A recent report researched and published on July 2nd, by the New York City Taxi and Limousine Commission (TLC) opened up with the statement "For the 60 percent-plus of all New York City drivers who are full-time drivers—and who provide 80 percent of all rides—work hours are not flexible." This statement basically negates any concepts that Uber drivers are masters of their own destiny.
The report comes after many years of speculation about the income that ridesharing drivers earn and dispels any fallacies and fake facts. The report was prepared and presented by James Parrott of The New School's Center for New York City Affairs and Michael Reich of UC Berkeley's Center on Wage and Employment Dynamics.
The bottom line of the report was a proposal that the City of New York sets a minimum wage floor of $17.22 an hour. With this minimum goal, drivers will (should) earn no less than $15 an hour after all expenses have been deducted.
Based on all the statistical data floating around, this new minimum hourly income would bump up the average driver's earnings by 22%, effectively increasing their income by some $6,345 per annum. According to the findings in the report, around 85% of all NYC drivers earn under this minimum proposed amount.
NYC Uber Profile
What makes NYC a bit of a different cultural mix than the rest of the market is a large number of low level educated immigrants, and that 54% of these drivers provide most of their family's monthly income. Another aspect of the NYC Uber driver profile is that 20% of the drivers use food stamps, which is in stark contrast to the much marketed millennial population that the PR machine is pumping out.
At present, there are over 80,000 Uber drivers in NYC which is 500% more than the 13,587 medallion taxi's that still operate there. The most recent statistic is that rideshare cars perform on average 17 million rides a month, and rising, which is twice as many than medallion taxies.
The NYC Cap
NYC Mayor Bill de Blasio tried to put a cap on the number of Uber drivers operating in NYC but was met with stiff opposition. Especially when the traffic was attributed mainly to Uber, to which Uber retorted with facts about how congested NYC traffic was before they started to operate.
Ever since the cap imitative failed, Uber has had a pretty quiet time till now. This recent Parrott-Reich proposal is taking a much more intelligent approach to capping Uber by offering a natural cap based on car utilization.
The Parrott-Reich Cap
So, what is the PRC? Quite simply put, its an intelligent and innovative approach to manipulating ridesharing companies into reducing their fleets to increase driver utilization. This is what the PRC terms as the utilization rate (UR). The utilization rate look at the total number of hours a driver has been on shift, from the moment he logs on to the moment he logs off the app. According to the PRC, in 2017, Uber and Lyft both had a 58% UR, while Juno had a 50% UR and a 70% UR for Via.
The UR is inserted into the PRC formula that determines the per-trip pay rate based on estimated per-minute and per-mile expenses. In this formula, the term FHV or For Hire Vehicle is what the TLC calls ridesharing companies.
Simplicity is Perfection. What the PRC has done is limited the number of cars on the road by putting the reigns on the number of cars back into Uber's hands. Essentially, Uber can ignore the PRC and have hundreds of thousands of cars on the road, but this will be detrimental to their profitability since the end result is; more cars more expenses.
The bottom line of the PRC is that the UI calls for reaching 100% effectivity, and that demands fewer cars on the road.
This is a three-way win, essentially what the TLC has done is that it has found a way to reduce the number of cars on the road, raise the base income of the remaining drivers and reduce the costs and headaches for Uber all in one model.
Win 1 – NYC
With this model, rideshare companies strive to reduce the number of active cars on the road, thereby reducing congestion as well as pollution.
Win 2 – Driver
Every rideshare driver will receive a base income per hour, no matter how many hours they drive and how many rides they made. Of course, Uber will not give a driver that does not take any rides, or drivers out to a zone where there are little orders on purpose to fake the system. We have to remember, that when a new model comes in, it will be made to fit into the corporate concept of profitability, and if drivers think they can log on and earn a basic income without actually working, well they will find out that the system is not stupid. This will lead Uber to create further incentive-based riding, where the more the rider works and drives, the higher the percentage of income they receive.
You might not think that Uber is winning here, but they are. They are getting a free pass to limit the way drivers provide service. They will create an incentive-based system that has a negative side that is as powerful as the positive side. In this case, where there is a minimum income incentive enforced, there will be a minimum effectivity code enforced, which means that if you refuse a ride, cancel a ride, or do anything that endangers customer satisfaction you will be out.
Consider that if there is a cap on the number of drivers at any given moment, then there will always be a queue of drivers waiting to fill in the cap. This means that Uber will win by being able to reduce its ranks of bad drivers, or drivers that don't perform 5-star services and reach a moment when all their drivers or at least 95% of them are all long-term, 5-star drivers.
Sometimes it takes a proponent to create an evolutionary step through misdirected concern. In this case, it was the TLC that wanted to nobble Uber but ended up giving Uber the perfect solution to raising its star rated driving force, reducing waste and creating a perfectly harmonious service between Uber, City, and driver. Let's just wait to see if this proposal is taken up by Uber.