Commentary: Uber/Lyft Drivers Will Earn a “Minimum Wage” Of $137,000 A Year – Minneapolis Riverfront News – Minneapolis Riverfront Neighborhoods.

By Carol Becker

The City of Minneapolis passed legislation to ensure that Uber and Lyft drivers are paid a minimum wage. The problem? Uber and Lyft drivers are not employees – they are small business owners.  Drivers decide when they want to work, what vehicle they use, where they buy gas, whether they drive for more than one company, and a myriad of other decisions. A “minimum wage” does not apply to businesses.

This fundamental misunderstanding has not stopped the City Council from plowing ahead with trying to calculate compensation that would “ensure” a “minimum wage”. Both the City and the State undertook deeply flawed studies and came out with deeply flawed answers. Based on these analyses, the Legislature has agreed that drivers would be compensated at $1.27 per mile and 49 cents per minute. There would also be one compensation rate across the whole state.

How much are drivers guaranteed to get, at minimum? $137,000 a year. Here is how it breaks down:

$1.27 per Mile * 35,000 Miles per year = $44,450

+ $0.49 per minute * 60 Minutes * 2080 Hours/Year = $61,152

+ $105,602 Driver Compensation + $35,201 Uber portion of fares * 17.5% tip = $24,640

+ 67 cents per mile IRS deduction * 35,000 miles *30% tax rate = $7,035

= $137,277 Minimum Compensation

I would repeat that $137,000 is the MINIMUM compensation for a full-time driver.

These small business owners do have costs. They need to provide a car. The IRS mileage rates estimates this would cost the owner about $23,000 a year, but they would get 30% of that back on their taxes. They would also need to pay other small business costs.  But it is clear. $137,000 would provide far in excess of a minimum wage. But this is unsurprising given that the City Council didn’t even understand the issue correctly. And none of this guarantees that all drivers will, in the end, receive a minimum wage. Because drivers are not employees. Any driver can make bad business decisions and lose money. Like any small business.

It is clear that both the City and the State need to scrap this whole effort and start over with the correct assumption. Uber and Lyft drivers are small business owners. If they start from the correct assumption, perhaps they could come up with a reasonable answer.