Uber and Lyft Beyond Austin, and Beyond Human-Controlled Cars

On May 8^th, unlicensed taxi companies Lyft and Uber were firmly stopped from operating unregulated in this large, politically moderate Texas city.  Since then they haven’t been far from the news, which for these companies, since they reached a million de facto employees last year, automatically constitutes important information about jobs.  What has come out over the past four months?

Only three days after the Austin election result, a Los Angeles Times editorial took one of my long-ago posted points about Uber and Lyft, that while drivers may gross respectable amounts they do not net nearly as much as true cabdrivers, and used it as the basis for concern about exploitation, with author David Horsey saying that getting rides from them would cause him to “feel morally compromised.”  I’m not sure that logically follows, but it’s a good thing for a major newspaper to reveal how little such work can actually pay; Horsey described a freelance writer trying Uber driving spending eleven hours taking in $118 before car expenses and “rideshare insurance.” 

On May 24^th, we got news of similar Israeli company Gett receiving a $300 million investment from Volkswagen.  That is one of several partnerships which have recently formed on driverless vehicles.  The day after that, Jefferson Parish, just west of New Orleans, delayed voting on an ordinance to regulate Uber and Lyft – the same thing happened there the next month, leaving, per Baton Rouge’s Advocate, the companies’ operations in “legal limbo.”  At the same time, both firms threatened to stop serving the Chicago area if their drivers were subject to the same rules as those from taxi companies.  Such a measure there passed on June 17^th, but Uber and Lyft have not left.

Next, from around the same time, a backed-up prediction, now seeming obsolete, “Why Uber and Lyft Will Have a Short Lifespan,” by Don Peppers in Inc.  That’s exactly what I thought, before those companies decided to join the looming self-driving trend instead of trying to lick it.  Yet he’s absolutely correct that they won’t have the corner on advantages such as easy hailing and computer dispatching forever. 

June 3^rd brought a Wall Street Journal piece about Uber and Lyft piloting grocery delivery in Phoenix and Denver.  Although that’s hardly a new or innovative business idea, it may work, if several conditions are met.  Customers must be willing to pay the $7 to $10 fee the article mentions.  The companies cannot afford a dramatic initial promotion, such as waiving that charge, without being buried.  They will need supermarkets to pick and prepare the order, since they can’t do that for that amount.  Even then, if the effort is successful, other firms, including the store chains themselves, will be waiting to pounce.

A further consequence of the Austin vote, and a huge vulnerability in Uber and Lyft’s business model, hit the news June 10^th.  All those drivers there, “thousands” of them, were correctly ruled employees instead of independent contractors, and so, when the two companies abruptly stopped doing business there, they ran afoul of a federal rule requiring firms with 100 or more on the payroll to give 60 days’ notice before large layoffs.  The former employees have filed two lawsuits, one against each, which rate to win and provide plenty of incentive for not skirting ethical business practice as well as the law.  The same effect has already come from another Uber setback, a San Francisco judgment penalizing them for firing drivers after obtaining unauthorized background reports.  Also, USA Today reported on August 18^th that a rather larger lawsuit in the same city, brought by drivers in 2013 claiming that the company used their classification as contractors to deny them expense compensation, was still in litigation. 

That same firm has now lost another eastern European country, with a July 13^th announcement that they were discontinuing business in Hungary, due to new laws they considered threatening to drivers’ safety.  On that continent it is already out of Bulgaria and is endangered in France, where they drew a June 800,000-euro fine for “operating an illegal car service.”

That brings us to veteran employment writer Rana Foroohar’s August 9^th Financial Times piece, “Uberisation and the dangers of neo-serfdom.”  She pointed out that a stunning and depressing 35% of American workers now function as “freelancers, independent contractors or for multiple employers,” and described a growing pattern similar to Skid Row day-labor pools, “in which the lord shows up each day and says ‘I’ll take you, and you, and you.’”  As I mentioned in April, the vast majority of such working is an economic inferior good to usual careers, paying less than full-time minimum wage positions after considering irregularity and extra expenses.  However, the problem is not with these gig-economy arrangements, but with the permanent jobs crisis and the 18 million positions the United States is now short.

So where are Uber and Lyft going?  It is clear that their future is not in human-operated ridesharing, but in driverless vehicles.  They are as well positioned as any to put self-driving cars on normal roads – in fact, Uber’s Pittsburgh driverless-taxi trial started this week.  The chances are good that we will still be talking about Ubering from one place to another by mid-century.  However, that will not mean quite the same thing as now.  Between their emerging direction and their incessant, and usually justified, legal problems, they will not long have as many employees.  We will once again have more resources and fewer jobs.  For better or worse, that is what is still happening with, and to, America.