California regulators think Uber is just being greedy and could operate fine with drivers as employees. There's no plan for what'll happen if they're wrong.
In my eyes, they are. Uber doesn't own any cars, they don't pay maintenance on these vehicles, so no matter what uber states you make, your actual take is far lower. I had a driver whose car had been totaled and was being held by the dealership, the driver was using a rental car to try and save up enough to pay the dealer. The people who drive for uber are often desperate and struggling, and given these two rideshare companies are famous for burning millions of dollars in VC money with little to show for it, quarter after quarter since they began, why not burn just a little bit more and actually offer benefits that any other employee in any other profession would already be entitled to?
> no matter what uber states you make, your actual take is far lower.
It depends. For a lot of drivers, the car is a sunk cost. That is to say, they would own the car regardless of whether or not they were driving for Uber because they need to meet their own personal transportation needs regardless of Uber/Lyft. For example, you can't take into account vehicle depreciation, because the vehicle depreciates regardless of whether or not you drive for Uber/Lyft.
The one significant cost that increases strictly as a consequence of driving for Uber/Lyft is vehicle wear-and-tear. However, when you take into account vehicle maintenance, Uber/Lyft drivers still make far more than minimum wage.
Uber requires that you have a certain car. I've had drivers who have leased a newer car to drive for uber, and I've had drivers that were renting their car from Hertz. It's a huge assumption that most uber drivers already had a sufficient car, and even if they did, the maintenance costs will surge as they pound on the mileage. Same problems with being a pizza delivery boy, but you can't get away with a 'disposable' 1k car.
> For example, you can't take into account vehicle depreciation, because the vehicle depreciates regardless of whether or not you drive for Uber/Lyft.
For taxable depreciation, which is generally equally spaced over a fixed time, ok. For actual economic depreiciation, as in the difference in what you paid vs what you could sell it for, time and mileage are both factors, extra miles from driving for hire reduce the sales value of the vehicle.
> time and mileage are both factors, extra miles from driving for hire reduce the sales value of the vehicle.
Yes, but time impacts depreciation far more than mileage, and the time-based portion of depreciation is a sunk cost. You can definitely argue that drivers accrue more miles driving for Uber/Lyft, and that they should be reimbursed for that, and I would agree with you. However...
Compare the Bluebook value of a typical car that might be used for this kind of work at ten years old with 120k miles (12k/year) vs. ten years old with a million miles (100k/year). The difference will end up being around $2500, because after ten years the car will be worth hardly any more than that no matter how many miles it has on it, and it can't lose more than 100% of its value due to higher mileage. ~$2500 amortized over 880k additional miles is <0.003/mile.
A 2016 Camry with 60,000 miles is worth about $5000 more than a 2016 Camry with 500,000 miles, which works out to about ~$.01/mile of depreciation.
So in a regime where drivers are compensated for the mileage-based component of the vehicle depreciation, and if the average number of miles per trip is, say 10 miles, you're looking at drivers earning about 10 cents more, per trip.
They don't subsidize their rides on a per unit basis. The driver expects to earn a base fare + some amount based no distance + time, and Uber takes a 20% cut from that. The actual marginal cost to providing a second ride, for Uber, is maps licensing, server costs, and maybe marketing promotion costs for that market.
The loss that Uber makes, instead, is because the amount that they pull in from the service fee isn't enough to cover the facilities and corporate salaries (they have 27,000 employees).
Uber rides were "adjusted EBITDA" profitable for 2 straight quarters before this — take "adjusted EBITDA" with a grain of salt, but it's also not "nothing".
Instead, Uber will almost certainly have to raise prices. We all collectively pay for the Uber drivers' welfare, but rather than having it be progressively paid for through taxation, it will be regressively paid for through price increases that disproportionately impact the poor / middle class.
>We all collectively pay for the Uber drivers' welfare, but rather than having it be progressively paid for through taxation, it will be regressively paid for through price increases that disproportionately impact the poor / middle class.
Sounds like a very American centric view to me and not even sure it applies in the US. In most countries personal ride services are consumed by upper-middle-class professionals at the expense of public transportation and road congestion.
I think it's very likely that the utilisation of ridesharing services skews heavily towards people with lots of disposable income in urban areas so having them pay higher prices is actually correct and internalizes the cost they put on public infrastructure.
> Sounds like a very American centric view to me and not even sure it applies in the US. In most countries personal ride services are consumed by upper-middle-class professionals at the expense of public transportation and road congestion.
Usages definitely rise with income, but that's true for most goods...
Consumers of ridesharing are anywhere from white collar workers with college degrees, to working parents that use Lyft/UberX to get to the airport, etc. But a $10 increase in fare means literally nothing to a millionaire / billionaire, but means a lot to a new grad, or even a median white collar worker. It's still regressive.
And also, this argument applies to any form of wage floor, not just ridesharing. We as a society try to guarantee a minimum standard of living (which is a good thing), and we can do that either by employing wage floors, or through raw welfare — we collectively pay for it in one way or another. The moment you institute a wage floor, for any kind of wage: food worker, transportation worker, etc — we collectively pay for it through price increases, which means nothing to a billionaire. Instead, having a robust social welfare system ensures the same standard of living, except the new grad worker pays less into it than the billionaire.
this isn't a wage floor, it's internalizing the costs that the service imposes on the rest of society. Why should the taxpayer have to jump in to save gig workers who are essentially living in a permanent state of precarity? Why should we encourage companies who cannot take care of their employees? Or for which separating themselves from obligations is actually their entire business model?
There is nothing regressive about this. If usage of Uber increases as fast, or faster than income then shifting some money from consumers to drivers (who are very much at the bottom end of the distribution) is progressive. Ensuring that public infrastructure is maintained which the poor rely on disproportionately is progressive. Pumping money into privileged forms of transport which has horrible consequences for the environment by pushing reliance on cars which worsens pollution as well as congestion is regressive.
It's completely cynical to suggest we need a 'robust social welfare system' which in this context means tax payers taking on the obligations of employers so that a bunch of tech workers can become millionaires at the age of 30 after an IPO, which is what Uber is. It's a distribution of money from the bottom 80% to the managerial and tech class while offloading risk onto the public and creating an underclass of disposable gig workers whom the company has no stake to ever invest in.
> this isn't a wage floor, it's internalizing the costs that the service imposes on the rest of society.
This isn't an externality, this is the market price of labor. Some labor has a high market price, some has a low market price. We draw a socially constructed line of what it means to be "at the minimum". There's no guarantee that all labor will be worth that minimum value, how could it? That means every service that you could possibly outsource to another individual, from cleaning your house to unscrewing a light bulb...would cost $15 / hour (or some hourly rate that society collectively determines). This is, by definition, a wage floor.
> Why should the taxpayer have to jump in to save gig workers who are essentially living in a permanent state of precarity? Why should we encourage companies who cannot take care of their employees? Or for which separating themselves from obligations is actually their entire business model?
You can make this argument about literally any welfare system. Why should the taxpayer have to jump in to provide single-payer healthcare? By doing so, we encourage companies who cannot take care of their employees by providing health insurance. Single payer healthcare is a taxpayer subsidized way of absolving corporate responsibility over its employees. We both probably disagree with this framing.
The obligations of a corporation's business model maybe SHOULDN'T include the provision of health insurance, in the same way that it maybe SHOULDN'T be in the business of providing a "minimum standard of living" that we collectively come up with. The business's role is to simply provide goods & services based on the conditions of the market.
> It's completely cynical to suggest we need a 'robust social welfare system' which in this context means tax payers taking on the obligations of employers so that a bunch of tech workers can become millionaires at the age of 30 after an IPO, which is what Uber is. It's a distribution of money from the bottom 80% to the managerial and tech class while offloading risk onto the public and creating an underclass of disposable gig workers whom the company has no stake to ever invest in.
You're just talking about Uber here, but this line of argument applies to literally any business that makes use of any labor whose market value is below the "minimum line" that society draws. Think about how high McDonald's share price will go if we institute a taxpayer funded Single Payer healthcare system. It would essentially be a distribution of money from the bottom 80% to the managerial class of _any_ corporation that is currently obligated to provide their employees health insurance.
Which is why I made the more fundamental, industry-agnostic argument: We as a society (rightly) try to guarantee a minimum standard of living, and we can do that either by employing wage floors, or through raw welfare — we collectively pay for it in one way or another. The moment you institute a wage floor, for any kind of wage: food worker, transportation worker, etc — we collectively pay for it through price increases, which doesn't discriminate against the buyer. A low class consumer experiences this the hardest, the middle class consumer the next hardest, the upper middle class the next hardest. Who cares the least about this price increase? The billionaire. It's essentially a regressive tax.
This line of thinking applies not just to Uber, but local businesses, fast food joints, grocery stores, anything that requires manual data entry — really any low-skilled labor.
EDIT:
I've found it helpful to visualize what this looks like with a concrete example:
Imagine a pizza maker's market value is (say) $5/hour. They are able to produce (for simplicity's sake) 5 pizza's per hour, or $1/pizza. Including other operating costs + 3-5% profit margin (that's the average for most restaurants), let's say that the pizza sells for $5. Thus the pizza maker can expect to earn $40/day, on the market. Suppose the "livable minimum wage" should be $15/hour, or $120/day. There are 2 ways to guarantee this:
A) The government deposits an extra $80 to the worker, allowing them to make $120 that day. They can buy a pizza for $5, which is about 4% of their daily wage.
B) The government mandates a minimum wage of $15/hour, which means that the labor portion of the pizza cost goes up from $1 to $3 per pizza. The pizza now sells for $7 so that the shop doesn't go out of business. The worker makes $120/day, and can buy a pizza for $7, which is about 6% of their daily wage.
Notice that in (B), the worker is actually worse off, even though they have the same amount of money in their pocket. The worker has to pay a higher percentage of their pay to afford to eat, but this $2 extra means absolutely nothing to a billionaire, it's pennies to a rich person. In scenario (A), the worker is better off, and the welfare system that sustains it can be funded through progressive taxes, which targets rich people.
You're absolutely right that it can be generalised to every industry, which is why I'm not a fan of single-payer systems or huge welfare states or making workers dependent on the state. This optimised free market + welfare state fantasy is technocratic napkin math.
Look at the reality in the US and in Germany right now during the crisis. Germany, which employs a model of corporate responsibility has seen only modest unemployment increases as companies take care of their workforce and collective bargaining ensures that companies are directed towards long term goals and fostering human capital.
The US is seeing great depression era unemployment and if you happen to have the wrong political party in charge who doesn't want to tax rich people and hand everyone welfare you're just screwed.
In the real world, this idea of efficient markets and generous governments is just a fantasy. There needs to be decentralisation and autonomy in the system and a distribution of responsibility at the local and regional level. If that means I pay 50 cents more for my burgers during regular times because nothing is optimised so be it. At least the whole thing doesn't come crashing down just because the government doesn't work.
