Why I Hate The Gig Economy

I know that Uber is extremely popular and my aversion to the company is probably going to get me nowhere (both literally and figuratively!) but I really find the two pillars of the company’s strategy to be detrimental to workers and not at all progressive.  I am not the first to point out that Uber, like Airbnb, has simply used regulatory arbitrage to build a business – see here, here, and here.  It always seemed incredible to me that a company that is essentially providing a taxi service with an app could somehow evade the regulations that applied to regular taxis and their drivers. Admittedly, taxi regulations around the country were archaic and probably not serving the drivers or the public particularly well – just try to hail a yellow cab in NYC when it is raining! But, just because the rules aren’t up to snuff does not give you the right to ignore them.  It seems totally unfair that one group of drivers is covered by one set of rules and another set, that do exactly the same thing, are virtually unregulated – this is just the kind of inequality that offends my liberal sensibilities. It is really no different than Wall Street firms essentially “shopping” for the least effective agency to regulate them, something that we all can agree did not end well for any of us. In the case of Uber,, this has resulted in the use of drivers with criminal records, criminal acts by drivers, and drivers who are unfit to be on the road. It seems hard to believe that Uber and Lyft were so opposed to a measure in Austin that required fingerprint included background checks and prohibitions about stopping for customers in traffic lanes that they both withdrew their service from the city. It is certainly hard to argue that these were unreasonable regulations.

The second pillar of Uber’s business model is the idea that their drivers are contractors and not workers. Now the difference between those two categories of workers has always been somewhat fuzzy and the issue is being decided by labor regulators in states around the country. Uber always says that their drivers’ preference for making their own schedules is what make them independent contractors.  But most contractors have some specialized service they provide, are able to provide that service to multiple companies, and can negotiate their own rates.  I hardly think that driving requires some specialized knowledge; and the fact that Uber offers incentives for working 60 hours a week indicates that they would prefer the contractor to only work for them; additionally, you can get deactivated as a driver for promoting a competing service, including your own; and, most important of all, Uber sets the rates that all their drivers get paid.  Yes, for some drivers, the flexibility offered by Uber is a great thing, although they can be deactivated as a driver at any time for a number of reasons without any real recourse. And those deactivated drivers are not eligible to receive unemployment. Now, setting up this type of guild, as Uber has done in New York, certainly will give drivers more of a say, but nothing like what they would have if they could form a union. For Uber, not having employees cuts down on overhead related to payroll and withholding taxes and avoids unemployment insurance. And, it is important to note, there are usually fees associated with the regulated taxi services that go to the city and/or state.  Again, Uber avoids those fees and the municipalities lose that revenue. My belief is that it is always preferable for workers to be treated as employees and to get all the benefits that come with that status, as opposed to contractors.

Now, all of the above does not mean that I think we should eliminate Uber. No doubt, it has forced the regulated taxi industry to improve its service – there are now apps for hailing regular taxis. And the need for an Uber-like service in areas where taxi service is limited is something that makes real sense; but Uber does not provide service in those areas because of the lack of population density. However, I do want to level the regulatory playing field for all these services.  If that means more regulation for Uber and, possibly, slightly less regulation for the traditional taxi service, then that is fine. And the drivers for Uber should definitely be treated as employees and receive all the benefits that that status entails. What really annoys me is when Uber pulls out of an area due to a regulatory ruling and then goes to lobby the state to overturn those regulatory decisions. If the gig economy really is such a great thing for workers and the flexibility that Uber offers its drivers really does provide such a great work-life balance, then they should learn to play by the rules.