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New Data Show Economic Loss From Banning Ridesharing

February 27, 2017

In just a few years, the ridesharing companies Uber and Lyft have become important and cost-saving additions to Americans’ transportation options. Predictions that Uber would become a monopoly have been proven wrong as its main rival Lyft continues growing at an impressive pace.

The latest data show that Lyft completed 19 million rides in January in the United States. Furthermore, Lyft drivers received $1.5 billion in earnings last year. These earnings would have been higher if not for some major U.S. cities that still do not allow ridesharing. This policy decision comes at a cost for the economies of these cities.

Just how much cities are missing out on by prohibiting ridesharing is the subject of a new study released by Lyft and carried out by the Land Econ Group. The study evaluates six cities in New York, Texas, and Missouri that do not have Lyft – Buffalo, Rochester, Austin, Houston, Kansas City, and St. Louis.

 

By considering and weighing three variables, the study predicts the number of Lyft rides that would have occurred in a city’s third year of operation. These variables are metropolitan statistical area population, median household income, and city density as measured by persons per square mile.

After projecting the number of Lyft rides that would occur in a city’s third year of operation, measures of economic impact – including drivers’ take home income and the economic benefit to local businesses – can be estimated with high levels of accuracy.

Lyft’s data from its areas of operation allows for reliable estimates of what cities without ridesharing are missing out on. For example, Kansas City is comparable to Lyft’s markets in Nashville and Orlando and St. Louis has many demographic similarities to Pittsburgh and Atlanta. The main findings from the six cities are shown in the graphic below.

 

 

Besides Austin – which famously lost Lyft and Uber after the city required fingerprint background checks for drivers – Buffalo is the largest U.S. city without the major ridesharing companies. And the need for more work opportunities and economic growth is clear in upstate New York.

Buffalo’s poverty rate of 31% is nearly two and a half times greater than the U.S. rate. The city’s five-year labor force participation rate, which measures people who are working or looking for work, stands at 59.2%, far below the U.S. rate of 63.3%. These are all problems that could be addressed with more work opportunities, which allowing Lyft and Uber would provide.

And Rochester, another major New York city that does not have ridesharing, has likewise paid the price for this choice economically. The city, though it is known for its colleges and universities, has one-third of its residents living in poverty. Similar to Austin and Houston, where Lyft ceased operations in November 2014, debates over fingerprinting are keeping ridesharing out of upstate New York.

Just how much economic activity are these New York cities missing out on? In November 2015, Uber estimated that the company would create 13,000 jobs if ridesharing expanded to all of New York. If anything, this job creation estimate is too low; Uber has 30,000 active drivers in Pennsylvania, a state with a similar population to New York’s when excluding New York City. (The New York City area is the only part of the state that has ridesharing.)

It is true that most ridesharing jobs would be part-time. Half of Uber drivers work on the platform for under 10 hours a week and 80% of Lyft drivers work on the platform for under 20 hours a week . Some critics of ridesharing’s business model worry about part-time work, but flexible work is a feature of ridesharing – not a bug.

Because drivers set their own schedules and use their own cars, a wide array of people benefit. From single caregivers and full-time drivers to college students and retirees, virtually anyone can earn additional income by partnering with ridesharing companies. This is why nearly all Lyft and Uber drivers cite flexibility as the main benefit of contracting with the companies. Lyft’s new data shows that this type of work leads to real income for drivers and noticeable positive effects on the local economy.

In 2017, there is no excuse for major cities to leave their residents without the work opportunities and transportation options that ridesharing provides . As the experiences of hundreds of other cities throughout the world show, ridesharing is a safe and affordable part of a city’s transportation infrastructure.

The latest data on economic losses from not having ridesharing should spur policymakers in Missouri, New York, and Texas into action. Cities need to promote more work opportunities and economic activity, and allowing ridesharing to grow is a commonsense place to start.

 

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