Increased Regulation is Threatening Good Jobs in NYC
By Rodrigo Moser, Senior Economist at Uber
This summer, publicly available data in New York City showed what we have long known was coming: after a decade of government layering fees on top of taxes on top of regulations, Uber and Lyft prices have become unsustainably high for the City’s riders.
For years, State and City officials acted like Uber, Lyft and their riders could absorb any cost, but new data from September 2024 proves that is not the case. In reality, rather than the unlimited elasticity policymakers predicted, riders and drivers are already being hurt by the constant stream of added taxes and fees.
To understand these dynamics, it’s important to examine what’s at risk and how the City got here.
Background
New York City for-hire vehicle industry jobs are good jobs. That is why there’s a waitlist of over 15,000 people vying to start driving with Uber and tens of thousands of people currently doing it.
Full time drivers in New York City make $52,900 a year on average after expenses — comparable to the median estimated earnings for all New York City workers (US Census Bureau). They get free benefits including paid time off, sick leave, dental insurance, vision coverage, mental health support and workers’ compensation, and are eligible for unemployment insurance, if they need it. Drivers control their own schedules and work when and where it suits them. In fact, on average, Uber and Lyft drivers in New York City are online about 6 ½ hours a day, 22 days a month- significantly less than taxi drivers or many full-time employees.
These jobs, however, are now under threat.
Progression of Taxes and Fees
Uber and Lyft rides in New York City have some of the highest tax rates in the entire world. The prices riders pay are heavily affected by a number of government-mandated taxes and fees.
Since 2019, 13.9% of the rider fare for an average trip goes to a number of costs put in place by City and State elected officials. For perspective, the equivalent share is 1.3% for Boston and 9.2% for Chicago. This means that if taxes and fees in New York City were more similar to Boston or Chicago, New Yorkers could save up to 12.6% on average for an Uber ride. That would translate into significant savings.
On top of the mandated taxes and fees, driver pay is largely determined by the City. In 2019, the Taxi and Limousine Commission (TLC) enacted a minimum driver pay standard. Since its inception, the pay standard has been the subject of much focus and attention from the TLC, which has passed five rate increases in those five years. Meanwhile, over the past 12 years, the TLC only increased taxi rates once.
To set their rate increases, the TLC models the earnings of a “standard trip” defined as a trip with a duration of 30 minutes and a distance of 7.5 miles.¹ Figure 1 presents the evolution of the target pay for this standard trip relative to its 2019 level.² We see that the standard has increased every year except for 2021, and twice in 2023, for a 20.3% increase over the period, slightly above wage inflation and well above minimum wage growth.³ As a reference, NYC bus and subway operator wages, which are a result of union negotiations, increased 14% over the same period, less than wage inflation. On the other hand, minimum wage remained flat at $15/hour from 2019 until 2024, when it increased for the first time in 5 years. Taxi meter rates were similarly neglected for much of this period; they increased for the first time in 10 years in 2022 and have held constant since.
Figure 1: Evolution of Hourly Earnings and Inflation
Persistent Impact of Fuel Increases
In February 2023, the TLC updated the per-mile rate to account for CPI-W inflation. One month later they increased it again, claiming they did so to account for increasing driver expenses and, in particular, increases in gas prices. As a consequence, the per-mile rate increased 13.2% relative to 2022, which translated into a 9% increase in driver pay for a representative trip. It is worth noting that this extraordinary increase only applied to Uber and Lyft drivers. Yellow cab drivers did not receive any relief.
In 2023, however, average gas prices decreased by 13% and have continued to decrease further in 2024. While the rest of the industries that imposed temporary gas surcharges removed them in 2023 (such as retail and package delivery), the extraordinary increase in the per-mile rate imposed by the TLC for rideshares was maintained, and in 2024 per-mile rates were increased again using the 2023 levels as a base. As a consequence, current per-mile rates are 6.5% higher than what they should be, had the extraordinary increase in per-mile rate been reversed.⁴ This layers on yet another extra cost to already high trip prices.
Impact on the Marketplace
These prices hurt riders and they take fewer trips. They also have the potential to hurt drivers by decreasing rider demand.
To understand the relationship between prices and rides, and to ensure an efficient marketplace, Uber regularly measures the relationship between prices and ride volumes. Those measurements show that riders in New York City today are meaningfully more elastic than riders elsewhere in the US. This makes sense from an economic point of view: ridesharing’s already high prices in NYC, coupled with the presence of many alternative modes of transportation (personal car, bus, subway, etc.) would predict that riders would be more elastic to further increases in price.
This is not just an academic concern anymore. Recent data shows a sustained pattern of trip growth decline in NYC, consistent with New Yorkers reacting to higher prices (see Figure 2). In fact, in September 2024, for the first time since the pandemic, New York City Uber and Lyft data showed a year-on-year decline in monthly trips. At a macro level, we have also seen that Uber’s trip growth in NYC has lagged behind the rest of the US in the post-pandemic period.
Figure 2: Uber and Lyft NYC Trip Growth (%, YoY)
The outer boroughs have been particularly impacted, with growth stalling most in the Bronx, Staten Island and some neighborhoods in Brooklyn, such as East New York and Brownsville (Figure 3). As our estimates would have predicted, the increased regulatory burden has pushed prices to a point where people are becoming less willing to spend on Uber rides, with low-income riders being the most impacted group.
Figure 3: Change in Growth Rate by Neighborhood
Conclusion
It’s time for our governing bodies to wake up. You can increase prices all you want — but if fewer people are taking fewer trips, you end up hurting the people you’re trying to help.
While dozens of cities around the world have passed minimum earnings requirements for ride-hailing, only New York City ties the minimum wage to utilization. This has the potential to further hurt drivers, since slowing demand due to increased prices can lead to lower utilization, which in turn would increase prices even more by increasing driver pay. Tightly controlling access to the app can help smooth short-term supply and demand mismatches. However, if this trend continues, permanent reductions in the number of drivers on the platform will be needed to avoid a harmful spiral embedded in TLC’s regulations, in which lower utilization rates lead to higher prices, which in turn lead to lower utilization rates.
There is only one long-term solution to stop riders increasingly opting out of requesting Uber rides: it’s time for the TLC to rethink the formula used for their minimum wage requirement and for State and City officials alike to pause on any new taxes and fees.
¹ See the latest published driver pay rules here, and current pay rates can be found here.
² Each point corresponds to the value of the variable during that year, divided by the value of the variable in 2019.
³ Wage inflation is calculated using the change in CPI-W, as used by the TLC to compute yearly rate increases.
⁴ Had the 2023 extraordinary per-mile rate increase been reversed, the current per-mile rate would be 1.277. Instead, it is 1.360, 6.5% higher.
