NYC Minimum Wage Law Drives Customers Away from Ride-Hail Apps

July 23, 2019
By Jennifer Tiedemann

Over this past weekend, the heat wave that affected much of the country hit New York City especially hard. As the heat index climbed over 100 degrees throughout the five boroughs, many subway lines were knocked out of commission, leaving passengers seeking other forms of transportation. But a lot of them may have thought twice before opening up a ride-hail app, thanks to a new citywide minimum wage law that makes Uber, Lyft, and similar services more expensive for riders.

Last week, Bloomberg News reported that the use of ride-hailing apps has been declining in the Big Apple, following the enactment of a new minimum wage law for ride-hail drivers—the first of its kind in the country. Enacted this past February, the law gives ride-hail drivers a minimum hourly wage of $17.22 after expenses.

Now, a few months after the advent of the ride-hail driver minimum wage, we can start to see the impact on ride-hail usage in New York City. And it’s not a pretty picture. According to data from the city’s Taxi and Limousine Commission (TLC), the number of NYC Uber trips dropped by 8 percent between March and May 2019. Over the same time period, Lyft rides also dropped by 17,000 from their March 2019 peak.

When we wrote about the ride-hail minimum wage law at the time of its passage, we noted that even the TLC—which strongly supported it—acknowledged that the law could be a bad deal for customers. TLC Chair Meera Joshi said when the regulation passed, “I believe all New Yorkers are willing to pay a little more and wait a little longer so the people transporting them are able to provide for themselves and their families.” Well, New Yorkers have been voting with their Uber and Lyft rides over the past few months, and it’s now clear that maybe they aren’t reacting in quite the way Joshi was hoping.

And it’s important to remember that the impact of such minimum wage laws can harm not just customers who don’t want to pay the higher fares that offset such increases. When ride-hail drivers see their number of fares fall, they’re seeing lost income. A minimum wage that takes fares away from ride-hail drivers is not the godsend its supporters say it will be. The same goes for other industries: In 2018, restaurant jobs in New York City declined for the first time in over a decade after the city enacted a $15-per-hour minimum wage for every employer with 11 or more workers.

Stories of artificially high minimum wages leading to job losses are common, but that didn’t stop the U.S. House from passing a bill last week that would raise the federal minimum wage to $15 per hour. The Goldwater Institute opposed this move, signing on to a letter to members of Congress explaining how such a law would cause more harm than good. Indeed, the Congressional Budget Office has estimated that a $15-per-hour federal minimum wage could result in the loss of 1.3 million jobs. While supporters of the $15 minimum wage say it will raise wages for many Americans, this ignores the many who will no longer be employed because of it.

Many ride-hail drivers in New York may have seen their earnings per hour go up because of the city’s minimum wage hike, but with ride-hail trips on the decline, it’s easy to see that a long-term promise of higher pay may not be all it’s cracked up to be. Instead, the wage hike may continue to drive away the customers they need to make a living.

Jennifer Tiedemann is Deputy Director of Communications at the Goldwater Institute.