Friday, March 16, 2018

Uber, Lyft, The Gig Economy, The Sharing Economy, and Work at Less Than Minimum Wage – I

It’s been about two years since I started writing about what were then two newly-named forms of work.  Since “the gig economy” started turning up on headlines, it, and its twin “the sharing economy,” have progressed, largely in ways my April 2016 post projected.  

I won’t recap what has happened with these new or not-really-new ways of earning money before my last, September 15th, pertinent post.  I’ll do some of that next week.  For now, I will get you caught up on developments since then.

That same day, Mike Isaac and Katie Benner told us, in The New York Times, that “Funding Talks at Uber and Lyft Complicate Ride-Hailing Alliances.”  They started by saying that “the only thing changing faster than who is winning the race in the cutthroat world of ride hailing are the shifting of behind-the-scenes allegiances between those companies and investors.”  Defensible, but perhaps nobody is winning.  Look for Lyft to eventually be absorbed by a driverless-car consortium and for Uber to collapse under the weight of its business practices.

Those who doubt the last half of the previous sentence should look at October 11th’s Mashable “Uber is under fire in *five* criminal investigations.”  Less than five months after that company’s similar spring, reporter Kerry Flynn related that “authorities are looking at whether Uber violated price transparency laws and determining how the company may have stolen documents from Alphabet’s self-driving technology division,” along with the Greyball authority-avoiding technique, “its toxic workplace culture and other shady practices” including using software to illicitly vary fares, that Uber’s Chief Legal Officer was on the way out, and that, to no surprise, on the story “Uber declined to comment.” 

An issue connected with ridesharing in general took the spotlight in “Is Uber Helping or Hurting Mass Transit?” (Emily Badger, The New York Times, October 16th).  That is a good question with the overall answer very much unknown, as the service, in different instances, replaces walking, legal taxis, the subway, people’s own cars, getting rides from friends or relatives, or not going at all.  In small towns and rural areas the mix is different, so it is hard to generalize.  Although this issue is mostly about helping people choose whether to be positive about the likes of Uber and Lyft, it is still worthy of more research.

Brooks Rainwater and Nicole DuPuis’s “Do cities still want a sharing economy? (TechCrunch, November 9th) suggested we are at a crossroads with not only Uber and Lyft but with AirBnB underregulated hotel services as well.  The former have achieved “an outright ban in London,” easy to understand with the level of training and regulation of taxis and their drivers there, but have found friendlier places elsewhere.  The authors found that cities were remarkably polarized on the three companies, with 51% claiming “good” relationships with Uber, Lyft, and AirBnB and 33% calling them “very poor,” leaving only one-sixth in the middle.  From municipal standpoints, sharing cars was more favorable than sharing living quarters, but, unless it was implicit in that 33%, the article did not mention the possibility of regulating these providers like the hoteliers and taxi services they are. 

In “Uber’s Year of Backfires” (The New York Times, November 29th), Robert Cyran told us that “Uber’s year of efficiency is backfiring,” perhaps appropriate for a company with net revenue, or fares minus payments to drivers, growing 70 percent per year to $2 billion in the third quarter, but achieving a corresponding net loss of $1.5 billion.  The previous two months, per Cyran, revealed two more worms, as “it emerged this month that Uber had paid the perpetrators of a data hacking $100,000 to keep the breach secret,” and, in its “courtroom battle” with Alphabet’s Waymo, “the judge said he no longer trusted Uber’s lawyers in the case.”

That brings us to this month’s news about a MIT study, flawed but revelatory to doubters, showing that the median net pretax earnings of Uber and Lyft drivers were $3.37 per hour, with 74% making less than their areas’ minimum wages and 30% actually, after vehicle expenses, losing money.  Per James Doubek in “Researcher Says ‘Criticism Is Valid,’ Will Revise Study Finding Low Uber And Lyft Pay” (, March 7th), the methodology behind that result was quickly challenged by Uber, and lead author Stephen Zoepf agreed, giving two sets of tentative revisions, one arriving at $8.55, 54%, and 8%, with the other concluding $10,00, 41%, and 4%.  It will be months before Zoepf issues a formal revision.  Yet all we need to do, per Noah Smith in Bloomberg’s March 8th “Uber Better Not Be the Future of Work,” is “to use Uber’s own data,” which claims a gross hourly $21.07, becoming $15.80 after the company’s 25% service fee and less after car expenses, which authors of studies have (under)estimated at 25 cents to 32 cents per mile, or an average $5.00 to $6.40 per hour.  Accordingly, typical hourly earnings seem to be no more than $10, which does not as Smith put it “impoverish workers” (they may opt out and avoid that poverty), but, with no benefits, means driving for Uber or Lyft is not a good job.  Indeed, “a gig economy that relies on small independent contractors consistently making bad business decisions isn’t the future of work” – not to mention the lack of regulation, which will not last forever. 

So where do we, as customers, investors, workers, and company managers, now stand with the gig and sharing economies?  That will be the subject of next week’s post.

Friday, March 9, 2018

February: A Tremendous Employment Month, With Latent Work Demand Shrinking: American Job Shortage Number (AJSN) Down to 16.8 Million

This morning, we expected a good set of Bureau of Labor Statistics employment data, but not this good. 

The publicized projection for net nonfarm payroll employment growth was 236,000, and it turned out even better – 313,000.  That, though, was only in a three-way tie for the best number.  It had to share that with each of the two measures of how common it is for Americans to actually be working.  The labor force participation rate jumped 0.3%, with 0.1% being a solid gain, to 63.0%, and the employment-population ratio did the same to reach 60.4%.  Both of these are now nowhere near last year’s lows, and are clear indications that an increasing number of people are not only avoiding official unemployment, which stayed at 4.1% adjusted and fell 0.1% to 4.4% unadjusted, but finding jobs.

The other results were mixed.  There is still an adjusted number of 6.7 million unemployed.  The count of people out for 27 weeks or longer also held, at 1.4 million.  The tally of those working part-time for economic reasons, or continuing to work at shorter-hours propositions while seeking full-time ones, however, worsened 200,000 to 5.2 million.  After last month’s 9-cent gain, which was adjusted to 7 cents, average nonfarm payroll hourly earnings were up only 4 cents, less than inflation, and are now at $26.75.   

The American Job Shortage Number or AJSN, which shows in one figure how many more positions could quickly be filled if all knew that finding work was as easy as finding a grocery store, shrank 344,000, a lot since it is not seasonally adjusted and January and February typically have similar levels of employment, as follows:

Its decrease from January was unusually broad-based, with 121,600 coming from those who wanted to work but have not looked for it for 12 months, 88,200 from lower official unemployment, 70,200 from those claiming discouraged status, and a rare fall, of 54,550, from those denying any interest in working.  The share of the AJSN from those technically jobless is now less than 38%, another post-Great-Recession low.  Its year-over-year change continued to be strongly favorable, with reductions in official unemployment, did not search, and the count of those non-civilian, institutionalized, and off the grid propelling the AJSN to a 1.07 million improvement since February 2017.  

I loved this month.  That 313,000 will get the headlines, but the bolstering of the employment-population ratio and labor force participation rate may be even more valuable.  The across-the-board shrinkage of those marginally attached, as in the statuses just mentioned, gives the job market overall strength behind its marquee numbers.  The turtle took a robust step forward. 

Friday, March 2, 2018

43 Years of College as the Presumed Choice – Its Meaning, Changes, and Value – II

Last week we showed that the percent attending postsecondary school has grown 50-fold since the Civil War.  We also saw the views of two unsure if that was justified, and what things around employment and university attendance have stayed the same since Caroline Bird wrote 1975’s The Case Against College.  Now we look at four things which haven’t evolved much, along with six overall points to understand.

The first much-the-same area is that, although preparation for specific careers now broadly dominates over personal enrichment, there remains debate over the usefulness of nonvocational course material.  Both sides have merit, with things resonating superbly with enough people to justify their teaching offset by the small likelihood of their appreciation by those with marginal ability.

Second, the smartest students and those most open to knowledge in general still benefit immensely, personally, from the liberal arts.  Although that is a minority position and has been ever since those in roughly the bottom half of high school graduates started routinely going to college, those running institutions specializing in letters and pure science should not be discouraged.

Third, college still serves valid purposes for students beyond academics.  It is a time for them to gain social skills, learn at least partially how to live away from their parents, and experience a relatively protected setting for mistakes they would probably otherwise perpetrate later.  While there are problems with excessive drinking among undergraduates, for example, they are smaller and less consequential than they would be if around cars, families, and career jobs. 

Fourth, it also continues to fill additional needs for our society.  Bird called colleges “aging vats” and warehouses for people frankly unneeded; with the jobs crisis just getting underway in 1975 those functions had only started, but are now crucial and entrenched.  Globalization, automation, and efficiency have eliminated most job-market demand for twenty-year-olds, and with even less to do than the average 27 weekly hours in class and studying, many would get in more, and more serious, trouble. 

So what can we conclude, and what should we do? 

Number one, right or wrong, college is probably more sacrosanct than ever.  In scary career times – and if you think our low unemployment rates are putting people at ease, try to confirm that with anyone around age 18 or their parents – the average wage gap between those with and without bachelor’s degrees will overpower any other perception, or reality.

Number two, as Bryan Caplan of this year’s The Case Against Education showed, this statistical pay difference is due less to the merits of college than to its attendance in the first place by the smartest, most capable, and most motivated people.  The advantage they get is not from universities themselves, but from their ability to “signal,” as he put it, their worthiness for the best opportunities by graduating.

Number three, those in the top half of students on merit still cannot afford to skip it.  For every Bill Gates, who dropped out of Harvard and did rather well thereafter, there are not hundreds but thousands who cut off their attendance and did not professionally succeed.  The signaling above may be superficial, but it has no viable widespread alternative.

Number four, the equation changes for those who, in the probably paraphrased words of Mike Royko, should be slicing salami instead of reading spreadsheets.  I am not aware of any completed analysis, but potential university students of the most modest levels, with their high nongraduation rate, should not accrue large amounts of debt in the attempt.  If they have the inclination and aptitude, skilled construction-related trades, which still have excellent prospects, would be better choices. 

Number five, from all standpoints other than the often-unaffordable luxury of an improved social life, starting with two years at a community college and, if successful, transferring to a four-year school is preferable for all but the smartest and richest.      
Number six, education for credentials, as Bird implied and on which Caplan wrote extensively, still helps the individuals getting them more than our nation as a whole.  As I showed in Work’s New Age, more schooling does not mean more work opportunities, but only changes who get them; as Caplan ended “The World Might Be Better Off Without College for Everyone” (The Atlantic, January/February 2018), “Trying to spread success with education spreads education but not success.”  These are the best attitudes.