Analysis | New York's new law curbing Uber, Lyft and other ride-hailing vehicles and setting a minimum wage for drivers could mark a new wave of regulation for the young industry.

Share story

New York City’s new law capping the number of ride-hailing vehicles and setting a minimum wage for drivers could mark the beginning of a new wave of governmental attempts to regulate ride-hailing services.

The measure was passed amid growing concerns about traffic congestion, fair pay for taxi and ride-hailing drivers, and the impact of ride-hailing on the city’s financially distressed public transit system — all issues familiar to other U.S. cities.

But New York’s law also returns the spotlight to congestion pricing as a way of regulating traffic in urban centers, not least because ride-hailing giants Lyft and Uber would prefer such an approach. Yet, congestion pricing — which is another name for taxing or tolling traffic using rates that fluctuate based on demand — has also been a hard sell.

Congestion-pricing proponents, including Lyft and Uber, say taxing all vehicles, particularly private vehicles driven by single-passenger commuters, would be the best way to manage inner-city traffic. But recent attempts to impose congestion pricing, led by New York Democratic Gov. Andrew Cuomo and Michael Bloomberg as mayor, have failed.

Meanwhile, several transportation experts who follow the ride-hailing business were mixed on their view of New York’s new law.

William Riggs, professor at the University of San Francisco’s School of Management, said that as the digital revolution creates new ways of getting around — think ride-hailing or app-based scooters — too many cities have responded in a knee-jerk way by enacting regulations before all the data is in.

New York’s law seems like such a response, Riggs said. He said Uber and Lyft already have every incentive to make sure streets are passable for its passengers and drivers. He also said New York should not be trying to set wages in a still-evolving industry.

“I think the market would figure that out,” Riggs said. “Limiting the innovation side of the market is focusing on the wrong issue.”

But Steven Hill, an author who has been critical of Uber and the gig economy for some time, praised New York’s measure.

“It’s long overdue,” said Hill, author of “Raw Deal: How the ‘Uber Economy’ and Runaway Capitalism are Screwing American Workers.” “They needed to do something about congestion.”

But Hill also sounded skeptical about whether the minimum-wage aspect of the law will work. While the vehicle-licensing cap might bolster pay by reducing the number of drivers, he said, the law’s minimum wage provisions won’t mean much if expenses are not factored in.

“That’s always been the big problem for these drivers,” Hill said. “When you talk to a lot of them, they have no idea how much they’re spending.”

Stephen Zoepf, executive director of the Center for Automotive Research at Stanford, called New York City’s law a “blunt tool” for a very nuanced problem — but also said it’s better than nothing.

“[I]f I try to put myself in New York City’s shoes, they’re looking at what’s happening to their streets and they’re looking at what’s happening to their drivers, and they said, ‘We have to do something,'” said Zoepf, an author of a study raising questions about driver pay for ride-hailing or e-hailing companies such as Uber. (The study — which he corrected after Uber challenged its methodology — found drivers earned a median profit of $8.55 per hour, rather than $3.37, as he initially reported.)

Zoepf praised New York for not just focusing on traffic but for also trying to address issues about driver pay, especially in light of claims by drivers that some had taken their own lives in part because of financial desperation.

“I think it’s important that cities stand up and say that they need to take control over what’s happening on their streets and what’s happening with their population,” he said.

On Tuesday, Democratic Mayor Bill De Blasio signed the legislation directing the NYC Taxi & Limousine Commission (TLC) to set a minimum wage and suspend the issuance of any new ride-hailing vehicle licenses for a year, except for vehicles that are wheelchair accessible. (New York is unusual in requiring ride-hailing vehicles to be licensed in the city; this is also why many of the drivers who work for Uber and Lyft do so full time.)

The Independent Drivers Guild (IDG), an organization that advocates on behalf of an estimated 65,000 ride-hailing drivers with Uber, Lyft, Juno and Via, pushed for the law. Moira Muntz, an IDG spokeswoman, said in an email that the group welcomed the law’s requirement of a minimum wage, citing a TLC study estimating that driver pay could rise by more than 22 percent. But she also expressed concern that the TLC — which must set the actual minimum wage — has underestimated driver expenses.

Uber and Lyft fought the measure, arguing that the new law will do nothing to alleviate congestion or enhance the city’s beleaguered mass transit system. The companies also warned that limiting ride-hailing vehicles would create additional passenger delays and limit transportation options in outer neighborhoods, thereby having a disparate impact on many minorities who live there. Both companies expressed support instead for congestion pricing that would regulate all traffic instead of an industry-specific measure.

“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 spokeswoman Campbell Matthews said in an email. “Not only will this keep tens of thousands of New Yorkers from realizing the economic opportunity of driving with Lyft, but it will do nothing to solve congestion and other complex challenges in New York. Lyft will never stop working to ensure New Yorkers have access to reliable and affordable transportation in every borough.”

Other cities, including Washington D.C., have seen ride-hailing vehicles filling their streets while siphoning off riders from publicly subsidized mass transit. A study by the University of California at Davis’s Institute for Transportation Studies, for example, found that ride-hailing contributed to a 6 percent drop in mass transit use in seven major U.S. cities from 2014 to 2016. But it’s not clear whether any will embrace New York City’s approach.

“New York City is regulated differently than other cities in the country — it is a licensed market where most drivers are on the road full time and drivers have to pay expensive licensing costs out of their own pocket,” Uber spokesman Colin Tooze said in an email. “What DC and NYC do share in common are public transit systems in need of support, and growing congestion. That’s why Uber supports comprehensive congestion pricing — the one solution that experts agree solves both problems.”