Regulating Ride-Sourcing Markets: Can Minimum Wage Regulation Protect Drivers Without Disrupting the Market?

Ride-sourcing platforms such as Uber and Lyft are prime examples of the gig economy, recruiting drivers as independent contractors, thereby avoiding legal and fiscal obligations. Although platforms offer flexibility in choosing work shifts and areas, many drivers experience low income and poor working conditions, leading to widespread strikes and protests. Minimum wage regulation is adopted to improve drivers welfare. However, the impacts of this regulation on drivers as well as on travelers and platforms, remain largely unknown. While ride-sourcing platforms do not disclose the relevant data, state-of-the-art models fail to explain the effects of minimum wage regulation on market dynamics. In this study, we assess the effectiveness and implications of minimum wage regulation in ride-sourcing markets while simulating the detailed dynamics of ride-sourcing markets under varying regulation intensities, both with and without the so-called platform lockout strategy. Our findings reveal that minimum wage regulation impacts substantially drivers income, and may lead to higher fares for travelers and threaten platforms survival. When platforms adopt a lockout strategy, their profitability significantly improves and drivers earn more, although many others lose their jobs, and service level for travelers consequently declines.