Uber and Lyft don't cover their cost of capital and rely on desperate workers

Yes, but these days it’s hard to find a lab that will hire you without a certification from a for-profit institution. I was a phlebotomist during my freshman year of college in the early 1980s (was a file clerk in hs) and just trained to draw blood for pre ops (never learned ABGs). But I’ve noticed that every phlebotomist job I have looked at requires certification from elsewhere. How do you get one? Generally, through a vocational college.

eta: sorry for the typo

That’s good to know but what level of education were you referring to?

I was thinking of my Midwestern home town specifically; which used to have entire high schools dedicated to vocational education in addition to vocational courses at traditional schools.

Then came the budget cuts; waves and waves of them over the last 30 years… and now, my home town is starting to look more like a ghost town.

Not due solely to those aforementioned budget cuts, obviously; but it’s yet another major contributing factor, IMO.

2 Likes

High school.

3 Likes

I’m glad to know there’s been an uptick for Cali, but sadly I cannot say the same for my home state.

Well, I can’t speak for every district. However, the district I worked for was very frugal in lots of ways and they avoided the major teacher layoffs that most other districts faced after the housing crisis. The state mandated that schools, hospitals, public buildings be structurally improved, which coincided with federal ADA compliance (and an absolute fear of any possible litigation). With their high reserves and bonds, they were able to make some major improvements. I’m sure they would have preferred to not put in a/c, but the teachers were gonna walk, as average ambient room temps were north of 97° for six weeks in fall and six weeks in spring.

They’re only paying them if they’re driving around aimlessly all day!

I wish I didn’t have to “like” your comment. Because it’s the most horrible vision of the future, and I fear you’re absolutely right about it.

1 Like

Externalizing costs is the key.

This is not economically literate. First: it confuses the inputs of capital and labor. More fundamentally, it confuses what Uber and Lyft offer, which is a market and service for participants to exchange individual rides in cars (albeit one that takes place under defined rules that set compensation, among other things, which doesn’t distinguish it from any other market). Someone running a market for other people to exchange things has no more capital costs than it takes to operate that market, same way your supermarket doesn’t actually have to own milk cows to stock the dairy section.

I’m not sure that this is inherently different from many other models. Back in the day, Shell and Amoco gas stations (for example) were independently owned. Owners provided the cash to buy the building, the pumps, the tanks and the land. You were required to buy the company’s gas to use the company name. Franchises are the same. If you own a Subway sandwich shop you pay for the shop and the inputs. In return, you pay a fee to corporate for the advertising and the “cache’”.

There is a somewhat new twist, though with the Gig Economy. The gig model treats workers like any other input like pig iron or electricity.

If we were talking about ebay, comparing the dynamic in the article to a market would be apt. However, we’re not.

I can put a single sock on ebay with a reserve price of $1000 (well, I assume so anyway … I’ve seen similar absurdities) and ebay will let me have a go at it. And they don’t mandate I buy a recent set of $500 knitting needles to put socks for sale on there.

If I drive on Uber or Lyft, I can’t pick my rates. I just have the choice of not making money if I don’t like whatever the going rate is at a given moment.

Uber is a market in the same way that FedEx is a market for contractors who deliver packages. Which is to say: no, they’re not. The U.S. government has even ruled several times that for certain purposes, FedEx can be considered the employer of their “independent” contractors.

The barrier for entry is lower but it’s shades of the same thing.

5 Likes

I like Uber, but not really for the cost. I’d be fine if you could summon regular cabs with a smartphone app. But seemingly, you can’t.

At least one of the taxi companies in my area lets you hail by way of an app. And I do not live in a particularly trendy place. Slightly trendy. Hopefully this spreads a bit so folks will have options.

You can set your reserve price on eBay that way because they say you can. If eBay decided not to let you, you’d be SOL. As I pointed out, every market has rules, whether more or less stringent.

You don’t have to participate in Uber or Lyft. The alternatives would include things like finding your own riders on Craigslist, jumping over the government barriers to entry involved with operating a taxi, etc. The theory of Uber/Lyft is that they’ve done that work for you.

The FedEx case you’re referring to turns on the distinction between “employee” and “independent contractor” under relevant employment law, such as the federal Fair Labor Standards Act (at issue in the FedEx case). There are six prongs under that law that are used to decide which category a worker falls into:

  1. The extent to which the work performed is an integral part of the employer’s
    business;
  2. Whether the worker’s managerial skills affect his or her opportunity for profit and
    loss;
  3. The relative investments in facilities and equipment by the worker and the
    employer;
  4. The worker’s skill and initiative;
  5. The permanency of the worker’s relationship with the employer; and
  6. The nature and degree of control by the employer.

Compared to FedEx, it’s safe to say that the balance of factors 3, 5, and 6 would weigh more heavily in favor of Uber or Lyft; and so might arguably 2 and 4.

Sure but ebay wouldn’t be a market if its rules (including pricing) were equivalent to uber’s.

That’s like saying that FedEx contractors are never for any purposes employees because the FedEx drivers could post classified ads in the local paper offering their services as package deliverers instead of being FedEx drivers. You might pick up a little side cash but not enough to keep yourself busy. FedEx drivers could at least try to land a spot with DHL, UPS, or some local courier service based on their work with UPS.

On point 1, uber has no business whatsoever without drivers. In this sense, they are even more reliant on their drivers than FedEx is on their contract drivers because uber literally has no business without contract drivers.

2‍. There’s no meaningful managerial impact that an uber driver can have on their work with uber. They can choose not to drive. They can improve their rating from average to above average by providing snacks (to quote one example I’ve heard of). It doesn’t change their rate and mostly serves to keep them from getting booted from uber.

3‍. Possibly.

4‍. The drivers’ skill requirement is the same skill every other licensed driver on the road has and the initiative is, again, the ability to decide not to make money by not driving.

5‍. Maybe.

6‍. There are stringent requirements for uber drivers that go well beyond what would be acceptable in most contractor situations.

4 Likes

I don’t know why that’s assumed. Uber seems to be doing just fine.

Not sure why you’re still referencing FedEx by comparison. There was already a settlement that determined that FedEx drivers were to be treated as employees, as you pointed out. Obviously the infrastructure involved in running FedEx: it’s network of retail and drop sites, its hubs, the fact that it operates the biggest freight airline in the world (!!!) make its business a pretty poor comparison to Uber. (And all of which bear on prong (3) of the FLSA test, particularly accounting for their value added to the overall transaction.) One could probably write a decent economics or law school paper doing a Theory of the Firm analysis, along Coasian lines, analyzing this issue, to see the degree to which employee vs. independent contractor decisions are affected by things like infrastructure and economies of scale.

Again, we’re back to a definitional problem of what exactly Uber’s business is: whether it’s connecting drivers to riders (a market, as I asserted) versus operating a taxi fleet. “Essential” does not mean “integral.” (Suppliers and customers are essential to a business, that doesn’t make them employees.)

I’ve never driven for Uber, though I’ve ridden it a few times. I would include things like managing the car and the ride experience, or being a better (faster or safer) driver as managerial skills within the driver’s control. Obviously the amount of time an Uber driver wants to devote to being available to drive, and to be in a location in which they’re going to pick up rides, affects their opportunities.

By definition. The driver purchased the car, pays for the fuel, insurance, maintenance, etc. Relevant to the transaction, that’s a high investment. Uber’s operating costs per ride are likely relatively minimal. (How much power/programming/admin do servers need relative to the volume of business they handle?)

See (2) above.

Again, by definition: permanency is determined by whether a driver chooses to open the app and make themselves available or not. They can stop working and go do something else anytime. There’s no assumption of an ongoing employment relationship. Can’t do that at a regular employee job.

Again, not privy to what those requirements are, never having been an Uber driver, but certainly as compared to most traditional employment arrangements, the nature and degree of control are minimal for Uber drivers. They don’t work set hours, they aren’t restricted to traditional meal and rest breaks, their “manager” is an app on their phone.

I’ll concede there’s a lot of abuse of independent contractor status by a lot of businesses, as the FedEx settlement showed, but Uber and Lyft seem to be almost textbook cases of an IC situation as compared to an employment situation, if you’re using the FLSA standard.

Pubs in the UK used to work quite like this and had for centuries. The landlord would lease the pub from a company at below market rent, but be tied into buying beer from that company at above market rate. Until the late 1980s, almost all these companies were breweries, which owned most pubs. The 1989 Beer Orders pressured large national breweries into giving up their pubs, so by the 2000s most pubs were owned by “pubcos” which still sold beer to the landlords under a tie arrangement but didn’t brew it.

If you saw a pub with “free house” on the sign, this meant there was no tie and the pub could buy beer from whoever it liked on the open market.

In 2014 the beer tie was abolished, and all pubs can now buy beer from any supplier.

2 Likes

They bring the customers through their marketing and platform, the driver brings the car and labor. In theory it’s mutually beneficial, and provides people with a means of supplementing other income, or under certain conditions making a living. I’d never choose it, but for some it’s a step up.

One could argue that Uber’s contribution to the mix is over-valued, now that they have crashed a lot of the regulatory barriers, they are very vulnerable to competition from someone who can add more value (like this Chariot service), or deliver a similar platform to drivers for less cost.

1 Like

Many smartphones have an app that lets you use it as a phone - you might have some luck getting a cab with that.