Harry here. Today is the last day of my vacation in Peru (picture here) but while I’m somewhere over the Pacific Ocean, the news about Uber and Lyft marches on. Today, RSG contributor, John Ince, takes a look at the major stories from the week.
I’ll be back next week so feel free to reach out again if I missed your question while I was away.
Sum and Substance: Twenty-six-year-old Takele Gobena is part of the “on-demand” economy, working full-time as a driver for Uber and part time for Lyft. The Ethiopian immigrant quit his job at the Seattle-Tacoma International Airport and purchased a new car to drive for the ride-hailing firms, believing it would make him a better provider for his one-year-old daughter. Instead, Gobena now finds himself in debt and, after expenses, making well below minimum wage. But because Uber and Lyft drivers are classified as independent contractors, Gobena is not protected by minimum wage laws.
Gobena’s plight is an increasingly familiar one. A new report from the National Employment Law Project, “Rights on Demand: Ensuring Workplace Standards and Worker Security In the On-Demand Economy,” highlights the problems so many on-demand workers face: “Characterizing workers as non-employees has serious negative consequences for them: non-employees have no statutory right to minimum wage, overtime pay, compensation for injuries sustained on the job, unemployment insurance if involuntarily separated from employment, or protection against discrimination.”
The authors of the report, Rebecca Smith, NELP’s deputy director, and Sarah Leberstein, senior staff attorney, call for workforce-wide enforcement of current and developing labor standards. “New technologies should not be allowed to displace existing protections for the many on-demand workers who are, in fact and in law, employees.” Gobena is inclined to agree. In a phone interview with Capital & Main, he spoke about driving for Uber and Lyft.
My Take: This story didn’t get much attention in the national media, but it’s an increasingly common situation. What is particularly noteworthy is that Uber de-activated this driver after he spoke out against the company.
Only after he took a screenshot of his de-activation letter and emailed it to the media did Uber relent and re-activate him. It would be interesting to hear Uber’s side of this story because it sure smacks of an attempt to silence drivers through intimidation.
This is the ongoing narrative (as we detailed this week) about the company and it’s not the way to win the trust, allegiance or loyalty of drivers. One wonders how this approach will play itself out in the long term. Will enough drivers recognize what is really happening here and walk away from their relationship with Uber?
Statistics released by Uber itself reveal that within a year, over half of all drivers are no longer active. What they haven’t released is data on how many of these driver were de-activated by the company and how many just decided it wasn’t worth it.
This is not a sustainable situation for a company that depends on drivers and now has a valuation of over $50 billion. The stakes are huge here. If Uber continues to alienate drivers through heavy handed tactics they just may kill the golden egg that has helped create such vast fortunes for investors and key management personnel.
Sum and Substance: Silicon Valley entrepreneurs keep telling us their way of doing business will “change the world.” And in many ways it already has, but it’s changed your world differently than it’s changed theirs. The “sharing” or “gig” economy—think Airbnb, Uber, and Taskrabbit—has made massive fortunes reducing labor to disassembled microtasks; unfortunately, it’s shrunk workers’ rights too. But as our jobs are redefined by labor-brokering platforms, some advocates are trying to redefine labor rights for a digital economy.
Currently, the gig economy trades labor fluidly across online platforms, digital hiring halls where workers typically farm out their short-term gofer services: a ride offered through your private car, fishing someone’s keys out of a gutter, hand-delivering a package across town. For these nominally independent contractors, labor protections under the Fair Labor Standards Act generally don’t apply. Yet these contract jobs are at least as hierarchical as an assembly line; “independence” means you get assigned where to drive but pay your own traffic tickets, you fund your own social insurance, and if you’re sexually harassed or hurt on the job, may be left completely on your own.
That’s why the National Employment Law Project (NELP) has come up with a new policy blueprint, focused on regulating the so-called “on-demand economy” of tech-driven gig employment, to put forward concrete policy models that can help restructure the “1099” contractor relationship to offer workers greater protection. One potential model is the statutory employee framework, under which contractors are for certain regulatory purposes considered workers, generally for tax laws. NELP notes that local and state policymakers can expand this structure to provide “portable” benefits by “directly requir[ing] that companies that use IRS-Form-1099 workers abide by labor standards such as the minimum wage and others, and pay into Social Security and state workers’ compensation and unemployment insurance funds.”
Many gig workers aren’t really thinking about retirement yet; they’re struggling to get paid today. … “We are not earning a living wage, we don’t have job security even though we bought a car to work for them,” Gobena said. The pressure intensified after he spoke out publicly about his labor conditions to the media, he claims. Although Uber has denied any misconduct, Gobena argued, “When drivers speak about their driving experience [and] working conditions for Uber and Lyft, they automatically investigate” drivers to try to penalize them. “I want that to be changed so that drivers like me and many others can have fair treatment.”
My Take: This article puts forth a pro-active approach to dealing with the plight of drivers based on a policy blueprint of the National Employment Law Project (NELP). This is somewhat similar to the flexible “dependent contractor” approach suggested by Harry and others.
In this approach contractors/drivers are considered employees for tax purposes and benefits are considered “portable” by requiring companies to use IRS 1099 forms. In this approach, minimum wage laws apply and the TNC companies are required to pay into Social Security, workers comp and unemployment insurance funds. It’s exciting to see how the law is evolving in this area to respond to the new challenges of the workplace.
Sum and Substance: From taxicab unions and package couriers to politicians and regulators, a growing crowd of people would like to destroy Uber. Add one more name to the list: Uber founder and CEO Travis Kalanick. Somewhere lost in the scrum over whether Uber drivers are employees or contractors, or whether the company conducts proper background checks, is the simple fact that Kalanick wants to eventually replace all Uber drivers with software and computers. Like Google and Tesla, Uber is trying to develop a car that can drive without a human operator. This makes for some odd contradictions. At the Dreamforce conference last week in San Francisco, Kalanick suggested that he started Uber to help drivers as well as riders. “We like to say that we give riders high-fives and give drivers hugs,” Kalanick said. “Taxi drivers have to pay $140 a day to rent a car. For that privilege, they get to be impoverished. Taxi drivers are good people. They are just treated badly.”
So why is Uber trying to put all human drivers — including those who work for taxis and Uber — out of business? “There is an insane amount of public good” that comes with driverless cars, including better safety, Kalanick said. “As a technology company, am I going to be a part of the future or resist it? We don’t want to be the taxi companies before us.” On the surface, Kalanick sounds flaky, even hypocritical. But his plan also reflects a business reality that Silicon Valley knows all too well. Technology is evolving so fast that companies must adapt or risk getting disrupted into extinction.
My Take: Travis Kalanick is facing some pretty nettlesome issues and this one is front and center. Does he risk alienating drivers by talking openly about driverless cars in Uber’s future. Or does he risk getting left behind in the insane rush towards automation? I don’t know how the guy sleeps at night with everything on his plate. Come to think of it … maybe he doesn’t.
Uber’s technology is reportedly ‘hanging by a thread’ — but the company’s CTO is getting it together
Sum and Substance: The technology that powers Uber’s app is “hanging by a thread,” according to a new report from The Information’s Amir Efrati. Uber has grown so rapidly over the past few years that its technical infrastructure has struggled to keep pace, according to The Information. Efrati notes, “Uber is growing so fast that every three months, what was peak traffic becomes its average traffic.” In addition, Uber has two different systems — a Node.js system that dispatches cars and a Python system that’s a backend system for fare calculations and customer emails. The engineers in charge of these systems have been “at odds,” which has created friction, according to The Information.
My Take: This perhaps explains some of the crazy things that seem to be happening with my app. Just got a ride request from 95 minutes away. Last week my driver ratings were above average, but my overall rating for the last 500 trips dropped two points.
Strange inexplicable stuff unless Uber’s tech corps is overburdened. Not sure whether this is good or bad for drivers. On the one hand it shows that Uber is growing demand at a crazy pace. But if they can’t handle that demand, the whole thing could come back to bite them in the face. How often have you as a driver encountered some technological glitch that made your life more difficult?
Sum and Substance: On Uber, it’s not just the passengers giving out ratings. News circulated last year that Uber drivers were quietly rating the people they pick up. But not many people know there’s an easy way to see how well you’ve fared as a passenger. Hidden deep in the Uber app’s settings, there’s a feature that will reveal just that.
• Open the Uber app.
• Click the Profile section located at the top left.
• Select Help.
• Pick Account.
• Choose “I’d like to know my rating.”
• Agree to “know my rating.”
• Check your email for a full report.
My Take: I’ve been getting a lot of passengers who want to know their rating. I usually tell them and many are pretty surprised it’s so low. If you don’t want to tell them personally, this is a good way to let them find out on their own.
Sum and Substance: Since the ride-sharing services waltzed into the Boston transportation market a few years ago, taxi drivers have argued that they have faced decreased business and devalued Medallions (municipal licenses to operate a taxi). The battle was taken off the streets and into the Massachusetts Statehouse earlier this week, when four competing bills were discussed that would put regulations on the for-hire transportation companies. One bill, proposed by Gov. Charlie Baker, would allow the companies to essentially operate as-is in the city, but the state would have an extra step of oversight on background checks, rather than leaving it completely up to the private, third-party service that the companies currently use. Uber has openly voiced its support for this bill. Another bill, proposed by State Rep. Mike Moran and Sen. Linda Dorcena-Forry, calls for tighter background checks that require potential drivers to submit fingerprints. This bill would also put restrictions on surge pricing (the practice of increasing fare prices when driver demand outweighs supply) by requiring the companies to disclose and standardize the formulas used to decide the increased fare.
My Take: This is a thorough article that details the major issues facing Uber in their ongoing war vs Taxi’s in Boston. It’s a story that’s unfolding in cities all across the United States and the world. Slowly but surely taxi’s are fighting back … with mixed success. Amazing how the economics of this battle somehow always find their way into the political arena.
What do you guys think about all of the top stories of the week?
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-John @ RSG