Disrupting Uber

Driver-owned apps could end Uber’s exploitative reign over the ride-share market.
Vic Vaiana
July 31, 2016
Smartphone directions in an Uber.
https://images.jacobinmag.com/2016/07/uberr.jpg
Yet again, an investigative report has found that Uber underpays its drivers. Using company-provided data and leaked documents, Buzzfeed found that drivers in Detroit, Houston, and Denver “earned less than an average of $13.25 an hour after expenses” and faced yearly expenses of roughly $3,000.
 
This doesn’t mean drivers are better off working for a traditional taxi company. While Uber’s burdensome cost-shifting has come to define Uberization, the company merely digitized the taxicab industry’s already exploitative practices. The taxi medallion system, which requires drivers to pay their cab’s medallion owner at the start of each shift, deserved to be “disrupted.” But Uber’s employees face serious costs and risks nonetheless.
 
The possibilities don’t have to be so restricted however. Ride-share drivers usually already own their vehicles, so in theory they could enter the ride-share marketplace themselves. By ditching Uber’s predatory practices for a cooperative model that uses the same technology, driver-owned apps could democratize the ride-sharing marketplace, fulfilling the initial promise of the so-called sharing economy.
 
A co-op app would also avoid the pitfalls of other worker-owned taxi cooperatives like San Francisco’s Yellow Cab Co-Op, which filed for bankruptcy in January. Yellow Cab relied on the older ride-hailing model; if new co-ops employed a ride-sharing model — like the one industry giants Uber and Lyft use — they could compete in the same marketplace and potentially out-disrupt the Silicon Valley darlings.
 
The Bottom Line
 
Uber’s platform technology may have forever changed the way people catch a ride, but it’s really the company’s adept regulation-dodging and cost-shifting that made it the profitable behemoth it is today. That, and the fact that it hasn’t shared its success with its drivers.
 
Uber emphasizes its positive impact on the lives of part-time workers who treat driving as a side gig, but the company depends on its full-time “partners” to transport a majority of riders. Less than 30 percent of Uber’s contractors work more than thirty hours a week.
 
But according to a survey by Harry Campbell — a driver who blogs as the “Rideshare Guy” — these full-time workers drive about half the total road hours across Uber’s platform. His blog has also reported that due to rate cuts, Uber drivers today drive nearly twice as many hours to earn the same amount in fares in 2013.
 
The drivers who don’t completely depend on their work with Uber to pay their bills — a group that makes up about half of the company’s workforce — depress full-time workers’ wages. Because they have less skin in the game, they aren’t motivated to demand better pay and benefits.
 
Full-time drivers have already joined forces to demand better conditions. In February, hundreds gathered in front of the company’s New York headquarters and shut off their apps in protest of a 15 percent price cut, the latest in a series of corporate decisions that have harmed drivers’ bottom lines. The Uber Drivers Network — which has been attempting to represent drivers in New York since 2014 — coordinated the action. The New York Post spoke to a protesting driver who told the paper he works sixteen hours a day, adding that the week before “[he] worked nineteen hours in one day, and I slept in the car at JFK.”
 
Farroukh Khamdamov, one of the group’s organizers, originally joined Uber to schedule work around his classes, but eventually had to take on additional hours to compensate for unexpected rate cuts like the one in February. Uber claims these cuts increase demand and therefore decrease driver wait times.
 
But, as Khamdamov points out, most drivers can only accept so many rides within a given time frame, so the price cut doesn’t benefit them at all. Having joined the company anticipating flexibility and independence, these drivers become more disenchanted each time Uber asserts its control by lowering their wages.
 
Members of the group have collaboratively developed an app called “Swift,” which would be entirely driver-owned. Khamdamov thinks that drivers — as Uber’s service providers and car owners — can leverage labor and capital against the company because after all “without the drivers, it’s just an app on your phone.” As a cooperative Swift hopes to create employee equity, increased job stability, and shared governance — enabling drivers to dictate the value of the service they provide.
 
The app’s launch date has yet to be announced, but drivers interested in driving full-time can already sign up. And while Swift has not detailed exactly how it will recruit and hire drivers, several models exist.
 
In the last ten years, taxi drivers have partnered with unions like the Teamsters and the Communications Workers of America in Seattle and Denver, respectively. Union Cab in Madison, Wisconsin — in operation since 1979 — has even managed to become the city’s market leader. Wages and benefits provided by Union Cab “exceed industry norms and still allow the company to make a profit. Veteran drivers’ annual income can exceed $40,000 (about 35 percent higher than the national average) and they receive health insurance, a rarity for taxi drivers.”
 
Combining these models with ride-share apps would help co-ops to survive in the new marketplace.
 
Two Ways Forward
 
Competing with Uber might seem intimidating, but in many respects the company is a paper tiger. Its massive valuation, which stood at $62.5 billion in January, comes from intellectual property — its brand and data — rather than from tangible assets. While consumers recognize Uber’s powerful branding, the company isn’t offering an exclusive product, nor does it own many liquid assets or means of production.
 
The company does, however, regularly invest in maintaining its exploitative business model. Uber registered as a “technology company,” and has successfully defeated attempts to re-classify it as a traditional transportation company. Recently in Los Angeles, it paid nearly $100 million to settle a class-action suit with about 385,000 of the city’s drivers. If the company had lost the suit, it might have had to treat these drivers as regular employees, potentially costing them billions in wages and benefits.
 
For Uber, offering a comparatively small settlement to individual drivers is an easy choice. Drivers and unions who can’t afford a lengthy court battle will take whatever concessions they can get through a settlement. (Workers can now solicit tips via a sign placed in their car’s back seat!)
 
But its exploitative business model has costs, particularly for drivers. According to Uber’s public numbers, the company hemorrhages half its drivers every year. Uber drivers seem to share the same experience of working for the company: they enjoy a brief honeymoon period, then soon endure what Campbell calls “pain points” — successive irritations like regular commission hikes or dealing with the company’s intractable customer service operation. Some drivers adapt by learning the kinds of work-arounds highlighted by blogs like Campbell’s, but most eventually quit.
 
Uber’s attrition creates a huge pool of frustrated but experienced drivers who could compete against the company in cooperatives. After comparing the company’s growth rate to the size of its driver force, Campbell calculated that Uber needs to hire almost sixty thousand new drivers a month to make up the difference. Cooperatives wouldn’t need to bear the expensive costs of driver recruitment — one obvious advantage of having stable employees.
 
Moreover, the creation of an open-source ride-share app would allow disgruntled drivers in any city to form local co-ops, a scenario that sociology professor Gerald Davis argues would not just disrupt but potentially devastate Uber. In his new book, The Vanishing American Corporation, Davis describes two paths forward, one where evaporating corporations and corporate responsibility continue to increase inequality and another where grassroots groups use technology to build their own infrastructure.
 
By employing experienced full-time drivers vested in the quality of their service, co-ops could easily outshine Uber’s part-time workforce. “Co-ops can compete by attracting the best drivers and by promoting a higher level of service than gig employees can give.” Regulations could play an important role, and given regular incidents involving dangerous Uber drivers, “government requirements for suitably vetted drivers (like in Germany) might tilt toward co-ops over Uber.”
 
Davis points out that to compete with Uber, cooperatives must consider whether “people have room for one more app on their phone.” One way to counteract infighting between driver-owned companies would be to “make the software open-source, so that upgrades can be contributed on the fly.”
 
Giving Drivers a Say
 
Consumers are generally happy with Uber and the company’s special status, so there’s little demand-side pressure to treat its employees better. However, Davis says, “co-ops may be less prone to attracting local resistance, and also more likely to generate loyal employees and, perhaps, riders.”
 
While 60 percent of frequent ride-sharing app users believe that services like Uber should not be subject to the same regulations as traditional taxi companies, they might be willing to switch to a co-op model that offers a cheaper price and solid service. Forthcoming apps like Swift will test this theory.
 
Uber attracted drivers with flexible hours and the promise of “being your own boss.” Ownership stakes in cooperatives could actually provide drivers with this autonomy.
 
By turning to co-op apps, drivers can retain the flexibility of working under a model like Uber’s while also having a say in their own wages and conditions. As software becomes more broadly available and drivers realize the low cost and high potential of organizing a co-op, Uber may find itself the victim of disruption.
 
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July 31, 2016