Uber will stop blocking drivers in New York City from signing on to its app, which it has been doing since fall 2019. The company says it wants to give drivers one less thing to worry about amid the novel coronavirus pandemic.
Uber began restricting drivers’ access to the app after the city passed a law in late 2018 requiring 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 enabling too much car traffic. 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 response to the law, Lyft began limiting drivers’ access to its app. But that had a domino effect: drivers who were kicked off the Lyft app began logging into Uber, significantly increasing the volume of vehicles on its platform. In order to maintain a good utilization rate, Uber says it was forced to follow Lyft’s lead and restrict access to the app.
But with uncertainty surrounding the pandemic, Uber says it wants to help drivers in any way it can — and that includes not booting them out of the app. “The last thing drivers should have to worry about right now is whether they can use the app, so we have decided to lift the current restrictions,” a spokesperson said in a statement. “In these difficult times, driver well-being is at the top of our minds, and we will continue to look for ways to support them wherever possible.”
The question is whether there is enough demand to meet the inevitable rise in driver supply that Uber is enabling. In a call with investors on March 19th, Uber CEO Dara Khosrowshahi said that gross bookings in Seattle were down 60 to 70 percent, a figure he said could be extrapolated to other cities hard hit by the virus, including New York City.
Uber says it wants to help drivers by removing barriers to getting on to its app. But at the same time, there are clearly far fewer customers who need rides these days. Under New York City’s utilization rate, the less work each of those drivers has, the more Uber has to pay. How much more remains to be seen.
