The case against the Uber economy

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I was in Toronto earlier this year, and I caught a cab to Union Station. I don’t live in a big city, and I have a car, so I don’t spend a lot of time in taxis. The driver seemed nice enough; he asked me why I was in town and jokingly offered to drive me all the way to my final destination (Niagara Falls) at a discount rate.

But when we pulled up to Union, his mood soured dramatically. I had to get out on the opposite side of the street from the station. The traffic on the road was bumper-to-bumper, but with suspiciously few yellow cars for a day that reached a low of -22 degrees. As I started to exit, the driver began to explain why.

“It’s Uber,” the driver told me. “They’re driving us out of business. On a day like today, a Saturday with this kind of weather, I should be very busy. But I haven’t even made a hundred dollars today and I’ve been working since 5 a.m.” It was a little past 5 p.m. at the time.

My story is an anecdote, but it is also indicative of a larger problem. Uber sells itself on the idea of ‘disruption’ where archaic industries are revamped by a new, consumer-friendly Silicon Valley behemoth led by a nerdy white dude. But that’s not all Uber is up to. The company is spearheading the ‘sharing’ or ‘gig economy’ revolution, where employers treat workers as independent contractors and deny them basic workplace rights and fair pay. Along the way, the company is crushing the taxi industry, not by beating it fair-and-square in the marketplace, but by undermining the legal regulatory structure. Here’s why you should delete your app.

In a 2015 article in The Walrus, Jonathan Kay asked the reader to imagine “[you are] a white collar professional working out of a small office… work is steady because everyone needs your services [and] your industry operates within a state-protected monopoly… Now imagine a competitor opens a business across the hall, offering the identical service. He’s got no accreditation whatsoever.” Kay then imagines that the political class refuses to enforce the existing licensing structure, and that customers love the new service, leaving your business to suffer tremendously. This is what is happening with Uber, both in Toronto and around the world. In fact, in Toronto, the prices of taxi licenses have dropped significantly. In 2012, a taxi-license cost $360,000; in 2014, it had decreased to less than $100,000, according to a report by Global News.

To obtain a Vehicle-for-Hire license in Toronto to drive a taxicab, a person needs to pay a $130 application fee, provide two pieces of government identification, a three year ‘abstract’ from the Ministry of Transportation, and a criminal background check (this list is not exhaustive), all of which must be provided in person at the Licensing and Permit Issuing Office. There is also an annual renewal fee for the license. The application process to become an Uber driver, to put it simply, is not nearly as strenuous.

In fact, a class-action lawsuit was launched by limo and taxi drivers in 2015 against Uber for violation of Toronto’s Highway Traffic Act. The lawsuit sought close to $400 million in damages for lost fares and an injunction to stop Uber’s operations in the province. This is far from the only legal action the company has faced: in July of last year, a lawsuit was filed in the District of Northern California by two women who alleged they were sexually harassed and assaulted by Uber drivers. A class-action was also filed in Alberta against Uber after a breach of personal data information.

In many cities across North America, taxi companies require a legal license called a “medallion” in order to operate and pick up customers on a city street. The Washington Post once called a medallion “the best investment in America,” but they have dropped in value dramatically since the appearance of companies like Uber and Lyft.

You may be less concerned with the livelihoods of taxi drivers and more interested in how Uber offers people a chance to make more money. In theory, the idea of supplementing your income with a side job where you control your own hours and working conditions seem wonderful. But on the ground, it tends to play out differently for people who drive for Uber.

I am not referring to them as ‘employees’ purposefully. Much has been made of the fact that Uber enters into agreements with its drivers by classifying them as independent contractors. Another class-action suit is currently underway against the company, launched by Samfiru Tumarkin LLP, which seeks $200 million in damages and the reclassification of Uber drivers as employees. Similar legal pursuits have been launched across the world, with mixed results. The Central London Employment Tribunal ruled in 2016 that Uber drivers are workers and thus are entitled to the minimum wage, breaks, and holiday pay. A legal battle is also being waged in California to determine whether drivers are contractors or not.

The legal determinations are ongoing, but what is for sure is that the trend toward hiring contractors is not unique to Uber. In fact, Uber is merely one of hundreds of companies that have become part of what experts refer to as ‘the gig economy’. This form of economic organization prioritizes contracting and freelancing work over full-time, permanent positions and results in people working various jobs over the course of their career lives.

This shift, which will fundamentally alter people’s work lives, is happening at an astonishing rate. According to a report by The Globe & Mail, ‘non-traditional employment’ (a fancy term for work that is freelance or contract) now makes up approximately 20 to 30 per cent of the Canadian labour force. Perhaps more distressing is polling data from Randstad Canada that shows 85 per cent of employers intend to move towards an “agile workforce” (meaning no full-time, permanent, stable positions) over the coming years. A study from economists at Harvard and Yale found that all ­– yes, all – net employment growth in the United States from 2005 to 2015 was work that was on-call, temporary or contract.

What are politicians doing about all this? Embracing it, of course. The Democratic Party in the United States, supposedly the party of worker and labour interests, labelled the gig economy a form of “democratizing capitalism,”. Folks who worked in the 2008 Barack Obama presidential campaign have since gone on to actually work for Uber. Government officials in Canada are not much better. What was the answer that Bill Morneau, the Finance Minister, had when the Bank of Canada released a gloom-and-doom forecast for national employment growth? Get used to it. Uber is at the forefront of this. In fact, the ‘Uberisation’ of work is often thrown around as a synonym for the sharing economy.

Maybe you have a stable, full-time job, and are not concerned whatsoever with troubling trends in the world of work (you should be). Your only worry should be how Uber affects you as a consumer. But the outlook for that side of things isn’t great either. Uber functions on a model of ‘surge pricing,’ (i.e., Price gouging) where prices increase as demand for rides rise. Although Uber likes to hide this behind neat language like ‘dynamic pricing,’ what it translates to for the consumer is outrageous fares when the weather is rough or there is an event such as New Years’ Eve.

This leads to some real horror stories for passengers. According to the Chicago Tribune, a customer was charged a total of $640 for a 30-mile drive to nearby airport. In India, fares have increased by 50-70% in a matter of weeks. A man in Alberta was charged more than $1,100 for an Uber ride from Edmonton to St. Albert. Research conducted at the University of Warwick has found Uber drivers plan to trick the app into thinking there is a shortage of cars, leading to higher demand and far more expensive fares.

And remember what I said above about Uber being a model for the gig economy? Apparently their surge pricing model is rubbing off on other businesses. The Chicago Tribune has reported that restaurants, including several well-known spots in London, have introduced surge pricing. Uber has also begun charging riders “a premium based on where they’re traveling” last year, according to Business Insider.  This means in addition to the place you’re going and how many other people are taking an Uber at the same time, you will also be charged based upon your route of travel.

Over-charging for fares is not the most egregious activity Uber has engaged in. Transport for London (TfL), the regulatory body for transit in London, refused to renew the app’s license, with one of the main reasons being a “lack of corporate responsibility… [in] its approach to reporting serious criminal offenses.” FOI requests made by The Sun in the U.K. show that police investigated Uber drivers for a total of 32 allegations of rape and sexual assault from May 2015 to May 2016. Fortune reported that an Uber driver in suburban Atlanta was arrested in late 2017 for charges of rape of a 16-year old passenger. A website, titled www.whosdrivingyou.org, has been created to monitor criminal and suspicious activity from ridesharing-app drivers, singling out Uber in particular: “Neither Uber nor Lyft uses fingerprints or law enforcement to background-check their drivers. And Uber doesn’t even bother to meet with drivers in person before allowing them to ferry passengers.”

It is not just the drivers. A former Uber employee named Susan Fowler wrote a well-publicized blogpost in early 2017 about the issue. She alleged, as a part of Uber’s site reliability engineer team, she was a victim of continued sexual harassment from a male colleague, which the organization’s HR team did nothing about. The inaction turned into threats, as Fowler alleged she was threatened to be fired if she continued to report on the harassment.

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