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Unionize Uber

[ 36 ] March 19, 2017 |

Uber

Great news out of Seattle:

A judge in Washington State has rejected Uber’s attempt to overturn a Seattle ordinance that gives its drivers the right to unionize, potentially opening the door for higher rates and labor costs. According to the Wall Street Journal, the Teamsters labor union intends to begin working to organize drivers soon.

The legal battle over the rule, which originally passed in December of 2015, has been lengthy. Last August, a federal judge dismissed a lawsuit by the U.S. Chamber of Commerce business group seeking the rule’s suspension.

Gee, you wouldn’t want to frame this “potentially opening the door to dignified lives for workers” or anything. Of course, this is from Fortune, magazine of the New Gilded Age. Anyway:

Uber has extensively lobbied its own drivers to oppose unionization. The company says the rule could impinge on drivers’ flexibility, and has previously protested a provision that would give voting rights on the unionization question only to drivers who make at least 52 trips in a three-month period. Those higher-volume drivers are presumed to be more likely to support unionization.

Observers have long argued that Uber’s business model depends on very low pay for drivers. A British government report last year found that Uber drivers often took home substantially less than that country’s hourly living wage. Elsewhere, Uber has battled lawsuits over its classification of drivers as contractors rather than employees.

Even under such conditions, Uber has repeatedly posted huge operating losses. Drivers pushing for higher fares or pay rates, then, are a major threat to the company’s viability.

The entire company is losing money on every ride while also relying on poverty wages and playing with employment law to shield itself and force its low-paid drivers to bear the burden of responsibility on the job. To say the least, this company needs to die. If employment law was to cover these workers and if unions were to represent the drivers, I would have no problem with rideshare services. The problem is not that I need to defend the traditional taxi companies, which are pretty bad in their own right. The problem is that the rideshare companies won’t do such less than crazy things as “consider their workers employees” and “run background checks on the drivers” and “make sure the drivers make at least the minimum wage.” This, on top of Uber’s cozying up with Cheeto Mussolini, makes it one of the New Gilded Age’s most rapacious and awful corporations.

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  • Derelict

    The real tell here is that, despite Uber’s refusals to obey the law, its refusal to pay drivers or follow labor standards, it continuing (successful) efforts to chisel every last penny from both drivers and customers, it’s still losing money.

    Now, admittedly, I’m no financial genius, but when your business model depends on 1.) completely eliminating the driver so that labor costs become essentially zero and 2.) all all of your competition going out of business, perhaps you need to stop by a community college and take an elementary business course or two.

    • DrDick

      Knowing anything about how the world operates is inherently antithetical to the libertarian project.

    • dmsilev

      So in a sense we can think of Uber as a mechanism for transferring money from rich venture capitalists and the Saudi sovereign fund to their customer base (who are paying below-cost rates for their services).

      • malraux

        I guess some innovative city needs to find a way to sell “Its like Uber but for mass transit.” as a way to get rich people to fund their bus system.

        • miwayha

          But who actually uses Uber Pool, though

        • NeonTrotsky

          But that would be socialism!!!11!

    • Ahenobarbus

      perhaps you need to stop by a community college and take an elementary business course or two.

      The people who run Uber are making a fortune. They don’t need your advice about what courses to take.

      • MgM63

        They are making a fortune because investors are incredibly stupid.

        • vic rattlehead

          Greed makes people stupid. Every group of investors seems to think they can cash out before it implodes and leave a later group holding the bag.

          • I think I remember reading that some of Madoff’s later investors were pretty sure that he was running a Ponzi scheme, but timed their investments—or tried to time their investments—to be out with a profit before the crash they were sure would come. I don’t recall whether the story (if it even existed…) broke down that group into the ones who were right, and the ones who were wrong.

      • Brett

        Not Kalanick. He’s probably earning a salary off of running it, but he’s all-in on this in terms of ownership – if Uber goes down, he likely goes with it and spends the next 2 years in Lawsuit Hell from all the investors.

    • CP

      It always amazes me how many of our ruling businessmen are simply terrible at business, until I remember that as far as they’re concerned, they win out no matter what and even if the business goes balls-up (say it with me: Golden Parachute!), so why care? Or what Aheno said.

      It makes it much easier to understand their incessant concerns that if workers have it too good, if they’re too comfortable, they won’t feel motivated to work properly: after all, that’s exactly what happened to them. It’s not what would happen, of course (even in a cushy Scandinavian safety net, middle and working class employees still have to do their work or face consequences). But it’s the world that they know, so they’re terrified that the rest of us might get in on the action. I mean, what would happen to them if the rest of society were freed to be just as terrible at its jobs as they are at theirs?

    • Brett

      The initial investors have likely all cashed out and sold their stake in the pre-IPO business to other ones, so aside from Kalanick himself (and whatever employees have ownership stakes that will go into play if Uber could go public) they’ve made money.

      I suspect what’s happening is a combination of Greater Fool and diversified portfolios. The investors in Uber right now are funneling money into the company because capital is cheap and they’re hoping they’ll find some other sucker to buy their stake. But if even if no one does, then so what? They take a risk, they lose some money, but they’re not going to be ruined by the loss (or at least most of them won’t – Kalanick would be ruined, and whatever investors are foolishly underrating the risk involved in investing in Uber and over-investing will be as well).

      I want it to finally implode already. Uber might disappear entirely, or it might shrink drastically down to a much smaller company working in a couple of big markets. I just hope it doesn’t take down some poor pension fund or three in the failing process.

  • DrDick

    More proof of the brilliance of libertarians!

  • MgM63

    How a company that posted a three billion dollar loss on revenues of 5.5 billion dollars in 2016 can have a market value of 68 billion dollars is incomprehensible to me. Do none of the investors who have driven the stock to such absurd heights remember the dotcom bubble?

    It is chilling to realize how much of the western economy consists of nothing more than the never-ending creation and promotion of financial chimaeras that have no intrinsic value. Wall Street is the biggest con in human history.

    • wjts

      Those tulip bulbs you like are going to come back in style.

    • Brett

      That’s what happens when you have incredibly cheap capital and high inequality. All kinds of stupid garbage gets investment funding.

  • JdLaverty

    Ubers real dream is to replace all those pesky humans with automated cars. An invention that I would honestly like to see put out on a fucking skip. I don’t consider myself a luddite, but once you start replacing humans in their entirety you’re going down a dangerous road. An Uber force full of automated cars doesn’t benefit anyone financially except for Uber (I’d be shocked if they lowered rates)

  • MacK

    I travel a lot – and as a result I have been obliged to use Uber from time to time. It’s interesting to see where, at least initially Uber has made inroads into the market and where it has not, and the factors that have driven that market penetration.

    New York
    New York has long had a medallion system – the taxi driver is largely unskilled, but must drive a vehicle – usually a POS – with a medallion, prices for which were over $1 million, but have failed dramatically as UBER and Lyft cut into the business – they are now priced at under $¼ million and still falling. The way the medallion system worked in practice was that investors bought up the medallions and through garages rented the yellow cabs to the drivers

    Here is a history from the NYPost http://nypost.com/2016/07/05/city-lets-uber-and-lyft-cannibalize-the-american-dream/

    Drivers rent the taxi for around $130 per day, that is to say they rent the medallion – they still have to put gas in the cab. Even when fares went up – taxi drivers take home did not.

    So when Uber came along, it actually was presenting the New York cabbies with what looked like a great deal – they could easily buy a town-car for a few days of what the wreck they were driving cost them, they kept ⅔ or more of the fare. Initially it was a great deal. The same thing applied in other cities with medallion systems, bit not so much in cities without.

    London
    London presented two sets of problems. First, you could spend 2-4 years getting the ‘knowledge’ that is to say qualifying as a London taxi driver. Then you had to buy a crude, badly made, fuel inefficient vehicle built from the remainders of obsolete parts bins from other manufacturers and pay much more than say an E-Class Mercedes for it. Of you could drive for UBER, keep ⅔ and remember, the fares could not be lower than Black-cabs for the most part, because you had a hackney license. What was not to like – it was a decent deal.

    Germany, other European Cities, other UK Cities
    To be a taxi driver you needed mostly a clean license, a quality vehicle (E-Class Mercedes are popular) and some basic testing. In return you got decent fares and in many instances were telephone dispatched by a local driver cooperative. Why would you give Uber ⅓ of your revenue to give you what you had anyway through the CoOp? Result, very few or no Uber cabs.

    Washington DC
    A large chunk of the local taxi industry was controlled by one family that is to say though there seemed to be several companies – Diamond Cab, etc. they had a single owner. Independent cabs were often pretty dodgy – I’d been in one driven by a drunk, another with fleas hopping off the seats, my wife had encountered some scary drivers whose attitude towards women.

    But in DC most people I know had a solution, when they got in a decent clean cab they took the driver’s card, and booked them or called them. There is a very nice older lady who we rely on completely for airports, etc. Other people keep several taxi drivers numbers – and it works fine.

    • MacK

      To put it another way, in New York, if you had the choice now of buying a taxi medallion for say $¼ million or even $150k plus say $40k for a vehicle every 3-5 years, or letting Uber take ⅓ or ¼ – seems the medallion is beginning to look like a much better deal. But at $1.2 or $1.3 million, it was a crazy deal.

      • Brett

        It was a big mistake to ever divorce medallion ownership from actually operating the vehicles – that should never have been allowed. Before Uber came along, it was a good way for investors and companies to snap up the medallions and then exploit drivers (hence the high valuations).

        From what I’ve read, the Paris Taxi Drivers had a pretty rough response to Uber showing up, but that’s because their system is built around taxi owners going into heavy and increasing debt to buy licenses from previous owners, and then selling them for even more money to the next generation of owners. It’s why the number of cabs in the system grew little from the immediate post-World War 2 numbers, and why they’ve reacted violently to any suggestion of increasing the number of taxis or alternative services.

    • Tyro

      The unreliability of DC dispatchers was so ridiculous that, combined with DC’s dodgy public transit and run-down local cabs, made Uber a natural fit for DC.

      Uber never would have been developed in NYC, but now that it exists, it’s perfectly fine as a concept. But the thing is that there’s no reason it has to be Uber– Uber offers no competitive advantage over Lyft, Juno, Gett, etc.

    • Bloix

      “In DC most people I know had a solution, when they got in a decent clean cab they took the driver’s card, and booked them or called them – and it works fine.”

      Yes, for locals. DC was unusual in that its taxi business was controlled not by investors but by drivers. And for decades DC was known for drivers who cheated tourists. The well-organized drivers had the political power to prevent the city from dumping the extremely complicated fare zone system, which encouraged drivers to cheat obvious out-of-towners while dealing fairly with locals, who had mastered the system. It had the additional benefit of making it easy for drivers to cheat on their taxes, because without meters there was no record of their income.
      Finally, Mayor Adrian Fenty took over the entirely captured taxi commission and pushed through the change to meters. (One of the reasons he lost his re-election bid was the opposition of the well-organized hack association.)

  • Bloix

    “The problem is that the rideshare companies won’t do such less than crazy things as “consider their workers employees” and “run background checks on the drivers” and “make sure the drivers make at least the minimum wage.””

    Traditional cab companies don’t consider their workers as employees and don’t make sure their drivers make at least the minimum wage. Drivers are considered independent contractors, and they are explicitly exempted from the protections of the FLSA (including minimum wage and overtime rules.) Next time you’re in a cab, ask the driver how many hours he or she works a day. Twelve is pretty much the rule.

    Where I live – Montgomery County, MD – one family-owned company, Barwood, has captured the regulatory structure to such an extent that it effectively has a government-sponsored monopoly. For decades it has extorted both drivers and passengers.

    http://www.bethesdamagazine.com/Bethesda-Beat/2015/Treatment-of-Drivers-Takes-Center-Stage-in-Latest-Taxi-Regulation-Debate/

    And the New York medallion system is a way of taking something that is free as air and turning it into a government-guaranteed income stream for investors – assuring high prices and exploited drivers.

    If anything has to die, it’s the regulation of the taxi business everywhere from small towns to big cities that does nothing but profit entrenched local business interests.

    • Tyro

      DC has no “medallion limit.” The result ends up being a race-to-the-bottom in terms of cab quality.

      I think small towns are destined to rely on part-timers using dispatch apps like Uber or Lyft, but cities have an interest in maintaining some level of sustainability for drivers and their cars.

      • Brett

        Don’t they enforce whatever requirements they have for driving a cab?

        • Tyro

          Those requirements are rather loose. It was well-known that DC cabs were purchased from NYC out of their pool of cabs that no longer passed NYC’s requirements.

  • Captain Oblivious

    I have no choice but to use Uber to get to my seemingly daily medical appointments. If I call Uber, they show up on time, every time. If I call a cab, they usually never show up.

    What strikes me about Uber, at least here (Pasco County, FL) is how little they charge. I would pay triple. I usually give the driver a big tip.

    There’s no excuse for this company not making a lot more money and treating their employees better. They have the right idea, but they don’t seem to understand pricing strategies very well, especially in areas like this where they have a virtual monopoly on reliable service.

    • malraux

      Based on their numbers, I think that triple the price is close to what it would actually cost to make uber viable.

      • Brett

        If Uber were actually a platform and not simply a car service company pretending to be one to save money, that’s what would happen. They might offer a “suggested price”, but the actual fare would be whatever the driver and passengers agree upon.

  • mikeSchilling

    The entire company is losing money on every ride

    Please stop saying this. It’s somewhere between extremely misleading and false. Uber takes a piece of every fare at a marginal cost of basically zero. That is, it makesmoney on every ride, but the total it makes doesn’t cover its expenses.

    • NeonTrotsky

      What on earth are their expenses exactly, if they aren’t buying or servicing vehicles or dumping a lot into labor costs?

      • Tyro

        Software developers, analytics/statisticians to improve service, set fares, and make business decisions, and sales/advertising/recruitment of new drivers and customers.

        The problem Uber faces is that none of its services are especially better than other rival dispatch services. I’ve made a habit of using them all, and the only thing Uber has is brand recognition. Kalanick is pissing away the only thing Uber has of value: the quality of its brand.

    • Brett

      If their expenses are still so vast that the net take on their rides is considerably lower, then it’s still implicitly a subsidy per ride that they’re giving out. They’re not setting the ride price-point where they can make even, never mind the profits they need to pay back their investors.

  • thispaceforsale

    Uber will always have the incredibly poorly time cover feature in Forbes that journalists can point to when the breathless articles detailing how it all went wrong start coming out.

    • Brett

      Or the “Sharing Economy” fanboys who were talking about how this was the Next Economic Revolution, wherein we’d share and rent everything in lieu of ownership. I notice those folks are a lot quieter now, what with most of the “Uber for X” efforts failing to get off the ground. Turns out most people like to own stuff, even if they barely use it.