Why Uber and Lyft suck
On August 20th, the California court ruled that both Uber and Lyft had to obey the AB5 order passed in January of this year. An order that stated that gig workers would need to be classified as employees rather than independent contractors. This decision would mean that companies who use gig workers as an essential part of their operating model would all of a sudden need to pay for headcount, healthcare benefits, paid time off etc. You can imagine how much Uber and Lyft hated that idea, considering how either company has yet to make any money with their current model. The response from both companies says a lot about what they are after and what they care about. They care about profits, shareholder value, and will do so at the cost of the heroes who are transporting spoiled, educated millennials and other members of the middle class while making 4 dollars an hour. That is the situation we are finding ourselves in.
Business model
Looking at their business model first, you’d think that both companies would be rolling in cash due to the fact that they do not have to pay for the fleet of cars, the maintenance of their non existent fleet, insurances, taxes, headcount, pension, etc. All costs associated with classifying their drivers as employees. Considering all those things, it is honestly incredible how a company like Uber, who has been around since 2009, still has not managed to make any money. Both companies are billions of dollars per quarter. That’s billion, with a B. Uber even posted an 8.5 billion dollar loss in 2009, which is also the year the company had their IPO (went public).
Going public before figuring out a legit business model is already a sign that this company is after one thing; profit for their upper management and shareholders. While the company is likely making some people rich, it does so because they are able to exploit the gig worker model. It just isn’t possible to create a personal taxi ride that takes you multiple blocks for just 10 dollars. Somebody stands to lose in this equation, which will be further explored in this article.
Economics
Now that we can see that it isn’t working in the real world, we have to wonder if the benefit they are offering is really a benefit. I’d argue that instead their services are offering a great convenience for the working class plus, the educated middle class who enjoy more privilege and wealth. These are your younger generations who mostly likely have a Master degree, earn 120,000 dollars at a tech firm right out of college, and pay 23 dollars for an avocado sandwich every morning before work. What companies like Uber and Lyft are doing is essentially creating a divide between the working class. In this divide, the gig worker stands to lose the most.
The gig worker, who has to sell his/her labor for less than minimum wage while also being responsible for the vehicle, the insurance costs, gasoline, tolls, car payments, maintenance and self employment taxes. Not only that but also consider how much faster a car depreciates when you are using it on a daily basis for hours on end. Furthermore, an Uber or Lyft driver in some cases bought their vehicle specifically for this job. That means a serious investment of thousands of dollars, which makes the transaction even worse for the gig worker. This creates a sort of morphing of personal life and finances with the job you are doing rather than just having to show up for a job for below minimum wages and no benefits. You’re also being asked to bring in your personal assets to the equation. A quick Google search and you will find many first hand accounts of drivers forced to work for 4–5 dollars an hour after you consider all of these costs. Some drivers even reported that they had no choice but to drive for such small profit margins because they bought the car literally for the purpose of doing this job. In other words, full investment of time, energy and resources is required to be a driver.
The Other and your neighbor
The exploitation of cheap labor has shifted in the past ten years from Asian countries to now the bottom part of the middle class here in the West. This shift is just another stage of capitalism and works to further create the idea that people are simply a tool for the creation of wealth for a select few people on top. Ever since we started moving most of our production to Asian countries because of cheap labor costs, we accepted in the West that our cheap household products and consumerism would be based on the exploited Asian worker. This trade is much easier to make because they are not like us in the West. For one, our cultures are quite different, we look different, we follow different customs, we value different things, we follow different religions. These differences make it easy for us to accept that we pay 12 dollars for a t-shirt. What has happened in the last ten years with the rise of gig workers being used by companies such as Uber and Lyft, but more nefariously by Amazon, is that we’ve now accepted that our own neighbors, people very similar to ourselves, are now the culprit of our modern conveniences and cheap products.
The main actor being the gig worker, who has to sell his/her labor for less than minimum wage while also supplying the vehicle, pay for its maintenance and insurance, and not receive any sort of real benefits as a worker. What I am saying is that your 10 dollar car personalized car ride exists only at the costs of those around you. This could be your neighbor or your uncle, who is forced to drive his car for 4 dollars an hour after all his expenses, just so he can afford rent, food, and his car payments. We are not talking about Chinese or Taiwanese workers in sweatshops or factories, but we are now officially affecting our own neighbors. And while exploiting Asian workers is just as bad as exploiting our own, it is even more sinister that we choose to accept this new situation.
Just think about how many corporations and startups have replaced existing models of labor and replaced it with a more inhumane working situation just to make a service or good slightly cheaper and faster for the rest of society. But these improvements are often unnecessary and play on our collective increasing laziness and privilege. One of the most useless benefits that people happily pay for is Amazon Prime. Hell, people are even paying for same day delivery if given the option! All of these insanely convenient benefits definitely come at the cost of people further down the economic totem pole. The point here is that you don’t need same day delivery or even next day delivery. It’s uber convenience that only seems like a benefit to someone with terrible planning capabilities and the lack of compassion of fellow man or woman.
Many of the gig workers that exist today used to have jobs that at least gave them minimum wage and perhaps even some benefits. More so in Europe than in the United States of course, that comparison needs to be mentioned. Historically, if you took a taxi service, at least those drivers had benefits and minimum wage going for them. They had something stable which allowed them to feel that they could provide for their families without too much fear of being left penniless. There was a chance to build wealth for the family if you worked hard because at least the terms sort of made sense. This no longer exists wherever corporations are allowed to have free reign and exploit weak labor laws.
In response to the court’s ruling, the CEO of Uber, Dara Khosrowshahi, did an interview with The Verge, where he stated that it was impossible for him to employ 50,000 drivers in California due to the new gig worker laws. Impossible only because that would require the company to pay millions of dollars extra to hire these employees and offer minimum wage and real benefits. In that same interview, he defends his business model by alluding to the fact that we operate in a system called capitalism, not labor-ism or socialism. A system that is about maximizing shareholder value and capital. He goes further to state that these big systemic changes, like the court of California ruled, are needed so that capitalism can evolve. What is sort of positive about this is that he does agree that perhaps capitalism needs another look so that it can become a little more about the gig worker in the 21st century. Interestingly enough, evidence of the lobbying and appeals to this ruling from both Uber and Lyft show us otherwise. Both companies have begun putting tremendous pressure on the California legislators and seem to be prepared to do anything to get the ruling overturned.
Uber responded to the court’s ruling saying that this decision was ill timed during COVID19, that many more people will lose their jobs. This puts an unfair pressure on the local government, because they have to keep pressure on these business practices but also have to consider that thousands of people will stand to lose their jobs. It’s important now for the California government to take a firm stand and move forward so that companies can stop exploiting local cheap labor. But the problem doesn’t stop here, both companies will continue to exploit the gig model in any of the states where this is allowed.
Conclusion
The idea and practical application of creating cheap personal transportation only stands to benefit one segment of the population because it is inherently unrealistic. It is not possible to create a 10 dollar ride spanning multiple miles unless someone stands to lose in that transaction. And this person is the gig worker, who is forced to sell his/her labor for less than minimum wage, no benefits, no health care, no paid time off; all the while also having to pay for maintenance and rapid depreciation of their own car. That is the price your fellow man is paying while you, the educated and privileged portion of the working class enjoys the personal transportation you love. This should not be possible, but capitalism and venture capitalists with deep pockets are making it so.
We as citizens have the power in a democratic society to demand change from our governors and legislators. It’s time to use that power and privilege to pressure our lawmakers to follow in the footsteps of the California court. No company should exist based on a gig worker model. Employees at all levels within an organization should enjoy the same benefits and be treated as a full employee. That is the humane thing to do.
I say to Uber and Lyft, begone!
Thanks for reading. I’m curious to hear your thoughts and don’t forget to clap if you enjoyed it.
