When the Minneapolis City Council in May 2024 reached an agreement with American cab aggregating giants Uber and Lyft to boost driver compensation and enhance working conditions, the immediate question emerged out of this particular development, who won?
As per the understanding, Uber and Lyft would concur on a wage floor that, after costs, would be inflation-pegged and equal to the $15 hourly minimum wage in the American state. There has been a heated battle between Uber, Lyft, their drivers, and lawmakers over the past two years. While some lawmakers have celebrated this as a 20% increase for drivers, the deal’s pay rates are lower than practically every proposal.
Now, drivers who have been “deactivated” (i.e., sacked randomly by opaque algorithms) can challenge their dismissals. Funding is also available for the driver rights education programme at a “non-profit driver centre.”
The true gem may be the demand for ride-hailing drivers to carry up to $1 million in insurance coverage, which now covers the period right after a trip ends. This will assist drivers in covering medical expenses and lost income in the event of assaults or mishaps.
However, this agreement maintains essential components of the digital ride-hailing business model, enabling Uber and Lyft to carry on with business as usual and subsequently weakening the compromise.
Ride-hail driver groups protested, lobbied lawmakers, and even engaged in negotiations with Uber during the two-year spat over the arrangement. Uber and Lyft threatened to go out of business three times in response to proposed laws, threatening to go on capital strikes.
The companies have caused political bloodshed each time: the first threat forced Governor Tim Walz to veto a bill in May 2023; the second caused Minneapolis Mayor Jacob Frey to veto an ordinance that the city council had passed in August of the same year; and the third occurred after Frey again vetoed an ordinance in March, which was overridden by the city council.
These companies can strengthen their positions while limiting our political horizons by threatening capital strikes. Distracted from their immense structural power, we discuss driver pay rates they ultimately undercut. Cities apologetically soften their goals, consumers justify price increases, and motorists settle for incremental advancements.
According to a sympathetic account, drivers won right away. If Uber and Lyft departed the state, the drivers’ earnings would be nothing. Drivers are better positioned to advocate for better terms if a deal allows them to keep working and receive higher salaries.
The digital ride-hailing model is based on two fundamental pillars that consistently worsen working conditions for drivers: firstly, misclassifying drivers as contractors to reduce labour expenses; and secondly, communication asymmetry between firms, workers, and authorities. Minneapolis’s agreement leaves both alone, but the choice to forgo data openness guarantees that working conditions would worsen as a result of what UC Irvine law professor Veena Dubal refers to as “algorithmic pay discrimination.”
Companies such as Uber and Lyft use ongoing worker observation to determine the minimum wage required to maximise the value that each driver contributes.
According to Dubal, “totally random and opaque means” determine the value of a driver’s labour even in cases where the tasks are identical.
Any idea of justice vanishes when predictability is eliminated, as employees are duped by algorithms into speculating about whether the costs associated with the tasks they are assigned will justify them, normalising unfavourable working conditions and longer hours. It takes more than just a pay floor to combat this trend.
Removing data openness leaves a significant gap in the bill. According to reports, Uber and Lyft pushed to prevent any assurance of a minimum income for each ride. Rather, over a two-week pay period, ride-hailing companies will top off drivers whose average earnings fall short of the requirement.
Furthermore, although the bill codifies pay transparency for drivers, it did away with the ordinance’s mandate that ride-hailing companies provide Minneapolis with regular, unrestricted data disclosures.
Uber and Lyft retaliated to New York City’s wage floor, which is an hourly net income of $17.22, by instituting a tiered quota system and enforcing a lockout, a coercive tactic in which an employer refuses to provide workers work unless they agree to new terms. The more trips completed each day, the greater the likelihood that a driver would be able to plan shifts during busy business hours.
This meant that drivers had to work much longer hours to guarantee priority when it came to scheduling shifts. Simply put, drivers who didn’t meet quota requirements couldn’t use the apps. The companies saw tremendous success with the initiative. A deliberate deterioration of labour conditions during its first phase, which ran from June 2019 to March 2020, pulled 8,000 drivers off each station.
Even in the absence of a wage floor, drivers lived in cars and put the maximum strain on their bodies to survive under the false impression that they had no protection at all. Mainly, the on-demand labour model focuses on maintaining unequal power relations among these companies, drivers, passengers, and cities. Any agreement that skirts the issues of data extraction, algorithmic management, and driver misclassification is, at most, provisional.
Uber and Lyft are skilled at distilling discussions and ideas into surface-level fixes. The urge to follow suit is natural given that drivers in large US cities routinely get starvation pay, according to recent UC Berkeley Labour Centre research. These drivers urgently need relief.
However, the success Uber and Lyft have had in evading billions of dollars in corporate taxes, changing labour laws, and taking over organisations supposed to control them, suggests that they will always find a way around regulations. We’ve been led to believe that there isn’t a choice and that suggested policies, such as increased public transportation and ride-hailing services run by local governments or the state, won’t be successful.
What’s flawed is the digital ride-hailing paradigm. It is costly, ineffective, discriminatory, and exploitative. Without a deregulated market, huge investor subsidies, and a powerful political apparatus to defend it, it cannot function. Ride-hailing services have adversely affected the quality of urban transit, caused significant increases in traffic and pollution, and negatively impacted working conditions in other businesses in nearly every place where they have been left to fester. For what purpose? The empowering of saboteurs who launder every expense imaginable onto the public while pocketing billions.
There will undoubtedly be another capital strike elsewhere. By misclassifying and abusing drivers until they fight back, ride-hailing robs them of their dignity. Will there be another “compromise” the next time that doesn’t affect the fundamentals of this strategy? Or are we going to finally walk away from the Faustian deal and take a chance on something different at the cost of the parasitic companies that are enslaving numerous cities, drivers, and passengers?
The recent agreement between the Minneapolis City Council and Uber and Lyft represents a complex victory with mixed outcomes. On one hand, drivers secured a wage floor, the ability to challenge deactivation, and better insurance coverage, marking a significant improvement in their working conditions.
However, the deal falls short of addressing the deeper issues within the ride-hailing industry, such as driver misclassification and the opacity of algorithmic management, which perpetuate exploitation and inequality.
Uber and Lyft have managed to maintain their business model, continuing practices that undermine drivers’ stability and rights. Their repeated threats of capital strikes highlight the immense structural power they wield, forcing political concessions and weakening regulatory efforts.
This dynamic underscores a troubling reality: while incremental gains have been made, the fundamental problems of the digital ride-hailing model—its dependence on deregulation, investor subsidies, and exploitation—remain unchallenged.
Ultimately, the true victor of this agreement remains ambiguous. Drivers gain immediate, albeit limited, benefits, but the systemic issues that degrade their working conditions persist. This scenario calls for a reevaluation of our reliance on such exploitative business models and consideration of alternative solutions, such as expanded public transportation and municipally-run ride-hailing services. Only by addressing the root causes of exploitation can we hope to achieve a truly fair and sustainable ride-hailing industry.