In a significant blow to the ride-sharing industry, both Uber and Lyft have announced their decision to halt operations in Minneapolis following the city council's decision to overrule the mayor's veto of a minimum wage law affecting rideshare drivers. The new law, which is set to take effect on May 1, establishes a minimum driver pay of $1.40 per mile and $0.51 per minute, or a minimum of $5 per trip, whichever is greater.

Lyft was the first to confirm its withdrawal, stating that it will be "shutting down operations in Minneapolis" when the law comes into effect. Uber followed suit, announcing that it will no longer operate its transportation network in the entire metro area, including the airport, starting from the same day.

The city council has been working towards ensuring that driver rates align with the local minimum wage, which rose to $15.57 per hour in January. Previously, median earnings for drivers in Minneapolis and St. Paul were recorded at $13.63 according to recent data from the Minnesota Department of Labor and Industry.

Despite facing fierce opposition from the ride-sharing industry, the city council decisively voted 10-3 to override the mayor's veto, underlining their commitment to not allowing communities to be "exploited for cheap labor," as stated by Council Member Jamal Osman, a co-author of the policy.

Critics of the bill argue that it will lead to increased ride prices, potentially deterring consumers from using the service altogether. Lyft, in a statement, expressed concerns over the ordinance, claiming that it would render rides unaffordable for the majority of Minneapolis residents. They labeled the legislation as "deeply flawed" and accused it of being rushed through without adequately addressing major concerns raised by the community.

Lyft CEO David Risher recently voiced his opinion that central governments should refrain from intervening in price-setting practices, emphasizing the need for a balanced approach. The company has indicated that it will continue to advocate for a statewide solution in Minnesota that considers the needs of both riders and drivers, with a hope to return to Minneapolis in the future.

Uber, on the other hand, believes that this move will not only result in unemployment for approximately 10,000 people but will also leave many stranded. Despite the setback, the company expressed optimism in achieving comprehensive statewide legislation that ensures a fair minimum wage for drivers, safeguards their independence, and maintains affordability in the rideshare industry through collaboration with stakeholders, including drivers, riders, and state leaders.

As the implementation of the minimum wage law nears, both Uber and Lyft will be forced to suspend their services in Minneapolis. The impact on consumers and the labor market remains uncertain, fueling a growing debate about the need for regulations that strike a balance between fair driver wages and affordable rides for passengers.