The summer of 2024 was a stressful time to be an Uber or Lyft driver in New York City. I can't even go online because there's lockouts currently. It has been three months. In May, Uber began preventing drivers from working, seemingly at random for hours at a time. Lyft soon followed suit. They open their app, and normally you would be able to click the go button and go online. But when you’re locked out, when you press go, nothing happens. An individual lockout can happen from anywhere from 5 minutes up to 8 hours. And there was no telling if you would get online or not. It was always a myth that drivers had unlimited flexibility. We understood that this stemmed from a six-year-old pay rule. And this really intrigued us and got us down the rabbit hole. I started driving for Uber to be able to work at my own schedule because I went through a lot of trauma with a divorce.

I was a mess emotionally. My typical workday starts at 6 a.m. I usually am busy until 11 a.m. I'll take a break, I go to the gym, and then from 2 p.m. till 10 p.m., I continue working. I come home, take my 8 hours sleep, and start my day again. So basically, a lockout is when you cannot go online to work. So essentially, you're micro-fired. Every day, I would get locked out of Uber. It was very frustrating. It was also affecting my self-respect. What am I? I'm a robot. Like getting locked out? Like I'm a person. I have to feed my family. Like, come on, I have child support. In June, we heard that this group that is representing thousands of drivers in New York City is organizing a protest in front of Uber's offices in downtown Manhattan. Drivers are classified as independent contractors because they set their own hours, while Uber and Lyft take a cut from each fare.

New York's rules ensure them a minimum wage, at least in theory. We definitely know based on Uber's messaging to the drivers that they're trying to respond to this minimum wage requirement in the city. That really set us on the path of answering why. What is driving their decisions behind this? And we came up with this idea of creating a WhatsApp bot that has an automated chat conversation and allowed drivers to send us screenshots and answer a few simple questions. We got more than 7,300 screenshots from more than 800 drivers. We interviewed close to 120 drivers. And by the end of it, we had a pretty good idea of how these lockouts work. Lockouts happen every hour of the day, every day. And that's despite Uber saying there are particular schedules of open access times where people shouldn't be locked out. We found that there were more than 400 instances of lockouts happening in surge zones.

So there is definitely potential impact there on consumer pricing. A lot of people, through our interviews, we learned that they are working way beyond their usual hours to try to make what they made before. The New York Taxi Workers Alliance says the lockouts manipulate a key metric in the law, allowing Uber and Lyft to avoid paying a minimum wage. The business model of the rideshare industry, their approach is to flood the streets with as many drivers as they can get to sign onto their platform. That leads them to be incredibly inefficient in the use of the drivers' time. Hey, no work today? Slow! Dead? Yeah. Come on. Where's the secret spot? So drivers, they're paid per mile and per minute. But for New York City, the unique part of the formula is that there is a denominator in this formula, which is called the utilization rate, which is a percentage that measures how busy drivers are. In 2017, I was contacted by the Taxi and Limousine Commission.

to consider undertaking a study that would support a minimum pay regulation for Uber and Lyft drivers. We spent a year very intensively researching the industry. We found in the course of our study that for 75% of the trips, drivers were being paid less than the equivalent of the minimum wage after factoring in their expenses. So, it was necessary for them to have a special regulation to establish a minimum compensation standard for Uber and Lyft drivers. The formula that determines driver pay takes into account how often drivers actually have passengers in their cars with a number called the utilization rate. If the companies keep drivers busy, nearly all the drivers' wages come directly from fares. But if drivers have too much downtime, the companies have to make up the difference. Before we had the utilization rate, if you wanted to be an Uber driver, you just had to agree to the Uber driving terms. I don't know how people hacked it. Maybe they didn't need any money and they lived with their parents or something.

but anybody like me really wouldn't have done it full time. Drivers for Uber and Lyft in New York City can expect a raise soon. The rule went into effect in February 2019, but during COVID, rideshare demand plummeted. and that sort of delayed the showdown that we're seeing today. In the initial pay standard formula, utilization was supposed to be reset every six months. The TLC opted to not do that in the first year. COVID came along. The years after that, economy, everyone's recovering from COVID. So it was only in the spring of 2023 that the TLC got back to this utilization notion. The current utilization rate is set as 58%. So we can think of it as out of 100 minutes that drivers are on the road, 58 minutes of that is spent with a passenger in their car, and 42 minutes of that is spent driving to the passenger and just waiting for a ride to be sent to them. And with the recovery of rideshare volumes, the regulator is revisiting

how the formula is calculated and trying to understand how it is going to work, by its original design. You are forcing companies to make a decision to lock out. Through July of this year, industry-wide utilization clocked in at 53%. According to a Bloomberg analysis, this means Lyft would have paid around $53 million more in minimum payments to drivers in the first half of 2024, and Uber would have paid at least $154 million. So after two months of lockouts and at least two protests by the drivers, the city and the two companies came to an agreement in late July, saying they would reduce lockouts. Uber has stopped lockouts as of early September, but Lyft is still doing it. The fight over lockouts shows how challenging it is to protect workers in the growing gig economy. If we're to have a society, in an economy that works for people in a sustainable way, there has to be the authority on the part of government to effectively

regulate businesses to ensure that workers are fairly paid, that the companies are not allowed to create negative externalities. In no place in the United States are app workers winning. New York City was closest to a situation where the workers themselves would be assured that they could earn a minimum compensation level and be paid for their expenses. The lockout situation now is putting that at risk. I think Uber is a fantastic thing. I actually bought shares of Uber right when they came out, and unfortunately I had to sell them. But I would have loved to hold on to them. I really do appreciate being an independent contractor and making my own way in life. If there was an opportunity out there, I would definitely take it. But currently, being an independent contractor works for my schedule and for my passions in life.

How Uber and Lyft Lockouts Cost Drivers Millions

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