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 15^th, 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 11^th’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 16^th).  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 9^th) 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 29^th), 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” (npr.org, March 7^th), 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 8^th “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.