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TLC Pay Increase Will Likely Accelerate Uber & Lyft Decision To Reinstate NYC Driver Cap and Ultimately Reinstate "Planner"
Recent minimum pay increase in response to record inflation is a positive development, but will likely accelerate Uber & Lyft reinstating NYC Driver Cap and their "Planners"
AutoMarketplace NYC covers the for-hire transportation industry and automotive news. Check out AutoMarketplace on YouTube ▶️
"Today, a group of New Yorkers who have put themselves and their families at risk throughout the pandemic are getting the help they need and deserve…Drivers have served on the frontlines and have been there for their neighbors — driving them around the city and delivering food to those in need. This is about respect and paying each one of these individuals a fair and decent wage." - NYC Mayor Eric Adams
“By regulation, they are required to raise the rates that Uber and Lyft have to pay to the drivers based on increases in inflation…They hadn’t done it in the past 13 months. But luckily, we didn’t have to go to court. The Mayor was really great about it.” - Bhairavi Desai, executive director of the New York Taxi Workers Alliance
The big news in the NYC for-hire transportation industry (TLC industry) last week was the Mayor and the NYC Taxi & Limousine Commission (TLC) announcing that minimum pay rates for non-yellow cab drivers (unclear if yellow cab drivers will also have a separate announcement, but we will track) would increase by over 5% ($1.161 per mile & $0.529 per minute). The increase was announced with some fanfare and is a welcome move, addressing the political story of the day - record inflation. From gas, groceries to the cost of used cars, Americans and New Yorkers are losing purchasing power (i.e., a dollar doesn’t go as far as it used to). In fact, our last article regarding increasing TLC insurance rates and our opinion about using Bitcoin 👀 as an inflation hedge directly relates to how we believe NYC drivers can combat the spiraling cost of doing business, but that’s a discussion for another time.
The impact of the TLC minimum pay increase I want to speak about right now is how this move will likely accelerate the reinstatement of Uber and Lyft’s NYC driver cap. This then ultimately leads to the reinstatement of the Uber (& Lyft) '“Planner”. If you remember, back in April 2019, Uber and Lyft announced they would no longer be accepting any new drivers in NYC. In fact, several months after Uber/Lyft capped drivers in NYC, it likely resulted in a driver supply shortage for Juno, which then decided to shut down its NYC rideshare business. Maybe Via front ran what they eventually saw happening to their NYC rides business too (also didn’t help most of Via’s rides were shared historically), when it decided to shut down its ridehailing service in December.
So, what am I talking about? How am I making these connections between the driver minimum pay standard, Uber & Lyft capping new drivers in NYC, Juno & Via shutting down and the reinstatement of the infamous Uber “Planner”? Might not seem obvious, but let me explain simply.
In a nutshell, the driver minimum pay standard is a necessary protection and great idea, BUT the way it technically works actually leads to drivers investing in one app platform 🤨. For example, if you are online with Uber, Uber is going to make sure you meet the minimum pay thresholds and therefore is going to keep you busy. Uber wants to make sure the drivers it allows online in NYC, when the minimum pay standard clock ⏲️ starts, are kept busy so the company doesn’t have to come out of pocket to fulfill the requirements of the minimum pay standard. This dynamic is what led Uber & Lyft to restrict new NYC drivers in order to optimize driver supply and trip demand matching, eventually leading to the companies infamous “Planners” (Lyft didn’t call it a Planner, but had a similar mechanism to Uber)
From A Driver Shortage to Driver Cap?
So how did we go from fears related to a driver shortage to a discussion of Uber and Lyft capping drivers in NYC?
Well interestingly enough, I wrote about it in May 2021 after returning from a trip to Miami. While my predictions may have been premature (also due to the Omicron surge), I think they will eventually play out. Basically, when driver supply begins to outstrip passenger demand (likely to happen as pandemic era assistance fades away), you’ll see Uber & Lyft initially have too many interested NYC TLC drivers to allow “online” to meet NYC’s minimum pay standard threshold. Therefore, Uber and Lyft will then need to ensure driver supply is fully optimized to meet passenger demand (something the companies can likely predict quite well now) and voila…the return of the “Planner”.
As I wrote in my May article:
“The broad benefits of the Planner are that it essentially reverts the NYC for-hire transportation industry back to its pre-Uber/Lyft origins as a professional ground transportation market consisting of mostly full-time commercially-licensed drivers. The downside is driver flexibility suffers as the Apps demand more from drivers who want to maintain access to them.” - AutoMarketplace, May 2021 👇👇👇
As the years go on and passenger trip demand, on a per available TLC driver/car measurement, grows to outstrip the number of available TLC drivers/ cars you might see the Planner go away or become more flexible. However, if inflation remains unnaturally elevated, increases in the minimum pay standard (due to inflation) might spiral out of control with Uber / Lyft passing costs on to passengers, which may in turn reduce trip demand. This dynamic then reinforces a status quo where driver supply is greater than trip demand.
All of this is hard to forecast or truly game out, BUT I tend to conclude that Uber & Lyft will revert back to its pre-pandemic status quo in 2019 and re-introduce the “Planner”, especially as minimum pay standards increase due to inflation.
What are your thoughts? Do you think the Uber (Lyft) will stop accepting new NYC TLC drivers? Do you think the Uber (Lyft) “Planner” will come back?
AutoMarketplace NYC covers the for-hire transportation industry and automotive news. Check out AutoMarketplace on YouTube ▶️