Uber and Lyft have stopped accepting new drivers on their respective platforms in New York City, Politico reports. The move comes after the city passed new rules that are designed to curb the explosive growth of ride-hail companies.
On its website, Uber attributes the new policy to “new [Taxi and Limousine Commission] regulations.” (To find Lyft’s notice about not accepting new drivers, I had to go through the process of signing up as a new driver.) This is a reference to legislation passed by the New York City Council in December 2018, which requires ride-hail companies to pay drivers at least $17.22 an hour after expenses. The pay formula uses a so-called “utilization rate,” which accounts for the share of time a driver spends with passengers in their vehicles compared to time spent idle and waiting for a fare.
The rules penalize companies for running too many cars without passengers on city streets. The higher a company’s utilization rate, the less it has to pay drivers to meet the new wage floor requirement. The rules were intended to increase pay for drivers, while also addressing what many saw as an oversaturated market in New York City.
In that sense, today’s news suggests the rules are having their desired effect. The wage rule was passed several months after the city council approved a new vehicle cap for Uber and Lyft in the hopes of reversing worsening traffic congestion. That rule doesn’t affect Uber and Lyft’s ability to onboard new drivers; it just restricts the number of vehicles that can be used to pick up passengers.
While wildly popular among riders, Uber and Lyft have been a source of almost constant grief for policymakers, disability advocates, taxi medallion holders, and labor groups. Critics complain that Uber and Lyft have been allowed to dominate the market without having to follow many of the same rules that apply to yellow taxis. This has led to a glut of drivers that has outstripped demand, driving down wages and increasing traffic congestion. At the time, New York City’s law capping the number of drivers was held up as a potential model for other cities that want to rein in the ride-hail industry.
Uber stopped onboarding new drivers in New York City on April 1st, followed soon after by Lyft. In January, Lyft sued the city to block the new wage rules, arguing that they would create an uneven playing field and would ultimately mean their own drivers would be paid less. Three weeks later, Uber sued the city over the cap on new ride-hail drivers.
“As drivers exit the industry and demand from riders increases, we will once again seek to add new drivers,” an Uber spokesperson said.
“Because of TLC regulations, we’re currently not accepting new drivers in New York City,” Lyft said. “We do have a waitlist and will let drivers know when they can apply to drive.”