What Use Is Uber?
Uber has gone public, and its IPO is struggling a bit. On Facebook, our own Road Scholar made the following observation:
Presumably [Uber/Lyft’s] stocks will tank?
There’s a parallel to trucking here. One can be a “company driver”, an employee operating the company’s truck (what I do) or an owner operator, operating your own truck under the auspices of the company. But the latter doesn’t afford a price advantage to the customer basically because it can’t. You still have to account for all the same costs in either case. That’s where Uber and Lyft are unsustainable. If they charged comparable rates to taxi companies it could work but then they wouldn’t have any competitive advantage.
This is largely true. Or as I am prone to say when people think they can accountant their way out of a problem by virtue of distributing costs differently… sometimes the cost is the cost. Or, at least, you can’t really improve it by shuffling who pays who but instead have to approach cost as its own thing. This comes up a lot in higher ed and some environmental initiatives. It’s also why the taxes raised for single payer health care are a political problem but not a policy problem since it’s just moving money around (with the potential of reducing costs being a part of the sales pitch). Right now Uber and Lyft are being heavily subsidized by investor cash infusions. That can’t go on forever. The cost is the cost and eventually customers will have to bear it (since unlike education and medicine, government mostly won’t).
So what, if anything, does Uber do to bring down the actual costs? And if they don’t bring down costs that much, then how are they to compete with taxis?
First, let’s talk about how they might actually bring down costs:
Busting Rents: In some parts of the country, high prices are attributable to rent-seeking, usually in the form of government-generated shortages. The most famous example is the New York Taxi Medallion system. With limited competition, they can charge more. With more competition, they have to charge less. There was a whole market when it came to Taxi Medallions that created costs that were, for the direct function of driving people from one place to another, largely unnecessary. So for some areas, this is legit savings. But New York City is a special case and it’s not clear how many places that actually translates into savings.
Fewer Regulation: This gets to the nub of a lot of animosity towards Uber, especially by taxi cab folks but also pro-regulation and good-government types. They are held to a completely different standard and Uber got to where it is by flouting the regulations that taxis have to abide by. The flipside of this is that one of the arguments in favor of regulation is that without them there is a race to the bottom and you can only get the cheap (less safe, less assured) stuff. Here, though, consumers have a more transparent choice. If you want to pay the premium for the assurances that come with regulation, that option is still available to you. If people aren’t choosing that option, it brings to question the actual value of the regulatory regime. It doesn’t mean there is no value, there are other things such as externalities to consider. But one of the stronger pro-regulation arguments (races to the bottom and consumers being unsure the standards of each option) don’t apply. But whether you think this is an unfair advantage or market justice, it is potentially a way for customers to save money.
Lower Driver Pay: On account of the income often being supplementary, the consumer can save money by drivers accepting less money than they would if it were their primary source of income. To pick another example, if writing is your primary career you have to hold out for jobs that contribute enough to your income for you to pay your bills. On the other hand, if it’s supplementary income (or no income, in the case of writing) you can accept a lot less or nothing. And as such, a publication that relies on the former is going to have to pay out a lot more than one that relies on the latter. On the other hand, people like writing and will often do it for free. People don’t like driving other people around and very few would do that for free. You can get by paying people for less if they’re doing it for beer money, but it’s somewhat limited.
Uncharged Expenses: This is actually only sort of “savings” in that it’s at least arguably cost-shifting from customer to driver. But it appears that wrapped up in Uber’s business model is people failing to account for the asset depreciation of their cars. Drivers who think they’re making more money than they are because they are not taking wear-and-tear of their car into account. My wife had a gig-economy job where some clients gave her a rental and some didn’t. We actually had to remind ourselves that it wasn’t just a matter of being able to drive a nicer car but that one of them was genuinely paying her more than the other. And in our situation it should be even more acute because her car is a ’96 and every mile brings us much closer to its inevitable end. From a customer’s standpoint, though, it’s the drivers eating that cost in a way that (unlike Uber burning through money) may be sustainable.
Offset Supplemental Income: They may be able to sell data, which they can then use to reduce prices. There’s nothing to stop taxis from doing so as well, I suppose, but they’d have to do extra to collect it and Uber being as centralized as it is would have more of it and could collect more of a premium. Some have suggested that Google’s investment in Lyft is along these lines.
To be honest, I look at the above and I am not remarkably impressed by the savings this will ultimately bring once the venture capital subsidies dry up. The biggest one is probably the first one and that only applies to a few areas. If price is their primary competition, it’s not clear that Uber ultimately will succeed on a large scale. There is a strong case that this will, ultimately, prevent them from outright winning a competition with taxis.
That doesn’t mean that the business itself is doomed to fail, however. There are a number of ways that it can compliment the taxi services by filling in holes. Uber’s strength isn’t its price, but its availability.
There may be in inclination to say “If there was that much need then the taxi companies would be doing it and since they aren’t we can assume there is no such need.” Which makes sense in a lot of cases, but does not take two important things into account: Minimum operating costs and demand surges.
For instance, there are places that don’t actually have cab companies. Where my wife and I previously lived, we’d have to call over a cab from an hour away. It doesn’t make sense for a cab company to operate there because there isn’t enough business to support someone’s lifestyle. But as a supplementary income, it becomes workable. This isn’t Uber’s focus at the moment, but they have things in place to fill in gaps like this.
It also doesn’t make sense for cab companies to operate with the capacity to meet peak demand. It’s better not to be able to serve people some of the time than to have cars sitting idle all the time. Businesses like Uber are able to activate supply during these periods, and the rest of the time the cars are still being used for other tasks. I’ve never used Uber, but one gig service I have used quite a bit is for pet-sitting. Rover has been the difference between our dogs having a place to be while we’re away or not. Between our ability to go somewhere or not. It doesn’t make sense for kennels to have the sort of capacity that they would only fill during Christmas, but converting home space into pet care space solves that. And so it is with driving people places. So here it can be good even if it doesn’t save money in the overall, because it means you can get a ride in the first place.
If this is all correct (both the lack of cost savings and the importance of availability) Uber is probably overkill and a lot of investors are really going to take a bath. But having spend all of that money setting up the infrastructure, it’ll be there for using. The fixed costs have been spent, and we all may benefit from the investors’ loss.
Driverless vehicles? (I don’t believe we got a final investigation report on the accident in Arizona, but as I recall, the impression from the draft report is that Uber is running this project cheaply)Report
I am actually wondering if their business plan assumed now progress on this front than occurred. Like how Netflix know early on they would be a streaming company that Uber figured it was setting itself to to be the autotaxi company.
But the question is whether they will be around long enough to be there.Report
Uber had an autonomous vehicle research program but ran out the way they run the whole company – slapdash, cutting all the corners. Someone died because of Uber’s negligence. They no longer have this program.
Of course once autonomous cars are a real force, Uber will again have no advantage over the taxi companies.Report
Of course once autonomous cars are a real force, Uber will again have no advantage over the taxi companies.
Probably even less of an advantage that what you are thinking now
The autonomous car internalizes the whole asset ownership costs (fixed -depreciation AND storage, none of which they ihave to incur now- as well as variable -fuel and wear & tear). Unlike the elastic supply to meet elastic demand of the gig economy, Uber will need to create a vehicle structure to meet the peak demand, and leave it idling in the garage at non-peak hours.
As much as I want drivers-cab or Uber- to make a good living, the avoided labor costs will never compensate building this behemothReport
Would Uber own the whole fleet? I figure their model would be replacing “Drive for other people” work “Your car can be making money while you sleep in”Report
It would be like those people who claim that if you invest in real estate, you can make “passive income” (the claim being that being a landlord is 0 work, which is def. isn’t, unless you hire a management company and let them eat a big chunk of the profit)
So I guess the model would be “buy a few driverless cars*, let people use them, profit”
(*And assume whatever legal liability if they hit someone or wreck or get stolen and used for nefarious purposes)
So it will become Kars 4 Slumlords?Report
Just as an aside, I have an income property, and as my mother owned a prop management company for many years, I have a pretty good idea of the business. I could do it, but the most essential things are to treat it as a business (no free rides, keep up on your maintenance, etc.) and knowing your market. When I was initially looking to place it on the market, I would have put it at $X, but checking with a prop. management company, they suggested it at $X+12%. Their fee was 10%.
They had it rented within two weeks.Report
Would Uber own the whole fleet? I figure their model would be replacing “Drive for other people” work “Your car can be making money while you sleep in”
Then it’s no different than now. The owner still has all the fixed and variable ownership costs (higher, because driver less cars are more expensive).
Yes, the owner might be teaching yoga (her regular income) while her car is going to the airport, so it’s not a “Right this very minute, should I do another yoga class, or should I do an Uber ride?” decision for her -she can do both and have TWO revenue streams at the same time. This could bring forth slightly (key operative word is slightly) lower tariffs, but slightly bigger margins for both Uber and/or the owner, but it won’t be much once the depreciation of the more expensive asset is taking into account.
But, as a business person, I cannot believe that Uber relaying in owners buying the self driving cars for the chance of getting some pocket money while giving yoga lesson is a winning business planReport
Yeah, that seems more like a Franchise model to me… Uber would sell rights to a certain [segment] of business and simultaneously protect and sell competitive segments for growth.
If they do it well, everyone makes money… poorly and you have all the various horror stories of franchises cannibalizing franchisees. Honestly, I’d bet on the latter given Uber’s track record. I’d be wildly suspicious as an individual franchisee …Report
I think somebody is going to have that model and I think it will ultimately be successful. People will probably even factor in that sort of thing into their purchase, knowing they can recoup some of the cost.Report
There is a disconnect btw/ the Uber driver you describe in the OP and the person that is going to be in a position to buy a new car with costly automation technology. That price might drop over time and used vehicles will eventually come on the market, but I would predict that in the meantime larger businesses will set up in obvious travel hubs like airports where fleets will be ready and waiting.Report
Still just the prelim.Report
Where I think your analysis may be off course is your assumption as to what Uber is. Amazon, FWIW, is not a retailing firm, nor a distribution firm, nor a publishing house, though they have all those business lines. Amazon has consistently pitched itself an information aggregation firm, who views its data on its customers as its prime asset. It generates its data through those other lines, which are also profitable, but they are and remain all about the data.
While Uber and Lyft certainly provide direct service and have some non-traditional cost and revenue issues for a transportation company, if you flip the script and look at them as data aggregation companies in a non-retail space, you see a completely different set of drivers (!) and a completely different set of cost allocation metrics. and by pitching their drivers as owner operators they free up capitol and off load the risks associated with collecting their data. Looked at that way, their cost containment methods are probably in line with industry standard, and they can probably make a decent long term return on investment for the IPO share holders.Report
I mention the data in the “Offset” section but you may be right that I am entirely underestimating that aspect of the business.Report
Yeah just as a knee jerk, knowing where people like to go and when seems like it could be (at least potentially) marvelously lucrative.Report
Is Uber really competing on price? I often travel and use an expense account to get from A to B… there’s no incentive at all to discriminate on price, so I don’t. At the airport (or any hub) where there’s a simple mechanism to get a cab that’s often easier than Uber, so that’s what I do. In the city where flagging a cab is harder than using Uber, then Uber wins. I honestly can’t say that I even notice a difference in price. Either option is unsustainable for everyday use.
I think I notice a reduction in scarcity, if not really a reduction in price… which perhaps means that removing the barrier to entry makes each individual unit less viable in the long-term owing to fewer trips per day. So I think there’s merit in questioning the overall Uber model for long-term sustainability at their current prices… but then I go back to the top and wonder if prices have anything to do with Uber.
Cab companies have attempted to respond with hailing technology of their own, but its so fragmentary and inferior (so it seems, I can’t say for every option) that the random traveler would never install it… it does me no good to have an app for Austin, one for New York another for SF, etc… that’s where Uber beats local markets. Theoretically, there’s a market for a “clearing house” app for all medallion taxis… but then its a question of whether you build an app and try to sell the service to a thousand entrenched businesses, or just ignore them and, well, do what Uber did.
I think its reasonable to assume that regulations and laws will catch-up to Uber, but the bet is that when they do it will normalize Uber at the expense of the Medallions and basically replace medallions with Uber certification. Costs will go up, but the superior Uber model will have won. I don’t think this is about costs.Report
I think this is an important point. I live in an inner ring western suburb that is historically a taxi desert. Getting a driver to your house ran anywhere from 45 to 90 minutes depending on time of day. Uber/Lyft are competing not on price, but on getting there much sooner.
Our commuter rail line opened a couple of weeks ago. Trains every 30 minutes from 4am to 12am, every 15 minutes from 6am to 6pm. The city hasn’t decided on having taxi/Uber waiting areas at the stations yet.Report
Yeah, right now there’s no Uber service in my rural-ish area… but there’s no reason why there couldn’t be (we have taxis, just not hailable taxis). I understand why their original model focused on penetrating the high value targets, but once established I expect to see it spread almost ubiquitously. The flip side is that our area is a bad investment for a full taxi service, but probably a good marginal increase to an existing model like Uber.
As I say, I expect prices to increase (and hopefully revenues allocated to cover full and actual costs) but the model extends coverage in ways Taxis don’t.Report
There is also the rating system. When I was in Lisbon a few months ago, we grabbed a normal cab from the airport. The cab was in a bad way and I tore my pants on a broken seat spring. The driver was terrible, and failed to inform me ahead of time that he did not accept credit cards, only cash. I could go on.
With ride hailing, I can see information about the driver, the reported condition of their vehicle, driving habits, etc. I get real-time data as to where the driver is, I can message the driver, find out if they are lost, give them gate codes, etc. I also know my cost upfront. No getting in the cab and watching the driver find new and exciting ways to run the meter up.
Put that on top of the near global ubiquity of the various services (I can grab an Uber pretty much anywhere), and traditional cab companies lose out regardless of how safe and regulated they might be.
The thing is, the traditional services could compete with Uber and Lyft, they simply choose not to and would rather engage in more rent seeking and regulatory capture to try and make the competition go away, rather than evolve to compete.Report
Right, but the Uber approach is still interesting precisely for the way in which it shifted (very real) costs to contract drivers while simultaneously exploiting a captured market. The open question is whether the contract market adjusts as more and better data about the costs of driving for Uber are understood, or whether its a “last fool” model that works until it doesn’t… or whether cities/states/countries re-regulate to account for all the costs (and get a bigger piece).
My own hunch is that it will be the last option… which will end the medallion model and replace it with the Certification model and we’ll all experience it as a net upgrade and semi-neutral costs as Uber shifts to monetizing other projects and treats Rides as little more than an Customer on-boarding process (like Prime).
On the one hand, a nice little story about capitalism defeating rents; on the other it didn’t defeat the rents on behalf of the workers providing the service; rather it exploited a gap in business expertise of a new set of contract workers to fund their eventual other business models… so lessons and cautionary tales abound.
{I promise I own no shares in Uber, yet}Report
The more I think about it, I can see a greater and greater symbiosis between Taxi companies and Uber if they are willing to turn the corner on it. In other words, Joes Taxi Co. signs up as an Uber service, offering both hailing services and a very successful call service.
The vehicle costs have to be born by someone, owner/operator or company and they do get baked into the costs passed on to the rider. Whether or not the vehicle owner, private of company, takes this into account all depends on that owner.
This would, of course, allow the city to keep some revenue from that medallion, but privide room for the other model.Report
Possibly? I’m not close enough to run any numbers, but I think Uber itself is hoovering up all those margins (and that’s some of the critique against Uber)… if when they pivot to other businesses and monetize the data from the service then maybe some room would open up.
But medallions are dead. Long live medallions.Report
Medallions should die, it’s a horrible idea.Report
Its like anything else… there’s a public good to be had certifying that Taxis are Registered and “safe” semi-public services… I mean, I kinda assume that Uber performs background checks… and the fact that my app connects me to Archie is some new layer of accountability and safety (as long as you look at Archie and the license plate before you get in the car). But then the standard should be open Certification and Adherence to Regulations… which turns into limiting Certification in the name of… let’s say, congestion… and then adherence to regulations become “must have xyz systems that cost $seven-figures, no matter the size” and voila, Medallions.Report
Medallions are bad because it’s an artificially set supply, not because of safety regs.Report
+1.
There are some real advantages to ordinary cabs, but the whole artificial scarcity thing is bad.Report
Uber seems to demonstrate that the artificial scarcity prevents a race-to-the-bottom.
I am trying to figure out which is worse.Report
If people are driving for Uber as a way to make a living, it’s a problem.
If people are driving for Uber for beer and pizza money, it’s not a problem.
The real problem Uber has is it has no effective way to prevent a person from trying to make a living driving for them, and then those drivers get upset over the fact that they can’t really make a living driving for Uber.
Now if Uber has been actively suggesting to drivers that they can reasonably expect to earn a living rage driving for Uber, then Uber deserves the grief it gets for trying to have it both ways.
But if Uber has consistently maintained that drivers should expect beer and pizza money, except on really busy nights, then the grievances of the drivers seem self-inflicted.Report
Except the issue is, how can something that’s supposed to be to get people beer and pizza money also worth 80 kazillion dollars as an IPO?
Uber’s actual problem is they quickly realized that just “getting people together for rides” isn’t actually an app that makes them money.
Which is why, as an Uber driver, you have to go with the as agreed to price from Uber. An actual “trip sharing” app would provide people the ability to match up, then they could haggle about the price on the app, with Uber getting a cut for getting them together.Report
I suspect that haggling is going to be a no-go and if Uber goes down whatever replaces it will probably also not have haggling. Might be more than one app with different prices and pricing systems. But for a single app, the most you’re likely to get is a list of per-mile/minute prices to choose from. But probably not even that.Report
Well, yeah, instead of haggling, you could just as easily go –
Bob will drive you for .57/mile and is rated 4.6
Chris will drive you for .55/mile and is rated 4.7
Tom will drive you for .63/mile and is rated 4.9
Or whatever. I’m not an app designer.
The place where Uber/Lyft/etc. gets in trouble, as far as being an employer, is by saying, you have to go by our prices, not make side deals, etc.Report
In theory, a true ride sharing app shouldn’t care if after you drive Sally to where ever, you get Sally’s number and she calls you directly for a ride in a week.
Uber/Lyft/etc. all do.Report
The “no side deals” is what Rover (the dog sitting one) does and that’s perfectly reasonable. No direct calling is the deal. The dog-sitters do get to set their own price, but it doesn’t do for them to only get commission on the first bite. (These rules are routinely broken, however.)
Drivers might actually agree to uniform pricing so that there’s not a race to the bottom. That’s why I think uniform pricing is likely to be a standard.Report
Not having haggling actually causes a huge problem in rural areas. I live far enough away from a large city that Lyft and Uber drivers…do not accept the ride. Because they’re being called from at least 20 minutes away…and sometimes farther.
I can’t blame them for that. They have no idea how far anyone is going, so for all they know they’re going to drive 20 minutes, pick someone up and drive them two miles, make $4 min fare, and drive 20 minutes back to an area that they might get a fare. (Or sit an hour up here and not get a fare.)
I understand why the rideshare companies don’t want to tell drivers where they’re going in advance, or how much they’ll make, or not let drivers counteroffer, all makes some sense in a _city_ where there are tons of drivers.
It makes absolutely no sense in rural areas where what thta results in is that no driver accepts the ride at all. Not only does this look bad, but it actually results in those people thinking of rideshare as very unreliable, when the point is supposed to be you can get it anywhere.
This is always interesting when people from larger cities encounter it from the first time. They’ll ask people ‘This says you have Lyft here, but it doesn’t work. Do you have Lyft here?’ and it’s like…yeah, in theory. That’s not magically going to make drivers appear out of thin air.
The first company that has haggling, or just, when the _first_ round of offers to drivers has been rejected, then circles back around with double the price, then triple the price, is going to be amazingly popular in those areas.
Source: I know someone who drives for them who lives near me, and he gets in his car and drives about 30 minutes south before really expecting any rides…and he doesn’t come back north before the end of the day.Report
Could be that post-Uber there is a model to control for this, or a company that caters specifically to the complicated places and those do allow haggling. I could see such a model working but with haggling as more as an exception than the rule.Report
If people are driving for Uber for beer and pizza money, it’s not a problem.
This is the ‘fast food employees don’t need to make a living wage’ argument.
The idea that ‘Oh, people who need to make enough money to live on shouldn’t be doing that job’ is just silly. There’s no job that ‘people who don’t need money’ will fill up first instead of ‘people who need money’. How would that even work? Any job is going to be filled by the _most_ desperate people able to do that specific job, by definition.
If we existed in a world full of idle rich where everyone who needed a job had a job, and there was some extremely odd category of ‘People who would be willing to do a job but don’t really need one’, uh, yeah, some people might be doing it for beer money. Or…not, because they’d take one of those mysteriously-available well-paying jobs _also_.
If something, anything, is worthwhile for society to pay people to do, it needs to be structured such that it is paying people enough to live on doing it.
Otherwise, it’s just volunteerism. And it’s worth pointing out we _do_ have volunteerism rideshare…it’s called carpooling, and people don’t make money from it.
If we can’t pay enough that people can make a living doing it, we shouldn’t start doing it.
And, yes, ‘we’ is getting a lot of work in that sentence, I’m aware we don’t all get together and vote on what we’re doing. But we need to at least realize it’s a _problem_ we’ve somehow gotten a new industry that is systematically not paying people enough to live on, and consider what to do about it.Report
I think you just threw almost every online publication under the bus.
Report
If we can’t pay enough that people can make a living doing it, we shouldn’t start doing it.
What if people didn’t do it for a living, but just for beer and pizza money?Report
What if it is only one facet of their life? Only one revenue stream?Report
Fast food workers are shift workers. They are expected to be at a specific place at a specific time and to work for a specific duration.
Uber drivers have none of those requirements.
Your comparison is thus invalid.Report
My household has five people with paying jobs. Only my own “pays enough to live on”.
My children are better off with paying jobs. My wife is better off with a paying job. My household is better off with them having these jobs.
Letting people make their own choices is better for everyone because they understand their situation better than we do.Report
My household has five people with paying jobs. Only my own “pays enough to live on”.
As you say, people who are not being paid enough to live on at their job are being subsidized by other people. (Or they’re dead.) Everyone else in your family is being subsidized by you, for example.
Rideshare drivers who do not make enough to live on are being subsidized by…well, who do _you_ think they’re being subsidized by? Are you certain it’s not you? Because it is.
We live in a society where there’s a _lot_ of subsidies being thrown around, where we try not to let people starve to death in the street, where Walmart and Uber are not paying people enough. Often paying so little employees are on _welfare_.
Wouldn’t it make more sense to say ‘Businesses cannot pay employees so little that, if not for taxpayer money supplementing their income, those employees literally could not afford to work for them.’?
This is why ‘Oh, it’s a bunch of kids working fast food’ or ‘Rideshare drivers are just supplementing their income’ is so harmful, because it lets us pretend they don’t need enough to live on. Which is, as I said, completely untrue because the most desperate people get the jobs first.
But that’s not harmful to think because those workers don’t have enough money to live on, it’s harmful because they _do_ have enough to live on. Of course they do, or they’d be dead! It’s just that money is a lot of little pieces of taxpayer money like subsidised housing and earned income deductions and welfare and non-profits and everything.
In fact, they’re probably bigger drains on taxpayers then actual unemployed people. They certainly outnumber them.Report
You’ve made a subtle shift here, so subtle I’m not sure you realize it.
Yes, I am subsidizing my family’s existence. However that’s not the same thing as subsidizing their jobs.
My family exists whether or not they have jobs, so even the terrible job my 15-year-old has lined up is a net positive. No one is magically going to offer her “a living wage” if you destroy her job.
The best way to destroy bad jobs is by creating so many jobs, even somewhat-bad jobs, that employers compete for scarce employees. The worst is with the stroke of a pen, that results in employees competing for scarce jobs.
So maybe my 15 year old goes up the ladder a bit this year and transitions from her horrible field job to a still really bad (but better job) filling ice cream cones. Then in 4(ish) years she’ll become an intern of some type.
No one, not the workers and not society, would be better off if those people didn’t have jobs.
We have the ability to wave a magic wand and make burger flipping a “good” job… however if and when we do that, it will require a robotics degree and we’ll have one human “managing” a crew of robots.Report
“The best way to destroy bad jobs is by creating so many jobs, even somewhat-bad jobs, that employers compete for scarce employees. ”
This is a terrific point, and I’m confident everyone agrees with it.
But can anyone here, even in their wildest flights of fancy, imagine such a world?
I know I sound like a broken record on this point, but when I look into the future, I can’t even begin to envision a scenario in which human labor of any kind is is scarce.Report
But can anyone here, even in their wildest flights of fancy, imagine such a world?
One with more immigration restrictions and where employers are punished for hiring undocumented people?Report
Ahh.
Freeing up those sweet lettuce picking jobs, I see.Report
Hey, *I* support open borders.
I could use the domestic help.Report
We’ve had that world, multiple times, multiple places. 1950’s after war (and after FDR died), various petro boom towns just recently.
The demand for labor can absolutely be higher than the supply… however this pulls in multiple issues that should be brought up.
First, my locality’s local demand for labor has very little to do with petro boom town #20.
2nd, “demand for labor” is something of a misnomer. My children(*) aren’t in competition with me or my wife for jobs, we all have different skills (or no skills for girl #3). The local hospital is desperate for nurses. My company is desperate for SW engineers. Girl #3’s employer wants any warm body. Although in High School, Girl #2 just got an internship for a chemical company as a chemist.
(*) Daughter #1 actually is in my field but she’s an intern.
Demand for labor is artificially lowered. If we want to increase the demand for labor then we should get the government out of the business of “destroying jobs” and also out of the business of making job creation complex, risky, and expensive.
This is the very opposite of “every job should allow you to support all aspects of your existence”.
The gov taxes job creation directly via social security, various other taxes, and insisting that various benefits be supplied.
The gov makes job creation risky when it tries to prevent jobs from being destroyed or people being fired.
The gov makes job creation risky through the existence of protected classes.
The gov also makes job creation risky when we “hold the employer responsible” for various things.
The gov sets a min wage expressly to destroy certain jobs… the original purpose of the min wage was to prevent cheap blacks from competing with expensive whites.
The gov sets up certification rules and such expressly to destroy jobs, i.e. prevent competition.
These rules and regulations were created with the best of intentions, they also have the side effect of lowering the demand for labor, especially cheap labor. If I can’t make money from hiring someone then I won’t. If I’m at risk for being arrested for hiring someone then I won’t.
We want a world where hiring someone should be the FIRST solution to deal with any business problem, not the LAST solution. We want a world where creating a job is a right, not a privilege.
Moving away from that world is popular every step of the way, but facing the trade offs really should be a big part of the evaluation and mostly it isn’t.Report
Dark, those are not ideas, those are just empty talking points from 1979.
If you take each one and think of its opposite, you have nothing more than policies which have either been tried and failed, or are too embarrassing to say out loud.
What would be the opposite of “taxes job creation directly via social security”?
Eliminating Social Security??
What would be the opposite of making ” job creation risky through the existence of protected classes”?
Making racial discrimination legal??
And how would any of these things lead to greater demand for labor?
All you are saying is, “If people are allowed to work for half as much, I will hire twice as many!”
Allow me to indulge in Econ 101. Lowering the price of something in order to spur demand, won’t result in higher prices; its true, you can look it up!Report
Or funding it through something other than a payroll tax.
There are benefits to outlawing discrimination… there are also costs. One assumes America becomes less racist as time goes on, so the benefits decrease. The costs come out of either your wallet or by preventing job creation by increasing risk.
A discussion I had with my business partner was both of us wondering how many people we could hire before we’d need to prove we weren’t racists. Everyone on our radar as a potential was either known to be white or really looked white from their resume.
Really core econ theory says lowering the risk and price for creating a job results in more jobs.
We are very close to full employment right now. There’s no way in hell we can “hire twice as many”. There’s no way we can even try to do that without increasing the amount of money going to labor.
Similarly basic econ theory suggests, STRONGLY, that the 7% or so “that the employer pays” for Social Security and Medicare is actually coming out of your wallet, not his. So how’d you like a 7% increase in pay?Report
Yay, a 7% increase in pay!
And all I have to do is stop contributing to my retirement?
And if I work for less per hour, they will let me work longer hours?
Wow, this is a sweet deal, alright.Report
No, your taxes would go up by the same amount and SS would remain the same.
However this would remove an economic distortion and accounting headache from the labor market. IMHO it’d also do a number of other nice things, like put SS squarely in the budget and remove the pretence that it’s somehow special, open the door for means testing, etc;
But all of that is secondary to putting job creation first, i.e. getting the gov out of the business of sacrificing jobs for various other social goals.Report
You keep chanting this, about how we need to create more jobs.
Yet in your own comment, you acknowledge we are already at near-full employment.
And nowhere is there any hint of a suggestion about how to increase the price of labor, i.e. wages.
But it isn’t just you- no one at any level of punditry or governance is suggesting anything either.Report
The idea is that, in theory, eventually businesses who want workers will compete for them.
Assuming, of course, that they don’t have reason to assume that the government will bail them out with cheap labor and undercut the bargaining position of workers here.
Businesses tend to be able to hold out longer than individuals, after all.Report
Aren’t you the guy who pointed out that if we force the fast food workers to get a higher wage, they will just be replaced with kiosks and burger flipping machines?Report
Where does the force come from?
I see a huge difference between a government finger pointing and saying “YOU WILL PAY THEM MORE MONEY!” and a manager showing up to work and asking “why are there only three people here today?” and hearing “they got better offers elsewhere and took them”.
Sure, automation *WILL* edge out a number of jobs. Find an old person and ask him what it was like to work in a McDonald’s in the 70’s or 80’s. Ask him how many people there were back there. Then, next time your neighbor goes to Mickey D’s, ask her to try to count how many people are behind the counter and bring that number back to you.
Compare those two numbers.
Automation *WILL* edge out minimum wage jobs.
But you will always need someone there who knows what to do when a drunk guy punches the touch screen and it is no longer readable. And if she gets a better offer to work somewhere else, she’ll take it… unless, of course, her leverage is taken away.Report
“Why are there only 3 people here?”
“They got better offers …”
Complete this sentence.
What offers would those be? Picking lettuce? Scanning boxes at an Amazon warehouse?
What jobs can we envision that offer a higher wage than the service jobs our economy is producing?
And can we envision them in sufficient quantity that a middle class can be re-created?
Remember, automation doesn’t need to replace all the workers in order to have a devastating effect. 25% unemployment in 1933 was enough to spark fears of a violent revolution.
And it doesn’t even need to wholly replace the worker in order to have a devastating effect.
All the kiosk needs to do is lower the skill level of the workers, and therefore enlarge the pool of their replacements.
Like in your example, what if her skill in “fixing” the broken kiosk was to simply unplug it and call out “Alexa, order a new kiosk”.
How much would the market value of her labor be worth?Report
What offers would those be?
Burger King needs people too. So does Wendy’s. The Navajo Hogan on Nevada Avenue *ALWAYS* needs somebody.
I sympathize with your luddism. I worry that there will be an underclass of people who are not particularly employable and it would be cheaper to cage them than to train them given the jobs available to them.
And especially if we can find people willing to work cheaper who are willing to put up with a lot more bullshit. (And, let’s face it, to undercut workers, it’d take getting the left on board with undercutting their own leverage.)Report
Why do we always imagine that machines will only replace the low skilled workers?
Isn’t the whole idea of Big Data and machine learning that it replaces the complex calculation and analysis skills of white collar professionals?
Think of what you or I or anyone who comments here, does on a daily basis.
I mean, the actual daily tasks, the tasks we have been doing just this morning.
How many of them really require our utmost high value skills? How many of them could be replaced with an algorithm, outsourced gig worker, or improved software/hardware?Report
Why do we always imagine that machines will only replace the low skilled workers?
What has happened the last 50 times machines replaced workers? Did they replace the low skilled ones or the middle skilled ones or the highly skilled ones?Report
When I was born in 1960, operating a cash register or typewriter WAS a medium skill job, one with a wage that could support a family.
That’s my point, that software lowers the skill level needed for virtually any job.
And it isn’t “in the future” its already happened, and is happening now. There is almost no job in which the required human skill level is higher today than a decade ago.Report
What happened the other 49 times?
Trying to get a feel of what happened so I can answer your question of “Why do we always imagine that machines will only replace the low skilled workers?”Report
Let me lapse into hyperbole.
All 49 other times, a previously high or medium level skill was transformed by technology into a low skill job.
Weaving? Ned Ludd was a medium level skilled trademan.
Digging ditches? When the Erie Canal was dug, those men were meium level craftsmen, earning enough to support entire families.
Yes, I’m exaggerating, but only slightly.
Think of Twain’s “A Connecticut Yankee”; in the 1880s, it was plausible that a man proficient in machinery was so skilled that if he were to travel back in time he would be a wizard.
Now think of the mechanic in the 1960s sitcom Andy Griffith Show; He was a simpleton named Gomer Pyle.
The guy who repaired a television showing the Andy Griffith Show was a highly skilled technician supporting a family; Today his equal, a copier repairman, is a college kid earning barely enough to scrape by.
The whole point of technology is to take over the most lucrative skill possible. That’s why we pay money for new tech.
Why don’t we have fruit picking machines? The technology exists and has for decades. But the human component is still so cheap it isn’t worth it.
The competitor for a guy picking lettuce isn’t an American; its the machine waiting as a schematic design somewhere.Report
All 49 other times, a previously high or medium level skill was transformed by technology into a low skill job.
Sure, let’s run with that. So what happens when new jobs are created? The new tech turns the high skill jobs into low skill jobs?
So people with fewer skills are now able to do more jobs than they could before?
Great, we’ve addressed the point we made several comments ago when the manager came into the store and asked: “Why are there only 3 people here?”
The answer was “they got better offers.”
You asked “What offers would those be?”
I’m pleased we hammered out what happened. Automation turned high skill and medium skill jobs into low skill jobs.
They got offered positions that wouldn’t have been possible without automation.Report
No, your assertion that they would get better offers was never substantiated.
If technology is lowering the skills level across the board, it doesn’t matter how many jobs there are.
The price of labor will keep dropping, because the value it adds keeps dropping.
If the fast food worker in your example is now qualified to operate the BrainSurgeryOMatic machine, which requires the same level of skill as the BurgerFlipperTron, what would the value of their labor be?
Why would an employer be willing to pay more for them?Report
Increasing productivity results in higher wages, not lower. We have multiple economic laws which say you’re doing the equiv of worrying about what will happen when gravity gets bored and finally inverts.
And yes, having one person crew an entire crew of robots sounds like a vastly increased economic labor force.
It will be fine. Seriously. Kicking 90% of the population off of farms was way more disruptive because we didn’t have social safety nets back then.Report
“Increasing productivity results in higher wages, not lower. ”
You sure about that? Like, is this what has been happening, or is it just what the books say should happen?
And why would robots lead to a larger labor force? You’re not even putting forward a theory of how this could happen.Report
This is roughly as predictable as a rock dropping if you let go of it in the air.
I literally just posted links which describe exactly what the theory is. (Edit: Sorry, I see my previous post with the links is probably waiting mod approval).
And by “theory” I mean “Theory”. We’ve been in this situation dozens or hundreds of times before, it’s very well understood. I’ll repost those links if you missed them.
https://en.wikipedia.org/wiki/Luddite
https://en.wikipedia.org/wiki/Lump_of_labour_fallacy
http://www.rcbi.org/index.php/features/747-makers-or-takers-why-robots-don-t-kill-jobsReport
Over the past 40 years, have real wage increases kept pace with increases in productivity?
No, they have not.
And why should they?
If the increase in productivity is being accomplished by a machine, the worker doesn’t become more valuable- there are still a million replacements waiting for his spot.Report
Depends on your yardstick. There are graphs showing a real disconnect between the two in 1973 or so. Two wildly divergent lines, one measuring GDP going up and another measuring compensation which is basically flat.
However this may not actually be a thing. Those lines for GDP and compensation are created using different measurements/definitions of inflation. If you simply don’t discount for inflation at all you end up with two lines that are pretty close to each other (link below).
The extreme difference between the claims and the apples to apples comparison says this is an issue of ideology, rhetoric, and misuse of statistics than a problem with reality.
https://www.vox.com/2015/7/28/9057149/wages-productivity-inflationReport
The Vox article isn’t really contradictiing the others; He is just saying he doesn’t think productivity has outstripped wages, which he agrees have been stagnant.
The more I think on this, the less clear it is why wages even SHOULD track productivity.
An employee’s value doesn’t correlate with how much they produce; it correlates with their scarcity.
If every every other hamburger flipper in town is killed off, then the last remaining one can command any price, without increasing his productivity one bit.Report
It would be odd to think productivity has been stagnant since the 70’s with the computer revolution.
Only if he can “command any price” for the hamburgers he creates.
Productivity of labor is a measurement of how much money they can create for the guy who owns the business. If 80 people can do the work of 100, then they can collectively be paid as 100.
If they can’t and the gov insists they be paid as 100 anyway, then ugly choices need to be made and ugly questions asked. The big one is “is the company still profitable”. Raising prices is often not possible without affecting demand, if BurgerKing could trivially increase their prices by 20% then they would have already done it.
The 100th worker is almost certainly not as profitable as the 1st. The store won’t be as profitable at some hours (like 2am).Report
“If 80 people can do the work of 100, then they can collectively be paid as 100.”
Yes, they CAN be paid that much, but why would the employer raise their pay if those workers could easily be replaced by others eager to still earn 80?
This sounds like the Labor Theory of Value, applied to labor itself.
But our libertarian friends are the ones who convincingly argue that labor is only worth what someone wants to pay for it, which is based on scarcity of labor, not the scarcity of the output.Report
The original Ford was thought a genius by ignoring that line of thinking on the assembly line. The old Nazi didn’t drastically increase everyone’s pay because he wanted them to buy his own products, it was in his own best interests. Turns out that “replacing someone” isn’t easy and skill matters, especially when you’re expecting one person to do the work of ten.
For all the talk you put out earlier about how these jobs become easier, they really don’t. They get more specialized because using technology is a skill.
When 90% of us were on farms you could be a dumb farmer with a few tools; Now days you need to know about everything from acidity in the ground to the ins and outs of a dozen different types of (often computerized) equipment to multiple different types of scheduling to prices in China. Technology is pretty inflexible, humans need to be flexible. Technology is powerful but dumb, humans need to know when it works and when it doesn’t.
And BTW I used to work, A LOT, with AI. It’s great when it works but it needs a human around to say “that’s stupid, we’re not going to do that”.Report
The idea that job skills are requiring more human skill seems entirely unsupported by either logic or evidence.
I read a book called “The Soul of Soil” where it went on for a hundred pages about the various aspects of soil, from PH levels to nitrogen to degree of fines versus sand.
It was published in 1911.
And it made a point that modern science was making available to everyone, deep knowledge that had previously been available only to those who had spent years acquiring it by intuition and trial and error.
Look at the tools you yourself use.
Is it easier to write document in Word, or a manual typewriter?
Easier to calculate using Excel, or a paper and pencil spreadsheet?
And in our discussions about minimum wage, isn’t the main line of argument that modern computerized kitchen equipment has made the humans nearly replaceable by kiosks and so their low pay is a pricing signal that their skills weren’t very valuable or special?
According to your theory, modern fast food restaurants should need a highly trained human to operate the complex computers that make french fries and process electronic banking transactions.Report
All things being equal, it’d be easier in excel. The problem is all things don’t stay equal.
I’ve analyzed data with paper and pencil. I’ve done the same with Excel.
With Excel I/we used hundreds of columns, millions of rows, and we used it interactively with the results of one value affecting the calculations of the entire sheet. In terms of knowledge needed to set up, and use, and understand the results, I’d say the excel sheets were by far harder.
Our deep knowledge and understanding didn’t come to a halt at 1911. Yes, you can look stuff up… but there’s a ton of stuff more that you HAVE to know to be successful. The bar has been raised a lot.
However as long as we’re making comparisons to 1911, in 1911 the AVERAGE yearly income was $520. Adjusted for inflation that’s $14k. By 1911 standards these jobs are valuable and special.
When you are finally successful at forcing these jobs to pay a great wage, you will also be forcing the people who do them to have a degree in robotics engineering. That will involve a lot more training than hitting the on button.Report
Oh, and while I’m thinking about it… I’d like to make a call out to any/every mod/developer/admin that the new site upgrade is working great.
When I click the “reply” button in my email it takes me right to Chip’s post.
Thank you!Report
*Scene from the 1964 World’s Fair*
“Yes, in the World of Tomorrow, the ordinary housewife will shop for her family by interacting with a supercomputer, a thousand times more powerful than the Eniac used by NASA.
She will be required to have advanced skills to interact with this superintelligent calculating machine, which will automatically calculate her items and deduct it from her husband’s bank account!
Meanwhile, Junior will also be required to have tremendous levels of education and scientific knowledge in order to operate his games which are also controlled by supercomputers, linking him to other boys around the world.
Truly, the level of intelligence and technical knowledge required by the World of Tomorrow is stupendous!”Report
As far as we can tell, IQ is increasing by about 3 points per decade. Technology and it’s demands is probably part of that.
3 points per decade means that 1911 guy had an IQ of 68, so by his standards we *do* have a level of intelligence which is stupendous. Similarly we have a level of technical knowledge which is absurd.Report
No.
The Flynn Effect doesn’t work that way, where you just extrapolate backwards and forwards. According to that metric, humans 400 years ago had zero IQ.
And IQ itself is suspect since it emphasizes abstract cognitive problem solving, which is of limited use in pre-modern societies, but an everyday vital skill in industrialized society.
See, you are doing the same thing that Twain did where he assumed that people in the 13th century were blithering idiots compared to the high tech world of steam engines and dirigibles.
If you go to one of these craft fairs where people do old fashioned crafts like spinning wool, blacksmithing, or hide tanning, you will see that the skills involved require a tremendous amount of mind-body coordination, to a degree that we rarely use nowadays.
Can you tell from the sound, when a hide is stretched tight enough? Can you look at a chisel and tell if it is honed properly?
No of course not. But a medieval person could.
Oh, we tell ourselves, but surely with a few days or weeks or practice I could do it. After all those idiots could do it why can’t I?
Again, no. Just no. It took them years of constant work to develop those skills and that form of intelligence and it would take us just as long.
We know this for a fact because the modern day people who do these things will tell you, “Its effing hard and takes brains as well as muscle!”
Getting back to the original point-
The feminist scholar Kate Millet said her awakening moment was when she was working as a model, and got a gig for a magazine ad for Olivetti typewriters.
She was to pose as a hapless secretary, and the ad copy was : “Out typewriters are smart. So she doesn’t have to be.”
But that’s kind of what technology is all about; The dashboard light that tells you when to change the oil is literally called an “idiot light”.Report
Fair point.
That.
Out forebears potentially being as smart as us doesn’t detract from how impressive our technology nor how much work it is to develop or utilize to its full potential.Report
One thing not being discussed in this bit of compare and contrast is the fact that the craftsmen of old lacked a clear understanding of the ‘why’ and ‘how’.
Why does the hide need to be stretched properly, how is this important to the tanning process?
Why does the hone of a chisel need to be just so, and how is the edge doing the work?
Many of the things you talk about, that esoteric knowledge that one gets from hands on experience, was the result of years of trial and error efforts of previous craftsmen who figured out what worked, without every really know how and why it worked.
Do you honestly think ancient tanners understood what the tanning oils were doing with the water between the fibers of the leather, and that the stretching was important so the oils could properly penetrate? Do you think they’d be aghast a the fact that hide does not need to be stretched to be tanned?
And I no longer need to have the hard earned skill of honing a chisel, because we understand the physics and metallurgy of cutting edges. I know that I can use a progressive series of diamond hones with a bevel guide and get an edge on a planing blade that will effortlessly allow me to take off bible page thin ribbons of wood from a plank. I know why a couple of quick passes of my chef’s knife over a honing steel will restore the edge.
So as you think about the lost skills, you also need to look at what was gained that caused the loss.Report
Again, we go back to the last 50 times this happened.
Have we established patterns for what happens?
With the sheer number of jobs that have been obsoleted since a few mere generations ago, are there more people working or fewer than there were in 1969?Report
What is that thing economists call “price signaling”?
Yes, there is a clear pattern of technology turning high skill jobs into low skill jobs.Report
Yes, there is a clear pattern of technology turning high skill jobs into low skill jobs.
Seems like there are more high skill jobs as a percent of the workforce now than before, say, the industrial revolution, no?Report
No.
See my reply to Dark Matter above, but the essence is that traditional skills didn’t require the sort of cognitive work we do now, but involved a much more intensive mind-body sort of intelligence.
The sort of thing Robert Pirsig talks about in Zen and the Art of Motorcycle Maintenance, where your hand becomes an extension of your brain and the nerves can tell you just exactly how tight the skin must be, or how to strike the flint to get an arrowhead.
Or to look at the waves and sky and know if a storm is approaching, or where water in the desert is likely to be.
Piloting a dhow along the Suez, mending a net by hand, knowing where the fish were; these were…and ARE STILL…very advanced skills on par with anything today.Report
How many engineering firms still have drafting staff or typing pools? We made engineers learn to do those jobs.
How many mid-range programming jobs were eliminated by spreadsheets? We made business majors learn to do those jobs.
How many mechanical engineering positions have been eliminated by the “a processor, some contacts, some relays, and an LED panel” approach to device controls instead of electromechanical?
How many future sysadmin jobs did Larry Wall eliminate all by himself?Report
Our current demand for mechanical engineers is more, not less, than back in the day. There are other things we need too for talented people so our demand for talent is MUCH greater than before.
I’ve worked myself out of a job several times. I’ve worked myself out of an entire market niche as well. It was a lot more scary in theory than it was in practice.Report
The thing that made Henry Ford insanely rich was figuring out how to replace highly skilled and expensive craftsmen with machines that required a much lower skill level to operate.
While still getting credit for paying his workers a much higher than prevailing wage. Because he was now shopping in a different labor market.Report
For that matter, information technology has replaced legions of white collar clerical workers.
Though in practice, these were more often than not ‘pink collar’ workers.Report
Source that your “one car every few months” craftsman was better paid than Ford’s line workers.
Your craftsmen of old could make a decent living but Ford’s crew were very well paid by the metrics of the day.Report
Given the last 50 times we’ve obsoleted jobs entirely, do we have reason to believe that this time it will be different?Report
This time it will happen to us.
And more specifically, me. I’ve lost my job because computers got smarter, more than once when I think about it.
I have had to totally re-tool and learn new skills, more than once, because you can’t make a living doing [X] any more.
On the other hand the job I’m doing now didn’t exist a decade ago, they would have had EEs do it and not Computer guys. And the job I’m applying for next week(?) really wouldn’t have existed. It didn’t exist even 5 years ago.
So yes, lots of people will be fired and/or have their jobs destroyed. Don’t worry, be happy, it will be fine.
It’s already been happening for centuries, it’s a good thing, not a bad thing.Report
And speaking of sacrificing jobs for social goals,
The senator’s plan, if passed into law, would mandate that large corporations obtain ‘equal pay certification’ from the Equal Employment Opportunity Commission (EEOC). Companies failing to land a certification would face fines – for every 1 percent wage gap, they would be fined 1 percent of their profits. … Harris said she would require companies applying for federal contracts to meet the equal pay standards.
The senator’s plan, if passed into law, would mandate that large corporations obtain ‘equal pay certification’ from the Equal Employment Opportunity Commission (EEOC).
https://www.foxnews.com/politics/harris-fining-companies-gender-pay-gap
It would apply to any company with 100 or more employees.
https://www.nationalreview.com/news/harris-announces-plan-to-fine-companies-over-gender-wage-gap/Report
The best way to destroy bad jobs is by creating so many jobs, even somewhat-bad jobs, that employers compete for scarce employees.
That’s this nice, logical, entirely thought-out theory of supply and demand, it makes perfect sense. But it literally does not seem to describe the actual world at all. There is basically no evidence of a link between wages and employment levels, either way.
For example, the employment market has incredibly tightened in the last decade, with unemployment falling by almost a two-thirds…and wages are essentially holding steady with employment. Why have they not gone up? Labor is a seller’s market, and, yet we’re still having basically the same crappy wage growth as we had during the recession!
Likewise, the government requiring higher wages slowly doesn’t cause unemployment. (Although you can obviously shock the system with a huge change.) We just had a lot of experiments of cities doing that by raising min wage, and…nada.
Again, this entire economic theory makes perfect sense. I can’t find any flaws in it as a self-contained theory. It’s just…not how reality works. And the theory keeps not being reality, no matter how obviously correct it should be.
I have a theory instead: Wages are simply not a large part of what determines how many employees are working for companies. Companies instead might base that determination almost completely on other facts (Such as the amount of labor required to met customer demands.) and ‘What wages I must pay these people?’ are barely a consideration.
I don’t know if that’s true, it’s just a theory I came up with. It’s to explain things that have been observed in reality.
This is opposed to a lot economic theories that were just sorta invented by economists out of thin air and so Obviously Correct that it doesn’t matter they don’t describe real-world behaviors. Which economists have a really annoying habit of doing.Report
I’ve had formal training.
No, you don’t get to overturn established theories of science by claiming you don’t understand them, don’t like them, or don’t see evidence for them. If that were how it worked then the anti-vaxers would do it. These theories of economics weren’t created by philosophers, we’ve had many centuries to work on them.
You’re narrowing a noisy multivariable system to two. You’re also ignoring multiple issues including that wage growth hasn’t been crappy, that’s a statistical illusion. Benefits, especially the cost of medical insurance, have increased.
And all types of people/family structures have seen wage increases, however since society’s unlying mix has changed the average has suffered. So for example single unwed mothers have done better if we compare them against single unwed mothers from decades ago, however they still do poorly against most other “types” of groups and there are a lot more of them compared to decades past.
Let me guess, you’ve never actually created a job yourself? Speaking as someone who used to own a business, this is nonsense.
The good news is get actual evidence to support your “theory” and you’re going to get at least one Nobel Prize and overturn a huge amount of economic theory. The bad news is it’s highly likely you’re arguing (your) feelings and not facts.Report
No, you don’t get to overturn established theories of science by claiming you don’t understand them, don’t like them, or don’t see evidence for them.
Scientific predictions don’t trump observed reality.
You’re narrowing a noisy multivariable system to two.
It’s your side making claims about two specific variables. That if min wage goes up, unemployment will.
Additionally, arguing ‘all effects of this throughout observed history have been drowned out by other things’ does not actually support your point. If the effect is so small it can’t be observed through the noise, it’s irrelevant to care about when deciding policy.
There have actually been studies that have tried to pry out some sort of microscopic effect. One of them, IIRC, hilariously found a higher min wage might drive an incredibly small fraction of unskilled 15 and 16 year old out of the market, like 0.1% for every 1% raise in min wage, and that was it. That was the total effect on employment they could parse out by combing through the data in minute detail. And other studies haven’t backed that up.
So I think it needs to be said: I am not arguing such a thing is literally impossible, or can’t be happening at a very tiny level. I’m arguing that it’s not been observed, and people have really, really looked for it, and at this point, even if there is some effect that min wage has on employment, it’s so small that it’s a really stupid objection to raising the min wage.
You’re also ignoring multiple issues including that wage growth hasn’t been crappy, that’s a statistical illusion. Benefits, especially the cost of medical insurance, have increased.
My claim isn’t that wages haven’t increased. My claim is that wage changes are completely unconnected to employment level changes. Which they are. (They’re barely even connected to the economy in general!)
The good news is get actual evidence to support your “theory” and you’re going to get at least one Nobel Prize and overturn a huge amount of economic theory.
If some people put forward a theory explaining why things fall upward, a theory that, says ‘due to the earth’s spin, things get slung away’, I don’t have to come up with gravity or anything to disprove their theory. I just have to point out that things don’t fall upward.
Likewise, I just have to point out that higher minimum wage do not cause higher unemployment. That is an observed fact, not a theory. It means theories that explain ‘why’ higher minimum wages cause higher unemployment are wrong, because scientific theories are supposed to explain reality.
And a lot of people have been pointing that out for quite some time, and really started doing so when all those ‘raising min wages’ bills passed a few years ago and all the dire predictions did not come true. Seriously, go and google it, you’ll find tons of articles from 2015 talking about what will happen, and, mysteriously, no articles from later saying ‘I told you so’. Because we basically ran a controlled experiment, and the predictions failed.Report
They don’t, but when most people say “observed reality” what they really mean is “my opinion and how I view the world”. The bar for overturning an established theory is extremely high and you’re not even close to reaching it.
To be fair, mostly this claim comes up with much hysteria in highly charged political debates. A more nuanced claim would be “those who still have jobs will be better off” and we might even talk about elasticity in the demand for labor, or whether there will be long term effects.
However various groups have high unemployment rates (inner city minority youth or Puerto Rico before the storm and economic crisis) which is probably connected to the min wage being higher than their productivity. And speaking of long term effects, this “living wage” movement is a big reason why the burger chains are experimenting with robot crews.
And there seems no possible justification for giving my teenage children a living wage. That means all jobs shouldn’t have a living wage, there should be a market niche for lesser jobs for children and low functioning adults. On a side note one of the issues here when we use my kids an examples is they’re competent, i.e. they’re not going to be the ones who lose their jobs if the min wage is raised too high in an effort to “help” people.
And that showcases the limitations of this, the gov wants things to be done from a social policy standpoint and is trying to outsource how that’s accomplished in an effort to minimize political pain.Report
The bar for overturning an established theory is extremely high and you’re not even close to reaching it.
The ‘high bar’ for overturning a theory is for when a _competing theory_ to explain the same evidence. There is basically no bar for overturning a theory on the basis ‘It does not match what is observed’. Just a single instance of a theory being demonstrably wrong is enough to undo it. Here basically every single study we’ve ever run has found this predicted effect to be not observable. Granted, all the evidence is vague real-world collection of data, so any specific example of it being wrong there could be due to noise, but all of it?
Indeed, this isn’t even a proper theory, as it doesn’t exist to explain any observed facts in the first place, which is how people are supposed to come up with theories. It’s merely an extension of a theory from the goods and services markets market, where it works, to the labor market, where it does not.
That means all jobs shouldn’t have a living wage, there should be a market niche for lesser jobs for children and low functioning adults.
Desperate people generally drive out non-desperate people, because desperate people will accept jobs non-desperate ones won’t. If your kids have jobs and don’t really need them, that is because there are enough jobs in the area that desperate people (With the same qualifications.) are already working.
It doesn’t matter if we change minimum wage laws so the desperate can’t accept lower wages. They will still accept crappier scheduling, or more work, or worse tipping hours, or bad bosses.
This means that there are literally no jobs that exist in this ‘niche market’ that you hypotheses. Every single job that people can be working at has people working at it trying to live on. Admittedly, there are some jobs that obviously do not provide enough work-time to live on, but that just results in people working multiple jobs like that.
In fact, this entire discussion is about _how_ one of those supposed niche market that ‘people can’t make a living doing it’, aka, rideshare drivers, is _full_ of people trying to make a living doing it! Which means this is basically a self-disproving line of discussion.Report
I call myself “Dark Matter” in part because the Theory of Gravity is demonstrably wrong. Of course whatever theory replaces Gravity will also be called “The Theory of Gravity” and will also have to explain the fact of gravity, rocks falling and that sort of thing.
My 10 second review of the internet suggests Labor Productivity still has its place in the grand theories. Afaict you’re picking nits in the data and then trying to use that to suggest the entire grand theory is unobservable and invalid. So this is Intelligent Design style arguing and not science, unless you can back it up in which case you’re in Nobel Prize territory.
That “with the same qualifications” there is doing a lot of heavy lifting. There’s an adult worker at [Box Store] who has a noticeably small brain and body. There are various people around with various social/personal/drug problems.
The question is whether business will accept marginal employees, much less let them crowd out others.
“Desperate” also deserves a lot of further explanation. Why exactly are they desperate? The Uber driver my family is dealing with socially was “desperate” for work because he keeps getting fired for smoking weed and/or sleeping on the job. So NO, we should NOT expect that kind of worker to crowd out my non-desperate kids.
Increase the cost of labor so employers have to pick between functional-but-ignorant kids and adults-with-serious-problems and I suspect kids win.
Further there’s the issue of “what percentage of these workers are ‘desperate’ and what percentage aren’t”? It’s been years and I don’t have access to the WSJ any more, but if memory serves the vast bulk had access to a breadwinner.
It’s great rhetoric to point to someone and say you’re trying to help them, ideally you’d be pointing at someone specific.
However it’s not clear this helps more people than you’re hurting. You are suggesting non-trivial amounts of economic disruption and you’re also trying to use rhetoric to handwave the costs of you ordering other people to spend their money to salve your conscious.
This whole situation suggests an “increase welfare” solution if you want to help (and target) the desperate and you could do that without getting the gov further into the business of destroying jobs and creating economic disruptions.Report
I think maybe a better way to think of it is that, what sort of economy have “we” created where people who really need and want jobs that can support a family, can’t find those and instead take jobs that are really only suited for pizza and beer money?
And the “we” in that sentence is all of us citizens who elect the people who make decisions about trade, treaties, public and economic policy.
Is this the economy we really wanted to create?Report
Unfortunately “we”, as in the general public, are pretty economically ignorant and often vote for popular things which negatively affect growth and employment.Report
Okay, there are a few people here who think they’re making a point about the amount time worked, and they’re not.
Rideshare workers should be paid enough, on average, to live on after expenses if they did it full time, at roughly the times that pay the best. This time is probably not 9-12, 1-5 office hours, but I’m sure the rideshare drivers can figure it out.
The fact many of them do not choose to work that amount, or choose to work weird hours randomly, doesn’t change anything about that, and it’s a little silly to pretend it does. Obviously those people won’t make enough to live on from it. That’s not the question.
The question is ‘Can someone put in a 40 hour workweek at this job and live on the income minus expenses?’. If not, we as society are underpaying for it, and something else is subsidizing it. (In this case, probably just via general welfare.) If we want it to exist, we need to figure out how to _not_ subsidize it, and how to actually pay for it.
If someone wants to make the claim ‘Well, drivers get to set their own hours’ as a _benefit_, and argue that means that $15 an hour is wrong…well, sure. As long as we remember they’re also paying expenses to operate their car and both sides of their payroll taxes and once we get into the nitty-gritty of all this that actual amount can be disputed. Which is why I said ‘living wage’ and not an actual amount.Report
How “we oughtn’t do this because of (some lofty ideals)” is all well and good and I agree with it as far as it goes.
It’s how that magically turns into “you can’t do this or else I will punish you” that has me scratching my head and wanting to point out that you aren’t my real dad.Report
Why? Or perhaps I’m not understanding your claim here.
Let me try this. If a driver works during optimum times, and is consistently taking fares (as much as can be reasonably expected), then yes, I could see the argument that they should be making in the ballpark of what other livery drivers are making. Whether or not that is a ‘living wage’ is a whole other question, but they should be making a competitive wage.
If they can’t, then maybe we should be looking at the things Uber does that is short changing the drivers. Like your example above about drivers not having visibility regarding the distance to a fare (I did not know that, I have visibility on them, seems only fare they know how far away I am). Or the utter lack of any kind of ability for a customer to offer additional incentive for a driver (if I am 20 miles out in the boonies and no one is taking my fare, or if I need a ride sooner than what the app says I can expect, I should be able to punch up the price I’m willing to pay for a ride, see if I can get someone to pick me up). Or the fact that Uber puts vehicle costs on the driver.
These are all legitimate complaints regarding how fares are set and driver compensation.
But ultimately the issue boils down to the fact that Uber never (TTBOMK) promised anyone a living wage driving for them, even under the best of conditions. The fact that some people got it in their heads that they could become unlicensed cabbies and have that be their primary source of income is not Uber’s fault, or frankly, their problem.
Now Chip has the more interesting question, which is why do we have an economy that causes people to feel like they should try to make a living off of work that was never intended to be that? All these people driving for Uber as a full time, primary income stream… why? Are they unemployable for some reason? Do they need job training? Are the underemployed for their given skill set? Do they need to seriously think about moving to a different city? Etc.
When I see a community with a large population working low wage jobs in order to scrape together a living, I don’t think about how I can force employers to pay more, I think about how we should be helping these people become more employable. If the available pool of labor for low wage jobs dries up, those low wage jobs will have to raise wages.Report
If a driver works during optimum times, and is consistently taking fares (as much as can be reasonably expected), then yes, I could see the argument that they should be making in the ballpark of what other livery drivers are making. Whether or not that is a ‘living wage’ is a whole other question, but they should be making a competitive wage.
Then, no, drivers are not generally making that. Incidentally, it’s very easy to find articles that claim otherwise, but be aware that all the companies have constantly lowered rate _and_ the percentage that drivers keep, so when you find something from 2015 that claims they earn more than cab drivers, be aware of that.
But ultimately the issue boils down to the fact that Uber never (TTBOMK) promised anyone a living wage driving for them, even under the best of conditions
There seem to be a lot of people in this discussion that appear to accidentally be arguing we shouldn’t have minimum wages laws or overtime laws or regulations like that. Which…if that’s what you’re actually arguing, please say so. It would be much less confusing.
Or if you’re arguing there should be a minimum wage, but rideshare drivers already make that amount, or make what that amount should be, say that.
If it’s neither of those things, if you think that these should be a minimum wage, and rideshare drivers do not make it, then please explain exactly why rideshare drivers are different and the law shouldn’t apply to them without using the circular logic of ‘rideshare drivers are not paid enough for it to be a real job, thus no one is doing it as a real job, and yes they are, but they shouldn’t be, thus we shouldn’t have to pay them real wages’, which could obviously be applied to basically any job that pays currently poorly.
And incidentally, make sure such logic does not apply to, say, waitstaff or retail workers or pizza delivery people, who _also_ bring in random amounts of money for the business they work for depending on outside demands. Yet we do not generally let businesses say ‘Well, you checked out no customers working the overnight shift at the gas station, so you get paid nothing.’ In fact, we specifically disallow such thing under the law….commission-only workers are only allowed in very specific circumstances that clearly would not apply to Uber drivers.
Which is half the point of the ‘contractors’ dodge they’re using to get around the law.
In other words: The structure of rideshare programs might, by the very concept, be something we do not want to allow under labor laws, and if companies wish to offer that service like that, they need to pay people to idly ‘stay at work’, just like other businesses do. Or treat it like tipping, where if they _don’t_ make min wage doing it, the company has to pay them min wage out of pocket.Report
I’ve been pretty clear and consistent in my disdain for pushing welfare onto to private parties. Minimum wage, rent control, etc. are all government abdicating it’s responsibility to manage social welfare because it’s politically painful.
So yes, I oppose Minimum Wage, I’d much rather we just have a UBI and let wages sort themselves out.Report
Let me be clear about this. I DO NOT have a problem with the ‘Contractor’s Dodge’, as you call it, as long as everyone is clear that the work being offered and paid for is piecemeal work. If Uber starts requiring drivers to be on call during certain times, etc, where it basically becomes shift work, then it’s no longer Gig work and the rules they have to operate under change.
I’m happy to argue that Uber has a shit compensation scheme and they should be paying more for the Gig work they offer, or paying for time in transit to a fare, or allowing their customers and contractors to engage in some form of haggling, etc.
But I do not believe that Uber is under any obligation to pay a person to remain idle at work unless they require that the person be available and actively taking fares at specified times. As long as the driver retains full control over when they want to take fares, and when they don’t, they relinquish any claim to being paid ‘on the clock’, regardless of their current task.
And that is the difference between an Uber driver and your pizza delivery guy. The traditional pizza delivery guy works from say 1700 – 2300, and is required to be available to delivery pizzas as needed by the company. The company is paying the driver for the exclusive right to their time during those hours. That is why he gets paid for idle time.Report
I’d add/suggest that it would be reasonable for Uber to have to disclose and provide a true accounting of costs borne by the contractor. Something more like Franchise disclosures, loan disclosures, and other types of disclosures where we assume that the contractor may not rise to the level of “sophisticated” investor… and or to protect business transactions from hidden costs/fees.
Reading the various Ride Share boards, its pretty clear that Uber/Lyft are working under a “last fool” model and not a true “contractor” model.
To Will”s ultimate point, if they *don’t* do this, based on what I’m reading there’s a legitimate investor concern that the model isn’t sustainable once the fools run out (or they monetize the data and can remedy the cost imbalance)… or, I suppose, it really does turn into people’s grandmothers and wealthy wives constantly joining the Fool Pool.Report
I can sign onto that. I’m not trying to say that Uber is some awesome company that does awesome things awesomely. But their shortcomings can be more effectively dealt with by making them be more honest and transparent with their contractors and customers, rather than trying to force them into an employment model that they don’t actually belong to.Report
That’s not true at all. An example: my mother retired from her job at 55 and for a while worked concessions at an amusement park. She has a pension. She has health insurance. She worked for pocket money and to have something to do. At some point, the price of gas went up and the job was no longer worth what she was bringing home.
There are a whole lot of unemployed and partially employed people (retirees, people with working spouses, student, etc.) who enter and exit the job market based on a relatively high reservation wage compared to the people who need to work to make ends meet.
And this is a problem, because the higher wages get, the more people from that first group enter the job market. And they tend to be more employable than the people in the second group.Report
There are a whole lot of unemployed and partially employed people (retirees, people with working spouses, student, etc.) who enter and exit the job market based on a relatively high reservation wage compared to the people who need to work to make ends meet.
I don’t understand, you seem to basically be making the opposite point that I’m objecting to.
I’m saying that pretending that certain sorts of jobs, like rideshare driver or fast food worker, are only inhabited by ‘people who don’t really need a full time job [and thus those jobs don’t need to pay enough to live on]’ is extremely dumb.
Not only because it’s not true in actual observed reality (Actual observed reality is probably something we should inject a bit more of into economics!), but because that doesn’t even make sense, economic-theory speaking…if we assume that jobs are equally accessible, the most desperate people should logically bid the prices downward and win the job.
This is, in fact, why we have a minimum wage to start with!
Or, like you said: People who don’t need the money don’t work when the job doesn’t pay well.
And this is a problem, because the higher wages get, the more people from that first group enter the job market. And they tend to be more employable than the people in the second group.
Is your idea that, if currently crappy-paying jobs pay better, higher-skilled people who _don’t_ need them will take them from lower-skilled people who _do_?
That doesn’t work. The more desperate people will _still_ bid wages down, even if there’s a floor on literal wages. They’ll work crappier hours, commute farther, take on more responsibility, live with shitter work environments, etc.
Or, to put it more obviously: This is literally the situation currently. There is already a floor on wages.Report
That’s demonstrably false. Places like Costco and Trader Joe’s pay higher wages than Walmart and other grocery chains and more desperate workers haven’t managed to bid those wages down.
To the contrary, it’s exactly what I’ve described. Costco and Trader Joe’s workforce has a different composition than those other places. You can see it when you go.
I’m not opposed to a minimum wage. But, for the most part, a $15/hr worker isn’t just a minimum wage worker who got lucky. When you jack the minimum wage up to $15, you put a bunch of different people in the same labor pool. And when those people compete, a lot of the very people you’re trying to help with the higher minimum are going to end up without a job.
Of course, a lot of other people will end up with higher wages. It’s a tradeoff.Report
I’m not opposed to a minimum wage. But, for the most part, a $15/hr worker isn’t just a minimum wage worker who got lucky. When you jack the minimum wage up to $15, you put a bunch of different people in the same labor pool. And when those people compete, a lot of the very people you’re trying to help with the higher minimum are going to end up without a job.
Nope. This is, yet again, another example of ‘Economic theory saying something at complete odds with reality’:
Higher minimum wage does not cause unemployment. And those people who hypothetically entered the job market would not have previously counted as unemployed, and the people they displaced would count. So this displacement you describe would show up in the unemployment stats even if it’s not really less employment.
It does not show up. Ergo, it is not happening in the actual world of facts we live in. Why? I could hypothesis that increase spending money in the hands of low-income people creates more jobs than are lost this way, but I actually don’t have to explain why the theory that doesn’t match reality isn’t true. It just isn’t.Report
OK. You can just keep making stuff up. I’ll rely on the literature (https://www.socwork.net/sws/article/view/538):
And (https://www.nber.org/papers/w23532.pdf):
I’m sure if you look, you’ll find plenty of papers showing that small increases in the minimum wage don’t show big disemployment effects. That makes perfect sense. Wages are sticky and business decisions are subject to a certain level of path dependency. You’re not going to see big changes in response to a small rise in labor costs. And that’s why I have no problem with the minimum wage.
But once you start ratcheting up the minimum wage to levels called for by “living wage” advocates, then yes, you do start to see significant disemployment effects. Maybe the increase in wages for those who don’t lose their jobs is worth it. I don’t know. But please stop pretending that the minimum wage is some kind of magic policy that doesn’t have tradeoffs.Report
earn a living rage
Is that what the driver strike was about? LOL
But seriously, if you assume that the driver already a car for the normal reasons and would have that same car whether they drove for Uber or not, then the Uber income does NOT have to cover or even contribute to the car payment (assuming a purchase vs a lease, which opens up other issues) but it does have to cover the marginal increase in mileage depreciation, maintenance, insurance, and repairs, AND afford the driver a reasonable (fsvo reasonable) compensation for their time and effort.
I mean… you could work it as a part-time job for part-time money but I don’t think it’s terribly unreasonable to expect a bottom-line compensation rate comparable to any other job — minimum wage, living wage, whatever line you want to draw.Report
If the compensation is not (fsvo) reasonable, then people would not do it for extra cash. I have been offered spec development work more than a few times, and turned it down because the customer was not offering me (fsvo) reasonable compensation for my time. I mean, I don’t expect part time spec work to pay me as much as I make working for Big German Multinational, but my time and skills are worth way more than what was being offered. But when I was an undergrad, those rates were attractive.
So I assume that the people who drive for Uber for extra cash are OK with the compensation they are getting, even though they are probably very bad at estimating the operating costs of their vehicle.Report
My point is that we shouldn’t be surprised when Uber pulls up the ladder and refills the moat under a new regime called “certification” – definitely NOT medallions… totally completely absolutely different.Report
I’m not 100% sure, but I believe the cab companies in Big City do something like this. Or if the companies don’t, then individual cab drivers do. They’ll be regular cabs, but they’ll also be registered/signed up as Uber drivers.Report
Even in dense urban areas, the cab companies were legendarily horrible before ride share apps. At least in New York City, there doesn’t seem to be any real difference in price between a ride share app and a traditional taxi. Sometimes, like a run between an airport and somewhere in Manhattan, the traditional cab can be twenty dollars cheaper. However, ride share app drivers are available day and night, tend to refuse minorities less, and don’t give you a hard time if you want to go from Manhattan to an outer borough. Traditional cab drivers would do all of the above, especially the last one, because a ride to an outer borough meant no return faire for them.Report
I believe it. Yeah, I can’t really tell a difference between my taxi receipts and Uber recipts (except that the Uber receipt automatically integrates with my expense app – another win for Uber).Report
Speaking of Big City only, I wouldn’t call the cab companies pre-Uber “horrible,” but one difficulty I had on the few occasions when I called a cab (as opposed to hailing one) was that it was uncertain odds a cab would actually show up. I think this happened because a goodly number of people would call cabs and while waiting might just hail any old cab that came along, so the called cab probably had the experience of showing up when there were no customers as promised. Therefore, there’s not much reason for the cab driver NOT to pick up someone hailing a cab instead of honoring their call.
I hope that’s clear. I don’t particularly blame the cab drivers as much as I blame the incentives. With Uber, the customer has already committed to paying and therefore has very little reason to abandon the call, and the driver has less incentive (in fact, has disincentive) to take another caller.
At a personal level (as opposed to a policy level), I’m much more inclined to want to take cabs instead of Uber.Report
Agreed. The primary societal benefit of ride hailing companies is primarily in the past in the form of a giant flaming wrecking ball crashing into the entrenched interest of the local cab companies. The rest is gravy (and rich gravy indeed considering that Uber is basically transferring money from rich people in the form of investments to poorer people in the form of subsidized transportation).Report
“Is Uber really competing on price?…At the airport…where there’s a simple mechanism to get a cab that’s often easier than Uber, so that’s what I do. In the city where flagging a cab is harder than using Uber, then Uber wins.”
Not every price is dollars, and time is money.Report
But it appears that wrapped up in Uber’s business model is people failing to account for the asset depreciation of their cars.
I think you are mixing here fixed costs and marginal (variable) Operations & Maintenance costs. Uber is right that the asset depreciation of the car is a cost that belongs to the driver and not to the customer. The car depreciates the same just through the passage of time, whether you use it or you keep it in the garage waiting for it to become an antique. And, given the high capital cost of cars, this depreciation cost is not insignificant, and represents significant savings compared to a taxi company that has to buy, and depreciate, the cars.
What drivers should be compensated for is the additional operation (fuel, tire wear, oil changes) and maintenance (additional wear, more frequent breakdowns) costs associated with the additional use. I don’t know for sure if drivers are adequately compensated for these, but I suspect they are not.
Stripping the asset cost (but not the added wear & tear and running costs) is a legitimate part of Uber’s model. Any owner of expensive assets (a factory, a car, a power plant) really want those assets to be running as much as possible, ideally 24/7, to diffuse the investment cost among as many widgets, or rides, or electricity, as possible. Running the asset more reduces the medium (fixed plus variable) cost of the widget or ride. At the same time, additional wear and tear adds a marginal cost to the next widget. To the extent they drivers are not considering this, or are not being compensated for this, drivers are subsidizing the riders. I suspect there’s a class action lawsuit waiting to happen there 🙂 .Report
Fair point. I’m using “depreciation” here loosely and maybe even wrongly in the business accounting sense. But a car that has been driven extensively loses more value than one sitting in a garage in the real sense of resale value, even though they both lose value over time.Report
But a car that has been driven extensively loses more value than one sitting in a garage in the real sense of resale
Correct. But a car that has been Ubered has produced revenue for the driver. To the extent that the value of that revenue exceeds the lost value on the car resale, the owner is better of by having run the car instead of keeping it in the garage.
The Uber model is not per-se wrong, neither for Uber, nor for drivers or riders. The pricing might, and probably is, totally screwed up, though, putting the whole idea in jeopardy, regretfullyReport
Right. My mention of this is that drivers are accepting underpayment because they’re counting the money they make and not the added cost (increased depreciation, but also as you point out maintenance costs … Which is probably a bigger issue)
Report
I find it interesting that there waa something of a driver strike/protest simultaneous to the Uber IPO. Maybe just a coincidence but April 15 was just a couple weeks ago too.
I’m imagining a bunch of drivers sitting down with their 1099’s and the tax program, which actually ends up figuring stuff like allocating depreciation and stuff on the Schedule C, and realizing how little actual profit they enjoyed.Report
“What drivers should be compensated for is the additional operation (fuel, tire wear, oil changes) and maintenance (additional wear, more frequent breakdowns) costs associated with the additional use.”
For business use of a vehicle, this is typically accounted for as depreciation rather than taken as direct cost.
“The car depreciates the same just through the passage of time, whether you use it or you keep it in the garage waiting for it to become an antique.”
?? Car value is more directly tied to mileage than to time. (If anything, keeping your car in the garage makes its value go *up* compared to other cars of the same age, because it will have been driven fewer miles…)Report
Uber’s strength isn’t its price, but its availability.
This
What Uber tapped, and solved for, is the unavailability of public transport for most people around the world (I travel internationally a lot – Uber has been a game changer everywhere).
Last week I was (for the first time ever) in Helena, MT. There are no taxis in the Helena, MT, airport. None at all. I’m not sure there are even taxis in Helena. There I am, on the curbside in a beautiful Big Sky State evening. I prayed, and Uber delivered. An Uber driver arrived within five minutes.
I think that the original Uber model was based in a more diffused, short distance, within the neighborhood, ridesharing. Under those circumstances, the additional wear and tear is not such a big issue, and Uber’s original pricing model made sense.
What Uber didn’t realize at the time is that there’s a huge need for public transportation (even, as @marchmaine points out above, irrespective of the cost). Uber tumbled into a huge unmet demand: airport rides (*), bar evenings (**), crummy parking destinations, taxi deserts (like 99% of the planet), etc.
Whether Uber (properly priced) is the correct answer to this demand, or something better will come next, I don’t know. But Uber is not just a cheaper taxi. It’s a massively available taxi service with low fixed costs and barriers to entry. It’s the perfect microeconomist dream 🙂
(*) I used to call a taxi in the evening for morning rides to the airport. Several times the taxi failed to show, which meant me driving madly in my own car to get there, park, and get to my flight. With Uber I do know where the driver is and when he is arriving to pick me up.
(**) An acquaintance of mine owned a dad and son (plus a couple employees) limo service. After airport drives, his bread and butter was driving people in the evenings for dates to bars, restaurants (yay drink and not drive), and theatersReport
There’s also something to be learned from the Amazon model… as @PhilipH also notes above… the initial pricing and offering of a ride-service at low prices is the Market Capital cost to reach “escape velocity” into a Data/Life-style behemoth that ultimately builds a life-style business that makes the whole dirty automobile and grubby ride sharing aspect just something that feeds their profitable bits.
Whether they can execute or pull it off is an entirely different question… but then, none of us really think of Amazon as a bookseller do we?Report
Whether they can execute or pull it off is an entirely different question… but then, none of us really think of Amazon as a bookseller do we?
I don’t think of Amazon as a bookseller, but I do think of them. or Alibaba, or E-bay, as a virtual marketplace, where the value is in matching buyers and sellers.
Yes, I know, that Google, Amazon, and others track my clicks and try (and mostly fail) to show me adds I might be interested in.
But I wonder how effective that business model is. My experience is that the ads I get tend to match things I’ve already purchased, or things I might have googled about in a flight of intellectual curiosity. But very rarely they tempt me into anything. They are easier to ignore than TV ads (and DVR makes those extremely easy to ignore).
Google, Facebook, Uber, MS, and many others know I am a middle aged, non-USA native, Houston based, professional, upper middle class, disposable income, white male. I doubt they have been able to turn that info into much revenue. Yes they might have sold it to others that sold it to others that sold it to others, but, at some time, someone needs to profit from knowing I am very much into equestrianism
Perhaps @veronica_d will one day write a post about it seen from the inside of a Google-like company. I’m not asking for any business secrets. Just to know when and how are people supposed to make money from all my secrets.Report
AWS is where the money is. Marketplace is the big revenue generator, but by most accounts AWS generates approx 50% of the profits on about 12% of the revenue.
And AWS didn’t really exist 5-years ago.Report
Where I live it’s cheaper to taco to the airport than use Uber. Tacos can wait at the taco stand and earn a fare both directions. Uber drivers have no such guarantee, so they have to charge you for their return drive too.Report
I’d love to taco to the airport, a ride AND a meal combined. but I’m afraid I will smell of salsa 🙂
More seriously, many (most?) large airports limit the kind of taxis that can wait in the airport taxi stands to certain airport certified ones, which, normally, don’t get rides in the city, but have to return empty to the airport.
And, of course, nowadays, Uber drivers stay in the cell phone lot waiting for a ride, so they can get the ride back tooReport
That was a wonderful autocorrect. The consistency really makes it. I’m not even mad, Google.
In Edmonton there is an ‘airport taxi’ company, but the taxi stand at the airport is mostly cabs from one of the major companies that does most of its business in town.Report
I just assumed it was a Canadian thing, calling a Taxi a Taco…Report
I thought it was the next great thing… I need a Taxi *and* a Taco… who do I call?
Think of the possibilities: Kabob Taxi, Smash Burger Taxi (maybe drop Smash?), and the ultimate, Ice Cream Truck Taxi.Report
Ice Cream Truck Taxi would definitely make a killingReport
We don’t say “aboot”, we say “about”. It’s Americans who say “abaht”.Report
I didn’t think it was a Canadian thing, but I just assumed it was a thing and I simply didn’t know what dragonfrog was talking about.
I do that a lot.Report
I know a lot of airports (usually through the local Port Authority) in the US have contracted with specific cab companies to run service at the airport. IIRC, any cab can do a drop off at the airport, but only the authorized cabs can sit and wait.Report
before Uber, where I used to live you’d order a pizza and then catch a lift in with the driver. For a nice tip of course.Report
does that mean an SUV is a gordita?Report
Uber: Making the dream of a taco truck on every corner a reality.Report
I have never used Uber and I can’t remember the last time I took a taxi, so I may be way off base here, but wasn’t a huge part of the early appeal of Uber the surge pricing? And if so, could that be affecting the current issue with pricing?
I absolutely agree about a sort of worldwide “taxi” solution, especially one as diffused as this and as easy to break into for economic reasons.Report
Surge pricing still exists in major metro areas where I Uber. Not sure how it plays out – Taxis in DC several years ago added fuel surcharges and surge pricing when gas was approaching $4 a gallon and they didn’t all go out of business for overpricing their market.Report
Surge pricing was a backlash against their initial appeal… it was justified as a utility to increase the number of drivers vs. scarcity (i.e. you trade $$ to reduce wait), but most people simply experienced it as charging me more money to get where I want. That is, Uber still showed up exactly as you expected… just that it cost a lot more. It was the “showing up just as you expected” that had become the norm and the mechanism for making that true was all too visible.Report
Surge pricing was disliked, but was an important factor in the “availability” thing I think is at the core of the service they offer. You might pay more for an Uber, but you can get an Uber.Report
It was, however, found that surge pricing wasn’t increasing the overall number of drivers, it was just leading drivers to concentrate in the surge areas and starving others.Report
If Uber returns / retreats to ride sharing, as in, “I’m driving downtown for work anyway, I might as well take someone along with me for gas money”, then it could be viable. It would be a much smaller company, and that’s not what the investors bought into. They were promised that Uber would destroy public transit, among other things.Report
Wouldn’t surprise me Uber investors take a bath.
I think there is a future for an Uber-like company that is a driving service and not just a carpooling coordinator. I don’t know if it will be Uber or Lyft doing it. Might be Google or something that uses it as a support for its primary business.Report
One of my ideas for a Seinfeld reboot is that Elaine finds out that an Uber driver is going the same place as her, and she refuses to pay because it’s “ride sharing“, and ends up spending the entire day sitting in his car.Report
As @dragonfrog alludes, Uber was originally touted as, and still seems to be advertised as, a ride-sharing app. You’re going downtown or to the mall or whatever and may as well fill the empty passenger seat and get a little gas money, or you’re trying to set up/join a car-pool to work. In those circumstances you wouldn’t really be putting enough extra miles on your vehicle to matter much wrt maintenance and depreciation.
My FB comment that Will quoted was assuming the polar opposite, that someone would purchase or lease a car specifically and exclusively to Uber and that would be their sole income.
The evolved reality is that folks are Ubering as a second income nights and weekends and the service has become an alternative taxi model. So the Uber income has to cover some, but not all, of the maintenance/depreciation which is partially age-of-vehicle and partially miles/wear-and-tear.
I’m going to back away from my unsustainable comment but note that the revenue to drivers likely needs to increase somewhat to work. If Uber is really eyeing a FB/Google/Amazon model of data acquisition/brokering then the ride app could end up as something of a loss leader for them.Report
As a more then occasional Uber user in the DC area (and several others when I travel for work) I always have the option for Uber Pool – which is the traditional sharing approach with multiple passengers – and UBer X which is the one rider one driver approach. Uber pool is cheaper, but you give up the direct to your destination approach of Uber X.Report
Ride Sharing is an interesting topic… was this the polite fiction that Uber used to hide true costs? Because never once have I ever experienced a ride share as in, “Hi I’m Archie… I was just on my way to Penn Station and thought I could grab a fellow Manhattanite and defray the costs of my actually having a car to drive around downtown Manhattan… and, I thought it might be fun to chat about my day on the trading floor.” Plus, is it even possible to park at Penn Station? Now that I think about it, is it even possible to park in Manhattan (I mean other than on the streets, which I just assume are abandoned vehicles… abandoned out of despair of driving in NYC).
If so… If anyone thinks this is ride-sharing, then it strikes me that just like franchise laws Uber should be required to disclose all fees/costs and provide good-faith business estimates to all drivers (if they don’t already, do they?) as part of the on-boarding process. I suppose since it is “free” to be a driver they are exempt from these sorts of things?
Are Trucking companies obliged to disclose various fees/costs/expenses to owner operators? Or are you all considered some form of “Sophisticated Investor”?Report
Ride Sharing is an interesting topic… was this the polite fiction that Uber used to hide true costs?
I think it’s the polite fiction they use to skirt bylaws governing taxi services.Report
Yeah, ride sharing kinda makes sense. If I’m going to King Soopers and I’m going to spend an hour there going up and down the aisles, why not ask if anybody on the block wants to come along? They pay me 5 bucks (or whatever) to go to the store and take them back to their house.
I was going there anyway and driving 4 blocks out of my way ain’t no problem.
But we live in a society.
You do that for someone two or three times and, suddenly, this is a person in your neighborhood who you’re taking to the store on the reg. Now what? Hey, you wanna come over on Saturday? We’re going to drink beer and play mumblety-peg. You still want five bucks to take me to the store? You’re going to the store anyway!
Uber being a taxi service allows this relationship to be at arm’s length forever.Report
There are parking garages in Manhattan. People even pay for spaces on a month to month basis.Report
You’re going downtown or to the mall or whatever and may as well fill the empty passenger seat and get a little gas money, or you’re trying to set up/join a car-pool to work. In those circumstances you wouldn’t really be putting enough extra miles on your vehicle to matter much wrt maintenance and depreciation.
What surprised me when I found out is that Uber drivers don’t know where you are going before they accept the ride. AFAIK, they have the oprion to set up a general direction (say, Northwards) but cannot skim the requests to see which one makes more sense for them. In that respect the app becomes much more like a Taxi and less like a car pooling app.
I think Uber has the computing power to tweak this feature a bit, giving riders the option to limit distance and direction (*), if they want. it will make drivers happier (no long rides if they don’t want to) at the expense of reducing the service availability a little.
“a little” is, of course, carrying a lot of weight here
(*) When I was a child, in Spain, taxi drivers (almost all of them individual owners) had a city issued sign with a specific neighborhood name printed on it (normally where they lived). At the end of their shift, the taxi drivers would put it on the windshield, and had the right to refuse any ride that did not go in the direction towards the signed neighborhood. Without the sign, they had the obligation to take all ides within the coverage area. Their “medallion” number was written in big numbers outside, so you could report them if they refused a ride absent the fishing sign. God, I hated seeing those signs in the evening – they never ever went my way (the bane of living in an upper middle class neighborhood, taxi drivers lived somewhere else)Report
@Marchmaine:
Assuming you aren’t being rhetorical – yes it is. My brother and his wife did in upper Manhattan for over a decade, and even moved the cars when required for alternate street side parking. They used the car for hauling some stuff to their co-op but mostly for travel outside manhattan.
@J_A:
I remember the signs and numbers from my time in Seville as a kid. Never knew what they meant however.Report
I think the comparison of Amazon and Uber as operating as hosts for the marketplace matching of customers and providers is a good one.
It explains why they command a near-monopoly, since really, the marketplace doesn’t need or want twenty different host sites.
But it also explains why eventually they will have to be brought under some form of public control like a utility or bank, because they become too important to the public.Report
I haven’t followed any legal details, but wonder about an Uber driver’s insurance status. What’s covered or not in the event of an accident when the car is being used for paid transport service? I know that at one time I lived in a state where standard insurance did not apply in the event of paid service, and for a while it made car pools rather complicated.Report
My wife recently had to get insurance for using her car for work. They have a “Business Use”.. it added only a few dollars a month to our premium but apparently it usually goes up around 15% (she was surprised that ours didn’t).Report
Is she carrying paid passengers? IIRC, that was the killer at the time/place I’m talking about.Report
I would assume that standard auto insurance coverage doesn’t cover commercial use. Just looking at my policy, I see a coverage exemption for when the vehicle is used “as a public or livery conveyance,” other than a “share-the-expense car pool.” A quick google suggests this is standard language in the industry.
I’m not sure this would be a state issue. The state or local government may require a driver to get a certain type of insurance, but Uber and others don’t concede that they are drivers. If there is not a licensing system to confirm insurance coverage, then the driver may simply not be insured. It looks like Uber and others are providing some sort of excess coverage over the driver’s insurance, but it may be centered on third-parties (pedestrians and other drivers) and have lower $ values.Report
In most states, your basic car insurance does not cover “commercial activity” (ie, being an Uber driver). You need commercial insurance.
I deeply suspect that there are quite a few Uber drivers who lack such insurance, mostly through ignorance or the belief that Uber’s own insurance somehow covers it. It does not.
If you, an Uber driver, suffer an accident while driving for Uber your insurance is going to cheerfully say “Not my problem” as you were using your car for non-covered activities.Report
That’s kind of the pretense that Uber makes though, isn’t it? That this is “ride sharing” not an unlabeled taxi service.
Kind of like how you have to declare as income rent paid by your tenant who lives in a separate dwelling from you, but if you have a housemate who pays you rent for their use of the dwelling the two of you share, that’s a private arrangement regarding how household expenses are covered, not income.Report
Not quite. At least, not in our state. I can’t speak for passengers, but “commercial activity” is covered under “business use” and is available on personal insurance. You’d want this if you delivered flowers or pizza for instance. We got it because my wife’s job involved house calls. If she got into an accident, it would be covered. We asked this about ten times in ten ways.
If there’s a delineator, it’s passengers and not commercial activity.Report
I suspect that type of coverage mostly benefits the employer. If someone gets into a significant accident going from one place of business to another, typically a lawsuit gets filed against both the worker and the business, and the business may not be covered. I wouldn’t expect that coverage to be very expensive, because its basically covering the risk of an accident with two pockets.
OTOH, it seems like driving passengers for money opens up new risks like civil rights violations, or just something along the lines of issues that arise btw/ strangers that hadn’t previously encountered each other.Report
Okay, now I’m confused. I don’t follow what you’re saying there.
Obviously, driving to work is covered under standard car insurance.
So what exactly is the difference between driving to house calls, and driving to any other place of employment? Or were you saying there _wasn’t_ a difference?
I can see the pizza thing, the driver is literally being paid to drive there and deliver something. While on the clock. Being paid to operate their vehicle to transport goods is obviously a commercial activity.
I’m just not following the ‘My employment location is randomly assigned to people’s houses so I have to constantly go to some other place’ as being a commercial activity concept. Using a vehicle to transport yourself, and just yourself, to a place you are going to get out and work at, is not commercial use of the vehicle.
Granted, who knows what stupid nonsense insurance companies have come up with? We should probably count ourselves lucky they don’t cap their covered monthly mileage and deny claims if we’ve driven over a certain amount.Report
The first question is whether you being paid or reimbursed for the drive. If you are, then you are at risk for non-coverage. If it’s an occasional thing you’re fine. It they determine that it’s central to your jobs you are not and you can take them to arbitration.Report
Okay, here are the answers to the questions on insurance:
When the driver is in his/her vehicle but is not logged into the Uber/Lyft app (the driver is not in so-called “driver mode”), then the driver’s own personal car insurance coverage will apply to any accident that occurs, and Uber’s/Lyft’s insurance coverage will play no role.
When the driver is logged into the app, but has not yet accepted a ride request, Uber/Lyft provides liability coverage for any accident that is the fault of the driver. It only covers losses sustained by others who were injured or had their property damaged. It does not cover the Uber/Lyft driver’s own car accident injuries or vehicle damage.Report
I looked at the policy limits. $25k property damage liability when the driver has logged in. Many years ago, when I had my first vehicle and was deciding about limits, my father — who worked in the back office part of the insurance industry — showed me pictures that explained just how easy it was to be responsible for a million dollars of property damage in the middle-of-nowhere Nebraska.
Cause a new luxury SUV to go through a storefront while you’re logged in and, unless you have personal insurance that covers it, you could drive for Uber for the rest of your life and not get out of that financial hole.Report
One thing not addressed in the link is that it is “excess” insurance, secondary to the primary insurance, which means (a) it is less expensive because it insures the risk that the primary coverage is exhausted, and (b) potentially open to some mischief, particularly if it is not fully drop-down coverage. Point b is highly speculative, but I think personal injury lawyers would strongly prefer that it was primary coverage.
Also, the coverage extended is only towards the non-contracting parties, consistent with the primary public policy concern. Uber/Lyft conceptualizes the arrangements as simple contractual exchange btw/ independent participants. The drivers have signed the agreement with Uber, limiting Uber’s responsibility, and the customer has “signed” the agreement with Uber, limiting Uber’s responsibility. Pedestrians and the occupants of other cars have no contract and are most vulnerable to considering this to be an entirely private contractual matter.Report
Ridesharing companies have commercial insurance that covers drivers while they are actually contracted to work for the company(1), aka, when they have accepted a ride and are going to get a passenger, or have picked on up and transporting them.
There is, however, a gap in the insurance for when a driver is driving around _without_ a passenger, which the rideshare companies don’t cover(2), which is probably still legally using the car for commercial purposes, and this was an interesting problem in the early days.
Nowadays, a lot of car insurance companies have a specific rideshare addition to policies.
1) Remember, they claim drivers are contractors. They make an offer for the driver to transport someone, and the driver either accepts or not.(3)
2) Presumably because otherwise people could just download the app, leave it on, never accept a ride, and get free car insurance!
3) This is, of course, an extremely dubious claim because companies can’t normally hire a contractor without, for example, agreeing on payment in advance or providing more details of the job. “I’m hiring your company to pave my driveway. I won’t tell you where it is, or how big it is, or any more details, but I’ll pay you $X a square foot.’Report
Per the above link, you do have a fair amount of liability coverage even if you don’t have passengers (as long as you’re waiting for passengers), but that’s all you have.Report
Ah. Good. I just texted my source about that when I saw your post, wondering, and it seems like the additional policy the insurance companies offer actually is to add comprehensive coverage to drivers who have no passengers. I.e, it’s just gap filling, and not really needed. It’s also not really that expensive, apparently. (Presumably because randomly driving around for no reason waiting for passengers is stupid, and most drivers just find somewhere to park.)
However, he told me that, originally (Before he started, so this is like third hand), Uber supposedly didn’t even provide liability during that period.[edit: without a passenger, that is] And no insurance company had anything either. Which meant you were, technically, uncovered, if you had an accident and the insurance company ever figured out you had the rideshare app on (and thus were operating your vehicle for commercial purposes) during it. I’m not sure if this is true.
Incidentally, he wanted me to tell you insurance is why you should never accept a ride in the wrong vehicle, even if it actually is the right driver and they have some excuse about why they’re in the wrong vehicle. If it’s not their registered rideshare vehicle, you are completely uninsured while in it. Same with people who give out their direct numbers to riders and bypass the rideshare company. You might have bypassed their cut, but you accidentally bypassed their insurance, too. Your driver gets in a car accident and you get injured, and the insurance company for that car discovers that you were paying for that ride, they will refuse to pay. (And the rideshare company, of course, has never even heard of that car, so obviously they won’t pay any claims.)
I’m actually a bit startled that no one has started a business venture to fill _this_ in. A company that takes a smaller cut, a flat fee, like 10c a ride, (Like airline insurance, basically.) but they don’t match anyone up with anyone, it’s basically just to let you operate as a private taxi and be correctly insured.Report
Rideshare insurance is a thing now and probably makes that harder. But I think we going to see more enabling creative income models in the future.Report
1. Has anyone done any work to figure out the expenses of who pays for the cleaning/maintenance of driverless vehicles? Let’s say you get a driverless vehicle out on the streets on Friday and Saturday night. What happens if someone throws up in it because they drank too much. Does it go back to the homebase for inspection between drives or not? What happens when the next customer refuses to get in because of the mess in the back?
2. There are more serious examples of things that can go wrong then my light example above.
3. It is pretty amazing that Uber/Lyft manage to pass on a lot of costs to their drivers and they still can’t find a way to make money. I love them. They make it easier to get places and increase reliability but people are very price-sensitive to their costs. I’ve been with people who would rather wait around or take another method of transit than the do a drive during surge pricing.
4. The primary way Lyft and Uber make life is easier is with transit to and from the airport in various cities and so I don’t need to rent a car when on business trips.
5. The best theory of their value is whatever data they are collectingReport
1. The annoyed customer presses the button on his phone saying “This car is filthy” and the car goes off to be cleaned and another car is dispatched to the customer. Quite possibly an algorythm or some bored schlub in a data center reviews the car video for the prior passenger and applies a “you barfed in our car and didn’t report it” charge to them, which likely is steeper than the “you barfed in our car and reported it” charge.
2. If driverless tech becomes good enough to get driverless cars on the road then most of your other examples are probably covered. If not, then not.
3. People are shockingly, astonishingly, price sensitive. Like the airline industry tried doing “you’ll have nice legroom, a free bag, good in flight meal, comfortable boarding” companies. Tanked. Horribly. People wanted to save the benjamins. If the airlines could figure out a way to safely sell seats on the wings? People would line up around the block for them.
5. Yes, and the old structures they defenestrated.Report
I’ll bet on the algorithms. Sensors of various sorts are getting dirt cheap: moisture, odor, visual recognition, etc. And we have almost reached the point of exchanging “How am I going to get enough CPU cycles?” with “What am I going to do with all these idle CPU cycles?”Report
I’m inclined to agree. If they figure out how to teach a car to drive itself; teaching it to tell if its passenger messed it up too much to remain in service should be comparatively simple.Report
The question then is, what to do after excessive BO.Report
A sensor dispenses industrial strength car deodorant and auto-taxi’s develop a culturally recognized reputation for a certain “smell”.Report
So it may not be the case that there is a systemic inefficiency in the basic costs and systems of car ride service provision the services have solved that are going to reap massive ps by totally changing the model, and disappointment that that may not be the case could be behind the underwhelming initial investment levels (which are disappointing entirely compared to expectations tat could have been set on any basis beyond clear public understanding).
But that isn’t the only source of value the services could provide. Over the long term, the services may have simply uncovered unmet demand for private ride services. I’m not well-known as a professional licensure critic, but it’s generally understood that medallion systems, however you might view their propriety or justification, are in effect nothing more than artificial constraints on ride service quantity, pure and simple. In the end networked ride sharing might turn out to be little more than a workaround on these quantity limitations (again, whatever one might think of that ethically). There is probably money to be made there long term, even if it only turns out to be on the scale of the existing industry, scaled up somewhat. (Granted it might be a little less, as the entrance of an uncontrolled number of new providers is likely to move the industry closer to a state of perfect-ish competition, which implies a move toward lower profits.) Basically, the taxi business is profitable if not wildly so, and under a new non-quantity restricted equilibrium, it’s likely to still be profitable – just only on the scale that it already was (or a bit less). If that makes sense.
As an aside, as an ex-short-time-cabbie, one thing this debate often excludes is the fact that taxi drivers generally or in a lot of instances never were covered by minimum wage laws. You get your cab, and if you don’t hustle, you might not make much on a shift. That was the gig, and there wasn’t really much political pressure on the system for that to change. If the notoriety of the sharing services ends up possibly incurring the dead hand of government on the industry due to increased political attention, that could actually end up being an advance from a worker-interest perspective.Report
The medallion system is the elephant in the room. Nobody can quite explain why there should be a limit on the number of taxis operating other than “well uh uh uh uh well that’s the way it is”
Like, if there hadn’t been an artificial limit on the number of taxis, then we wouldn’t be having the discussion about Uber because it would be a lot easier to be a cab driver and more people would do it. It would be a lot less convenient than simply downloading the Uber app and hitting “sign in”, but it’s also the case that there would exist a business model that didn’t depend on drivers not carrying full insurance and not being paid properly.
“taxi drivers generally or in a lot of instances never were covered by minimum wage laws. You get your cab, and if you don’t hustle, you might not make much on a shift.”
That’s also why you only saw cab drivers in city centers or at airports (or sports stadiums when there’s a game), because if there’s no minimum-wage guarantee then you’re not gonna go trolling around neighborhoods in the hopes that someone might want a ride.Report
IIRC the common justification for the medallion system is that if the city handed them out to anyone who asked, you’d have 100K cabs clogging up the streets. And that isn’t necessarily wrong, but that doesn’t mean that the politicians have any clue how many cabs are actually needed in a given city, nor that the medallion system is even remotely capable of responding to changes in demand.Report
Regarding regulation-
Sure, one can chose to ride in a regular taxi over a rideshare if one is worried about personal security while being chauffeured.
But if I’m around town walking or riding my bike, it isn’t a market choice when the rideshare driver is unfamiliar with the neighborhood, has there head down in their phone, and blows through crosswalks and stop signs, nearly killing me.Report
Perhaps relevant:
https://www.nytimes.com/2019/05/19/nyregion/nyc-taxis-medallions-suicides.html?action=click&module=Top%20Stories&pgtype=HomepageReport