Uber and Lyft made a deal to raise drivers’ wages. It was another victory for big tech | Edward Ongweso

Who came out ahead when the Minneapolis city council announced a deal with Uber and Lyft to increase driver pay and improve working conditions last month?

On 20 May, the city council heralded a compromise with the ride-hailing companies. Uber and Lyft would agree to an inflation-pegged wage floor matching Minnesota’s minimum wage of $15 an hour after expenses. Some lawmakers have hailed this as a 20% raise for drivers –however, the deal’s pay rates are lower than almost every proposal made over the past two years amid a bitter fight between Uber, Lyft, their drivers and lawmakers.

Drivers, often arbitrarily fired (“deactivated”) by opaque algorithms, are now able to appeal dismissals. There’s also funding for a “non-profit driver center” for driver rights education. The real gem may be the expansion of insurance coverage requirements for ride-hail drivers up to $1m that now includes the time immediately after ending a trip, which will help drivers with medical costs and lost wages after assaults or accidents.

This deal, however, preserves integral parts of the digital ride-hail model, allowing Uber and Lyft to continue operating and undermine the compromise later.

In the two-year clash over the deal, ride-hail driver groups demonstrated, lobbied lawmakers and even negotiated with Uber. Uber and Lyft repeatedly threatened capital strikes, promising to leave the state three separate times over proposed legislation. Each time the companies have drawn political blood: the first threat convinced Tim Walz, the governor, to kill a bill in May 2023 with his first veto; the second prompted Jacob Frey, the Minneapolis mayor, to veto an ordinance passed by city council in August that year; the third came after Frey again vetoed an ordinance in March but was overridden by the city council.

Threatening capital strikes lets these firms narrow our political horizons while bolstering their own position. We debate driver pay rates that they inevitably undermine while distracted from their inordinate structural power. Cities preemptively dilute their ambitions, customers rationalize higher prices and drivers consign themselves to marginal improvements.

So who really came out ahead?

A sympathetic telling holds that drivers scored an immediate victory. Drivers’ wages would zero out if Uber and Lyft left the state. A deal that lets drivers keep working and earn better wages positions them to continue fighting for better deals.

There are two key pillars of the digital ride-hail model that perpetually degrade driver working conditions: 1 driver misclassification as contractors to lower labor costs, and 2 information asymmetry between workers, regulators and firms. Both are left alone by Minneapolis’s deal, but the decision to abandon data transparency specifically ensures working conditions will deteriorate due to what Veena Dubal, labor ethnography and UC Irvine law professor, calls “algorithmic wage discrimination”. Utilizing constant worker surveillance, firms like Uber and Lyft calculate the minimum pay rates necessary to extract the most value from each driver. Dubal observes that even if the work is the same, “entirely unpredictable and opaque means” calculate what a driver’s labor is worth. With the removal of predictability goes any notion of fairness as workers are tricked by algorithms to gamble on whether assigned work will be worth the expenses incurred, normalizing longer hours and poorer conditions. A wage floor alone is insufficient to fight this dynamic.

Moving away from data transparency creates a massive hole in the bill. Uber and Lyft reportedly lobbied to block any guarantee of minimum earnings on every trip. Instead, ride-hail firms will top off drivers whose average earnings are below the minimum during a two-week pay period. And while the bill codifies pay transparency on the driver’s end, it dropped the ordinance’s requirement that ride-hail firms make regular and unrestricted data disclosures to Minneapolis.

After New York City introduced its wage floor, an hourly net income of $17.22, Uber and Lyft responded by introducing a tiered quota system and forcing a lockout, a coercive strategy where an employer denies employees work until they accept new terms. Drivers were forced to work substantially longer hours to receive priority for scheduling shifts – the more trips done each day, the better chance a driver had to schedule shifts during peak business hours. Drivers who failed to meet quota requirements simply weren’t allowed to use the apps. The program was a wild success for the companies. Its first phase in June 2019 to March 2020 forced 8,000 drivers off each platform thanks to intentionally deteriorated labor conditions.

Misclassified without basic protections and managed by algorithms powered by pervasive surveillance, drivers lived in cars and pushed their bodies to the limit to eke out a living even with a wage floor.

The heart of the on-demand labor model is about preserving lopsided power dynamics between these firms, passengers, drivers and cities. Any deal that sidesteps questions of driver misclassification, data extraction and algorithmic management is, at best, temporary.

Uber and Lyft are deft at reducing debates and proposals to superficial treatments. The temptation to follow along is understandable; a recent UC Berkeley Labor Center study found drivers in major US metro areas consistently earn starvation wages – they need relief now. And yet, the success Uber and Lyft have enjoyed in dodging billions in business taxes, in reshaping labor law, and in capturing institutions meant to regulate them, suggest the companies will always find a workaround. We’ve been led to believe there is no alternative, that policy proposals – municipal or state-owned ride-hail, expanded public transit – will fall short.

In reality, it is the digital ride-hail model that’s fundamentally broken. It is inefficient and expensive, exploitative and discriminatory. It does not work without a deregulated market, exorbitant investor subsidies and an expansive political machine to protect it. In almost every city where it’s been allowed to fester, ride-hailing has decreased the quality of urban transit, contributed to massive increases in congestion and pollution and degraded working conditions in additional industries. To what end? The empowerment of saboteurs who pocket billions while offloading every possible cost onto the public.

Somewhere else, there will certainly be another capital strike. Ride-hailing robs drivers of dignity by misclassifying and exploiting them until they fight back. Next time, will it end with another “compromise” that leaves the core of this strategy unperturbed? Or will we finally reject the Faustian bargain and risk something new at the expense of the parasitic corporations holding countless cities, passengers and drivers hostage?