Uber's and Lyft's ride-hailing deal with Minnesota comes at a cost

Uber and Lyft drivers in Minnesota will see higher pay thanks to a deal between the state and the country’s two largest ride-hailing companies. The upshot: a new law that gives some protections to drivers while placing limits on state government.

The bill, which Governor Tim Walz has supported publicly and is expected to sign, stipulates that starting January 1, 2025, drivers will be entitled to earn at least $1.28 per mile and $0.31 per minute. Those rates are somewhat in line with what a state study on driver compensation recommended: between $0.89 and $1.207 per mile and $0.487 per minute. 

While the new bill ends a multi-month saga in which Uber and Lyft threatened to leave the state multiple times, it’s unlikely to end arguments over who should set wages for gig economy workers. Nor does it hand a victory to any one party. Instead, this web of compromises outlined in the bill gives a little bit to everyone — except perhaps to the rider.

Josh Gold, Uber’s senior director of public policy, told TechCrunch that while the company is happy to continue operating in Minnesota and the deal gives it some pricing flexibility, Uber still sees the rates as too high.  

“Riders and drivers are gonna feel the increase in rates and the decrease in demand that results from that,” said Gold. 

Uber and Lyft have long used that lose-lose scenario to argue against raising pay or adding other protections. The companies’ pitch isn’t wrong — although it does ignore the benefits of raising pay and the value of other protections outlined in the bill, such as vehicle insurance and compensation for injuries while on the job. 

Those very protections must be paid for somehow. In New York City, where Uber and Lyft are required to contribute to the Black Car Fund, which provides drivers with worker’s compensation, the 2.75% levy on each fare comes out of the rider’s pocket.

The threat of higher rider costs is the main reason Gov. Walz vetoed a previous version of the bill. Walz claimed at the time that it would have made Minnesota one of the most expensive states for ride-hailing. 

Some local politicians are unhappy with Minnesota’s new law because it also preempts Minneapolis — where 95% of all taxi and ride-hail trips occur, according to the state’s Department of Labor and Industry — and other cities from enacting their own wage floors. 

In March, Minneapolis’ city council passed an ordinance guaranteeing drivers earn a minimum rate of $1.40 per mile and $0.51 per minute. Uber and Lyft opposed the bill, saying it would make it too expensive to operate in the city. They threatened to leave by May 1, 2024, but then demurred, saying they’d consider staying if the Minnesota legislature got involved. Which it did. 

“Any and all attempts to undermine local control are bad,” posted Minneapolis Council vice president Aisha Chughtai on X. “It’s a Republican and corporate tactic used around the country. Watching our Gov. Tim Walz cave to multibillion dollar corporations in insisting on preempting Minneapolis is gross.”

In 2023, Uber and Lyft collectively spent $220,000 lobbying in Minnesota, according to state lobbying records.

The agreement in the Minnesota legislature comes as the gig worker fight continues to play out in California. The California Supreme Court will hear arguments Tuesday on the constitutionality of Proposition 22, the 2020 law that classified drivers as independent contractors rather than employees. 

The outcomes of both legal processes will have implications for how the ride-hail companies operate across the country, what sorts of pay and protections drivers can expect, and how much rider fares stand to increase.