

    I think more accurately uber/lyft/etc’s labor pool was based on us being in the middle of a crippling worldwide economic depression combined with a huge pent-up demand for reliable taxi service in cities like SF and NYC where the incumbent actors were unutterably terrible. Very few people want to be full-time taxi drivers, but circa 2011 a lot of people were not in a position to turn down any possible paying gig and presumably another large group of people needed to take additional part-time work to supplement whatever other income their household was getting.

    The ride-“share” services seem to have hit a point of equilibrium in terms of quality though (still better than medallion taxis, but not as nice as uber black used to be and not offering any compelling new features), and the tightening labor market is, as you correctly note, going to start biting them sooner or later.

  • An excellent overview and analysis. Thank you, Charles.

  • Jay

    There are many Uber vehicles due to demand. And that’s because the mass transit system has failed many New Yorkers. What DeBlasio, Cuomo & Lander refuse to recognize is that it is not the Uber & other vehicles clogging traffic. Rather, it stems from failed policies of the Bloomberg and DeBlasio Administrations. For example, instead of five lanes of traffic on an Avenue, there are now four- why? Because one lane is reserved for bikes. Of course, when squeezing 100% into 80%, traffic will occur. On top of this, there are now two lanes reserved for Buses on some Avenues so there are only 2 lanes available for cars on Madison Avenue. Further complicating matters is the insistence of both DeBlasio and Lander to close traffic off in Central (and Prospect) Park, forcing cars which would have flowed through Central Park, back on our streets; this backs up cars for miles on Avenues on both the East and West Sides. Finally, there the Bloomberg street parks which closes off Broadway to traffic from 50th Street to 32nd Street, forcing cars onto adjacent streets, causing backups not only on the Avenues, but the side streets too.

    Get rid of the bike lanes, the pedestrian islands, the double bus lanes, pedestrian malls, re-open up Broadway and Central Park and the lanes around Union Square to traffic and one will start seeing buses and cars moving much faster.

  • Horse Sense

    New York is well overdue for the implementation of a congestion tax to modify peoples transport habits.It is very successful in London.

  • 8FH

    Except those are not the areas with the worst traffic, and the bus lanes carry more people than the lanes would be able to accommodate with cars. Plus, traffic studies generally don’t show an effect of bike infrastructure on traffic speed at rush hour.

    The fact is that the congestion is more correlated to the increased numbers of car service cars than any removals of lanes. It’s possible that that’s due to failing transit, but the alternative is not to remove the alternatives to transit. Taking a car is not a valid every-day alternative to transit for most people in this city.

    Additionally, the DOT almost never removes traffic lanes when adding bike infrastructure. Instead, they narrow over-wide lanes. And if you look at the bike infrastructure, you’ll also see that it carries massive numbers of people.

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