The Achilles Heel of the Gig Economy is that Workers Can’t Make Enough Money

New Orleans   Uber is the canary in the coal mine. After years of listening to the reports that held up Uber as the herald of the future, creating a new business model where an application would substitute for an employer, the accounting is finally coming due. Its drivers were touted as the vanguard of the gig economy, complete with claims that this was what the “new” worker really wanted from employment. Now it turns out Uber may be the canary dying in that coal mine because the Achilles heel of the gig economy is increasingly revealed: it’s not sustainable. No matter what Uber and others want to call them, they depend on workers, and workers are voting with their feet that they can’t make it on temporary work, so they have to keep moving, and that means working for another company. The gig economy doesn’t work when people can’t make a living on Uber and similar gigs.

Uber has lost $4 billion over the past 18 months for lots of reasons, but largely because it can’t make its workforce either happy or stable. They are like a bait-and-switch operation offering incentives, prizes, tips, and extra bonuses, but increasingly hitting the brick wall where their drivers are realizing they still are barely making minimum wages per hour. In fact the Wall Street Journal reported that Uber cooperated with a study done by a New York University professor that,

“found that no matter which directions fares go, drivers invariably take home about the same earnings over time…[because] When there is a fare cut, drivers’ pay per trip falls but riders flood the service, offering more business. A price rise eventually lures more drivers than Uber needs and scares away riders. The changes are short-lived as an equilibrium is reached after about eight weeks, and drivers’ average pay comes out the same.”

This means that Uber, the harbinger of the future, “must lean heavily on pricey incentive payments – cash for completely a certain number of rides a week, say – to bring driver earnings above what typically amounts to around minimum wage.”

Wow! I’ll guarantee you, because I know many once upon a time Uber and Lyft drivers that join on the promise of higher wages, and they leave when they finally realize that paying for gas, their car, insurance, and then looking at their pay, it just doesn’t add up. Uber is stuck on a business model that is based on exploitation of workers, that business model, like most of the vaunted “gig economy” is unsustainable, because workers fooled at first, are not fooled forever when it comes to the empty pay envelope.

Uber and the rest of these companies are not a new model, but an old one. They are labor contractors trying to sweat workers with a new tool, but an old scam. This is a piece rate scheme. Some workers can make it, but most can’t. Worse, all of these companies are pushing off their responsibilities as employers to provide social security, unemployment and even bare bones benefits, but making the workers who are their lifeblood into subcontract labor. In Europe and some US cities, that part of the hustle is also falling apart as Uber is increasingly declared an employer.

Workers are being gigged by this model. The canary is dying in red ink. A business model that depends on exploiting workers is doomed, even if it takes some time to die.

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The Delete Uber Drive

New Orleans   There’s an old saying that “what goes around, comes around,” and that was never truer that the huge hit that the arrogant, bullying, worker exploiting Uber ride sharing service has taken since the company once again tripped over its own greed this last weekend when it showed its true colors once again in the wake of President Trump’s immigrant bashing ban.

I started out calling this one a little wrong. I could tell on social media that there was a “delete Uber” drive that was going viral, but at first I just thought they were simply getting outshone by their competitor, Lyft, which had shrewdly ridden the wave of protest and opposition and garnered publicity worth many times the value of their contribution by dropping a cool million on the ACLU to help in its legal fights to break the ban. They weren’t alone, since ACLU collected $20 million total over the weekend, proving that there are rewards for doing the right thing.

One of my Facebook friends clued me in that the Uber fury was based on their strikebreaking. I had known that the well regarded, 18,000 member New York Taxi Workers Alliance, a quasi-union affiliated with the AFL-CIO, had called a one-hour strike around New York’s JFK Airport to protest the Muslim-ban. Many of its members are immigrants, including a fair number of Muslims, so this was a righteous action for them.

Almost all of us who travel have succumbed to Uber somewhere or another, in my case it was in Mexico City, Christmas, 2015, when it was the only way I could get a ride for my family to the airport to head home at 430 AM in the morning, after I was defeated by the cab company and in desperation. So, we know about the way “surge” pricing works. The price of the fare goes up when demand goes up. Demand goes up during sporting events, parades, rain, snow, and it turns out taxi worker strikes. Halfway during the one-hour strike, Uber turned off its surge so that people could get a ride from JFK during the protests more cheaply. Later when they realized they had also run into a wall of protest, they dissembled with some “alternative facts,” claiming that they had turned off the surge to make it easier for people to get to JFK in order to protest. The real facts were that they left their surge on getting to the airport and turned it off for those leaving the airport. Sounds like strike breaking and boost the ban activity, doesn’t it? Now thousands have surged to delete Uber from their smartphones in protest.

Uber is getting all the trouble it has earned. The Uber CEO Travis Kalanick then was forced to try to explain why he has been all cozied up to Trump since the election, including agreeing to serve on a transportation committee appointed by the White House. He responded that he would “work with anyone” trying to deal with transportation. Anyone is a broad list which includes most of the autocrats and dictators around the world, many of whom have already seemed to close to Uber, since bullies like bullies sometimes in a birds of a feather kind of thing.

Whatever problems Uber is having now couldn’t happened to a more deserving gang of folks. Now, we’ll see how they like a little disruption and a lot of deletion.

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