Minnesota Uber and Lyft drivers often earn less than minimum wage, state study says

The state-commissioned study offers data for policymakers in Minneapolis and statewide hoping to boost pay for rideshare drivers.

By Dave Orrick Star Tribune

March 8, 2024 — 7:20pm

Uber and Lyft drivers in Minneapolis and St. Paul and greater Minnesota often are paid well below the equivalent of the minimum wage after expenses are deducted, a state-commissioned study has found.

Released Friday by the Department of Labor and Industry — and immediately criticized by the rideshare giants — the study could play an important role as local and state elected officials seek to boost the earnings of drivers, many of whom have clamored for higher pay for several years.

The study's immediate impact is to raise fresh questions about a controversial minimum-pay plan approved Thursday by the Minneapolis City Council amid threats by the ride-hailing companies that they will cease operations in the city, and perhaps the state, if it takes effect.

Mayor Jacob Frey, who had pleaded with City Council to wait until the study was released, vetoed the plan Friday, but it's possible his veto could be overridden next week.

The new report suggests that the goal of supporters of the plan — to ensure drivers earn at least the equivalent of the city's $15.57 hourly minimum wage — could easily be reached by mandating a lower minimum compensation than what City Council had approved.

A similar debate has progressed at the state level. Last year, Gov. Tim Walz vetoed a statewide minimum-pay plan amid opposition from Uber and Lyft. After Walz established a task force that failed to reach a consensus on how much drivers should earn, the state commissioned the study as a way to clarify the compensation issue amid the algorithm-driven pricing of app-based ride services.

What the study found

That 70-page study examined data from Uber and Lyft documenting how much drivers earned during more than 18 million Minnesota rides in 2022 — far more detailed data than anything previously examined at the state or local level.

It largely validated the narrative of many drivers, who are considered independent contractors: After taking into account wear and tear on their cars, time spent driving to and from rides, and the cost of gas and other expenses, drivers across the state earn well below the minimum wage they would likely receive if they were employees, not including tips.

However, before expenses, drivers are paid well above the minimum wage while working.

The study did not have access to the cost of the fares — or the cut the rideshare companies took.

The Minneapolis plan approved Thursday guarantees a floor of $1.40 per mile and 51 cents per minute. The driver of a wheelchair-accessible vehicle would get $1.81 per mile.

Frey had pushed for a minimum payment of $1.20 per mile and 35 cents per minute.

The state-commissioned study suggested that $1.21 per mile and 49 cents per minute for rides across the metro could not only get drivers the equivalent of Minneapolis' $15.57 hourly minimum wage, but also a suite of benefits, including paid leave, health insurance and retirement savings.

Data from the study reveals that driver compensation figures circulated by rideshare companies might include tips and often focus on the time drivers have a passenger. The study revealed that only accounts for about 58% of the time a metro driver is on the job.

And then there are those expenses that can be the difference between a driver earning the equivalent of minimum wage or better — or less. The authors of the study calculated annual expenses, including more than $1,400 for a cellphone and nearly $2,700 for insurance, in a way that the rideshare companies characterize as absurd — as if the drivers wouldn't otherwise own a car or a cellphone.

What Uber and Lyft say

On Friday, Lyft sharply criticized the study and its authors, who also have been tasked with studying rideshare compensation in Seattle and New York.

"While the study is deeply flawed, it clearly recognizes that drivers are independent contractors," Uber said. "With the state and, most importantly, drivers agreeing that flexibility is critical, any compromise must prioritize independent contractor status.

"It's also now clear that the Minneapolis minimum wage proposal is off by a whopping 60%."

Lyft was more pointed.

"This study is dishonest, counterproductive and a disservice to the goal of meaningful policymaking," Lyft said in a statement. The company called much of the report "nonsensical."

The study was authored by James Parrott, director of economic and fiscal policies at the New School's Center for New York City Affairs, and Michael Reich, an economics professor at the University of California at Berkeley's Institute for Research on Labor and Employment.

What's next?

City Council will vote next week on whether to override Frey's veto. It's unclear whether supporters will consider changing their plan.

State lawmakers pushing for a statewide driver minimum wage have months to pass legislation in the current Legislature.

"This report represents Minnesota-specific data and is data that should be used to inform policy and discussions moving forward," Labor Commissioner Nicole Blissenbach said in an interview.

She said the report doesn't provide recommendations but offers options.