We examine the pay and hours of drivers working for transportation network companies (TNCs) in Seattle and propose a minimum driver compensation standard. Current gross driver hourly pay is approximately $21.53. After expenses of $11.80, a driver nets $9.73 an hour, much less than the minimum wage. A third of all of drivers work more than 32 hours per week and provide 55 percent of all trips. More than four-fifths of full-time drivers purchased their vehicle primarily or partly to provide TNC services. Nearly three-fourths rely on TNC driving as their sole source of income.
The proposed standard matches the independent contractor equivalent of Seattle’s $16.39 hourly minimum wage for large employers. The standard also includes $1.17 per mile for drivers’ expenses of acquiring, maintaining, and operating vehicles used to transport passengers, for health insurance for those who do not have any, and mandatory payroll taxes and license fees required of independent contractors. Gross compensation, including expenses, would be $28.19 per hour.
The proposed compensation standard would increase hourly gross compensation by approximately 30 percent and increase net hourly compensation by more than 60 percent. About 84 percent of Seattle drivers would receive increases. The compensation standard pays drivers for their time and expenses during all of their working time, per the City’s enabling legislation. The compensation standard will reduce racial inequality in Seattle, since TNC drivers make less than most Seattle workers and black drivers constitute a much larger share of the TNC workforce than of the Seattle workforce as a whole.
The costs of the compensation standard will be partly absorbed by reductions in the industry’s high commissions, improvements in managing drivers and their vehicles (which now carry passengers only about half the time they are on the street), and small fare increases. Commissions could easily be reduced from their current 25-30 percent to 15 percent, the current cap in Seattle for food delivery services. Policymakers may also want to consider an alternative version of the pay standard, which adds provisions for rest breaks, paid sick leave, paid time off, workers’ compensation, unemployment insurance, and retirement savings.