Minimum wage and maximum impact?
To that end, in New York, the ride-hailing firm known as Juno (operated by Israeli firm Gett), filed for bankruptcy protection this week and said lawsuits — and new minimum wage mandates — led to the decision.
As reported in The Wall Street Journal, the move to seek bankruptcy, and restructure, comes even after the company had contracts in place with about 50,000 drivers in the New York region, and had been completing around 50,000 rides daily. The financial publication cited papers filed in the U.S. Bankruptcy Court in the state of Delaware. In a statement that announced the bankruptcy, Jett said “misguided regulations” in New York City led to the discontinuing of operations.
It should be noted, however, that at the same time Juno filed for protection, Gett said it had entered into a partnership with Lyft that would help Gett expand in the U.S. in a bid that would focus on B2B rather than B2C transportation.
The misguided regulations were not specifically noted in the announcement, which came from Gett. However, the liquidation of Juno comes as the city instituted what is known as a “floor” for driver pay, tied to minimum wage of $17.22. In the wake of that floor, the amounts charged per Juno ride were up by roughly 20 percent, and rides slipped to a daily tally of about 25,000.
Because Juno’s lone market had been New York, there were no ways to offset the impact to such a spike in cost input.
The impact raises the debate as to whether the floor equates to a ceiling on growth for ridesharing companies. Juno may be a special case, limited to a single market.
But as ridesharing firms find this input rising, by competition or legislation, they will likely counter through measures that impact when drivers can ply their trade, and even how many drivers can be on the road.
As noted by Karen Webster in this space last month, companies like Uber and Lyft may set strict parameters around driver flexibility to take on additional work — which dampens at least part of the appeal of the gig economy.
The issue is a pressing one, as in California, for example, Uber, Lyft and DoorDash face a state initiative that would require those firms to pay contractors (designated as independent contractors) minimum wage.
Margins, of course, may hang in the balance.