May 2016 -

Uber gigging, Austin style

Dr Sunshine is sad to hear that the Uber gigs of drivers in Austin have ended. Most of them enjoyed it, and it brought some extra cash as a bonus, which the drivers will surely miss. They need it, too. Most of them invested in vehicles that they would not have bought were it not for the opportunities those cars made possible with Uber.

Uber lost a dispute with the Austin City Council. They took their case to the people, but the people rejected them, too, despite a vigorous and expensive campaign in favor of Proposition 1 in the spring of 2016. In Uber's defense, the convenience of ordering, tracking, and billing services brings a lot of value to their customers. Society as a whole may benefit in some ways, too. For example, a plausible but hardly air tight argument can be made that Uber reduces the number of intoxicated drivers on the roads. Regardless of such benefits, the gig economy is of great importance to people who want that kind of work.

However, Dr Sunshine does not think it fair to blame the demise of Uber in Austin entirely on the City Council. City governments have been regulating public transportation businesses since forever, and regulation of that kind also has benefits. Instead of cooperating with standard regulations, or perhaps arguing that such regulations do not benefit society and should therefore be curtailed uniformly across the spectrum of public transportation offerings, Uber argued that it was entitled to some sort of exemption, the basis for which is beyond the understanding of poor Dr Sunshine.

This was not the only exemption from government regulation that Uber asserted as part of its business model. Uber also believes its workers are independent contractors who are not entitled to benefits and protections that various laws grant to employees. While Uber has not yet lost that battle, they have come out on the short end of a major skirmish, to the tune of about $100M, which they can no doubt well afford and are probably happy to pay, for now, even though they must surely recognize that the war isn't over.

Uber set up its business in such a way as to avoid, among other things, investment in transportation equipment. Drivers use their own cars and foot the entire capital outlay and ongoing maintenance expenses from their own resources. The Uber business model also avoids most of the costs of "human resources" that other companies with tens of thousands of employees have to pay for.

Dr Sunshine would have more personal sympathy with these cost-cutting strategies if Uber shared their savings with their drivers. But, the business records of an Uber driver that Dr Sunshine knows indicate (to Dr Sunshine, at least) that those savings do not go to the drivers. On the contrary, it appears that Uber takes unseemly advantage of the willingness of their drivers to make capital investments and pay maintenance expenses. Once those costs are taken into account, Uber drivers in Austin earned $8 to $15 an hour, depending on how efficiently they were able to operate. An independent contractor with substantial capital investments in a business ought to be able to do a lot better than that.

Dr Sunshine hopes Uber and other businesses in the gig economy will continue to function, but he also hopes they will be forced into more equitable business arrangements with workers doing the gigs. Are the workers giggers or giggees? Dr Sunshine is not quite sure. Not many cities have had the guts to insist on their right to enforce regulations on Uber. Dr Sunshine thinks the people's republic of Austin deserves some credit for doing that even though the immediate consequences inconvenience Uber customers and deal disastrous blows both to the current lifestyles of their drivers and to the drivers' prospects for recovering substantial investments that they made on behalf of their former employer.

Dr Sunshine

PS. Dr Sunshine is reminded of a scene from a Woody Allen movie (at least he thinks it was a Woody Allen movie, though he doesn't remember which one -- probably Hannah and Her Sisters, maybe Love and Death) in which a liberal New Yorker attempts to sympathize with the plight of maid at a party where she was serving hors d'ourves or something. The maid is a proud worker and rightly berates the liberal for his condescension. The liberal doesn't come out looking very good, and maybe Dr Sunshine won't, either. In spite of that, he decided to put forth his argument in case some validity may be found in it.

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