Just now
In 2020 the city of Seattle passed the Fare Share ordinance which set minimum compensation for rideshare drivers; in 2022, they followed this with PayUp, similar legislation aimed at delivery couriers. While these earning standards were written with the intention of improving the welfare of earners, they have failed to deliver, and proven to have negative consequences for the riders, eaters, and local restaurants whose voices they ignored. Prices for riders and eaters have increased dramatically, hitting low-income residents the hardest. Meanwhile, drivers, couriers, and restaurants in Seattle have seen earnings sputter out with fewer work opportunities. In short, gig workers in Seattle are worse off than before the minimum compensation standards came into effect or than in markets with other minimum compensation approaches. In this blog post, we will outline each of these unintended outcomes and offer a different vision for pay regulation that is supported by earners and Uber alike.
The city of Seattle passed unique regulations intended to increase gig worker pay. However, these rules were developed with inadequate research and insufficient worker outreach. As a result, they used ill-advised assumptions about how much it costs to drive a car that inflated pay far above the minimum wage rules that apply to all other kinds of workers in Seattle, while limiting the way platforms could implement these new rules more flexibly to avoid price increases for riders and eaters.
The individual standards aim for rideshare drivers and delivery couriers to earn at least the Seattle minimum wage for the time they spend actively completing trips. The rules conclude that drivers and couriers need to earn substantially more than the minimum because they incur costs while driving a vehicle. The problem with the standards, though, is that they grossly overestimate typical costs associated with driving or delivering on Uber. There are a number of well-researched studies of rideshare driver costs in the US finding variable costs ranging from 19c to 25.8c per mile (see Research from Cornell, The RideShareGuy, and BW Research). Variable costs include costs like fuel costs, variable depreciation, and maintenance and repairs. Even research by the Anderson Economic Group, which attributed to platform work driver fixed costs (like lease payments), resulted in much lower cost estimates than the IRS mileage deduction rate for commercial use.
Instead, the Seattle rules set a mileage rate of 67c per mile, pegging to the highest IRS tax deduction rate. This rate exists to simplify workers’ income tax reporting, and is therefore designed to be high enough to cover the vast majority of vehicles, including “vans, pickups or panel trucks”. The average Seattle Uber drivers’ car is significantly more efficient and cheaper to operate than a commercial van or truck, with 76% of 2024 on-trip miles completed by zero-emission or hybrid vehicles. Further, the IRS rate reflects the fixed costs of owning a car. Applying this rate to Uber assumes that drivers buy cars principally for the purpose of driving them on Uber; in fact, most Uber drivers already own a vehicle that they then choose to use on Uber. The IRS studies and publishes another mileage deduction rate, for miles driven for medical or moving purposes. This rate looks only at variable costs, and as a result hews much closer to the academic research on the cost to use a personal vehicle for rideshare or delivery, at $0.21 in 2024.
By failing to properly account for driver and courier expenses, these regulations unintentionally set minimum compensation far higher than minimum wage. For a sense of scale, an overage of just $0.40 per mile corresponds to an additional $12 per hour for a driver driving 30mph. While this sounds great in theory, as we demonstrate below, it has actually resulted in no higher earnings to drivers because the increased costs resulted in far less demand for their services.
The total effect of the issues highlighted above has been a huge hike in prices for rideshare and delivery. This hurts customers, merchants, and ultimately even the workers which these laws purport to protect.
These laws immediately made Seattle the most expensive place in the country to order an Uber ride, or a meal on UberEats. Following the implementation of Fare Share in 2021, the average price riders paid for a trip in Seattle jumped more than 40%. Eaters in Seattle saw similarly large price increases following PayUp, including a $5 local operating fee.
When the prices of rideshare or delivery services increase, fewer customers want to or can afford to order rides or deliveries. The starker the price increase, generally, the starker the reduction in demand for rideshare or delivery services. Given such a large price hike in Seattle, it is no surprise that Seattle is having a worse recovery than all other large markets in the US, with trips down more than 50% relative to the rest of the US.
PayUp was only implemented 6 weeks ago, but we are already seeing a large decrease in orders from UberEats. So far, restaurants and couriers have seen order volume decrease by 30%, with volumes continuing to drop.
Increasing prices for transportation hurts all consumers, but they hit low-income and disadvantaged users the hardest. Low income communities rely on Uber: in Seattle, 44% of rides trips start or end in a low-income neighborhood.¹ Low income riders are more likely to use Uber to complete essential trips, such as getting access to groceries or going to a doctor’s appointment. Nearly 4 in 10 low-income riders say they typically rely on ridehail for these essential trips.² This reliance is perhaps predictable, since low income riders are more likely to live in transit deserts and are less likely to own a personal vehicle.³
Counterintuitively, we see that Seattle’s low income riders are less elastic than others to the price increases — since Fare Share the proportion of Seattle trips that have served disadvantaged areas has actually grown as total trip volume has fallen. This is suggestive of these riders’ reliance on Uber to provide essential transport, and their inability to access other suitable modes to complete these trips.
High prices for food delivery are also hurting Seattle’s most vulnerable populations. Internal analyses that build on top of research by the Brookings Institution show that UberEats helps increase food access for underserved communities. In our analysis from 2020–2021, Seattle even stood out as having consistently high demand from low-income and low-income, low-access (LILA) communities. Nearly 30% of orders in Seattle came from Low Income communities, while only 25% of the population resides there.
The city’s earnings standards achieved one thing: they increased the pay of drivers and couriers for time spent on a trip. However, the resulting reduced demand has more than offset these increases.
Drivers can and do perform many tasks while online on Uber. For example, some drivers fulfill requests on other apps or even take breaks while remaining online–there is never any obligation for a driver to accept any offer delivered. Reduced demand creates more of this open time — with fewer trips being requested, drivers must wait longer between trips. This means that gains in pay per trip will be offset by the decrease in trips, resulting in no expected benefit to total earnings. This is exactly what we observe: three years after the introduction of Fare Share, Seattle area drivers’ earnings per online hour have now fallen to some of the lowest of any market in the country, far from the above-average earnings that existed before Fare Share launched.
Similarly, after the introduction of PayUp in January 2024, couriers are spending on average 30% more time waiting for delivery requests than before the ordinance went into effect. We don’t see a similar shift for couriers in other US markets. As a result, Seattle courier earnings during all hours online are flat to slightly down, albeit over a small sample period.⁴
Not only did the earnings standards in Seattle fail to improve the welfare of earners, both standards actually hurt earners, while having profoundly negative implications for merchants, restaurants, consumers, and vulnerable communities in Seattle. These outcomes were foreseeable and avoidable. There are better ways to successfully improve the lives of drivers and couriers.
Uber has supported and advocated for ways to provide drivers with important benefits, such as minimum compensation standards that improve driver earnings, protect driver flexibility, and don’t harm the consumers who use Uber for transit or delivery. This can be best achieved with compensation standards that are created with workers’ voices at the forefront and are not needlessly costly. These standards should apply across a pay period, and incorporate reasonable estimates for worker expenses. Estimates of costs should be localized to specific geographies.
As noted previously, Uber remains eager to work with policymakers, drivers, advocates, and other stakeholders around the world to forge frameworks that unlock true flexibility plus benefits and protections for platform workers — without the catastrophic effects illustrated above.