Every week, it seems, Uber opens a new and previously unimaginable battlegrounds in its war for global ride-sharing dominance. Last month, the company was turning French cabbies into a new Parisian mob, hunting down anyone they suspected of being a cake-eating Uber driver. Just a few weeks later, it was launching a full-scale PR assault against the Mayor of New York, adding a "De Blasio" tab to show riders how long they would have to wait for a car if the city's taxi-loving despot gets his way.
Meanwhile, for most of us, Uber is the $50 billion-with-a-b ride-sharing juggernaut we hate on principle, but don't know how to get home from the bar without. Given this ubiquity as the world's most combative car-hailing company, it perhaps makes sense that Uber now finds itself in the middle of the country's biggest political battlefield, used as a rhetorical football in the 2016 presidential debate.
Presumptive Democratic frontrunner Hillary Clinton kicked off the 2016 Uber War in her agenda-setting economicpolicy speech last week, saying:
...many Americans are making extra money renting out a small room, designing websites, selling products they design themselves at home, or even driving their own car. This on-demand, or so-called gig economy is creating exciting economies and unleashing innovation. But it is also raising hard questions about work-place protections and what a good job will look like in the future.
She went on to pledge that she would "crack down on bosses who exploit employees" by classifying them as contractors, "or even stealing their wages."
To many, it seemed like a direct shot at Uber and the rest of the so-called "gig" or "sharing" economy—the Uber drivers, AirBnB hosts, Etsy sellers, and Postmates messengers who can be beckoned at the tap of a smartphone, but who also aren't on any employer's payroll.
The GOP saw its opening for an attack. As Clinton's remarks settled, the Republican National Committee went into action, blasting out a "Petition in Support of Innovative Companies Like Uber" with ominous warnings about the "taxi unions and government bureaucrats who would stifle innovation." Jeb Bush's campaign gleefully alerted reporters that the 2016 presidential candidate would be hailing an Uberon his visit to San Francisco Thursday.
Other GOP White House hopefuls have also heaped praise upon the sharing economy. Marco Rubio dedicated a whole chapter of his book to "Making America Safe for Uber." Ted Cruz has even gone so far as to claim that he is Uber—"the Uber of Washington."
So far, though, there hasn't been much effort on either side to come up with specific policies or solutions to adapt public policy around the realities of this new workplace—both to protect and foster innovation, and also to ensure fair wages and treatment for independent contractors working in this new landscape.
Independent contractors get paid on an ad hoc basis instead of an hourly wage. While the practice isn't new by any means, it has become controversial for app-based companies whose business model relies on the idea that they are third-party facilitator, connecting service and customer, but not the employer of those providing the services.
A recent decision by California's Labor CommissionCalifornia's Labor Commission foundthat a former Uber driver who had filed a complaint had actually been an Uber employee—something the company has been fighting against in several courts. While the decision applies only to one driver, its implications are big: If Uber drivers are employees, they are eligible for things like overtime, workers comp, and minimum wage. Similar class-action suits are moving down the pipeline in the state, and in other jurisdictions as well.
To make matters worse for Uber, a San Francisco judge recommended last Wednesday that the company be suspended from operations in California for refusing to hand over data on who their drivers pick up and where, to show that the company is providing equal access to its services.
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So what does all this mean for 2016? Clinton's speech was made in the context of concerns independent contractors are exposed to more risk than traditional employees. Some costs are also shifted from employers to contractors. Payroll tax accrual, insurance, health care and other basic benefits businesses are required to provide for employees can be avoided. This is arguably a huge benefit for profit margins of businesses in the sharing economy. Firms can generate higher profits because drivers are less costly to "employ".
Ironically, the Affordable Care Act, or Obamacare, actually makes it easier for firms to employ contractors. The ACA's exchanges are designed to make it easier and cheaper for individuals to purchase health insurance, making independent contracting for sharing economy companies more attractive than prior to its passage when employer-provided health care was the only option for many Americans. Jeb Bush acknowledged that in a scrum with reporters after his campaign appearance in San Francisco last week.
Employees even provide the tools of their trade themselves, driving their own cars to pick up riders or deliver food, or renting own their own houses. Economically speaking, they're providing labor and capital, and being charged for it via the tech company's cut of their revenue. Clinton's logic is that this cost shifting is emblematic of a broader decline in labor's "bargaining power" or share of economic output. If workers are seeking flexibility, the sharing economy can be a liberating experience with no set hours or boss. But for members of society who turn to the sharing economy as a last resort, that liberation can feel more like desperation and a race to the bottom; these are the Americans that Clinton was trying to address.
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From an economic perspective, there's some truth to the idea that workers aren't getting as much pay as they have in the past. It's certainly not the exclusive fault of the sharing economy though. Labor's share of economic output has fallenfrom a peak of about 59 percent in 1970 to about 53 percent today—a difference of about $1 trillion in wages, salaries and benefits for workers, or enough to boost the average family's pre-tax income from $64,432 to $72,656. In that context, the emergence of the gig economy is relatively recent—most app-based sharing companies, including Airbnb, Uber, Lyft, Spinlister, among others, were founded after the 2008 crisis.
Whether these gig companies are actually hurting labor income—or are treating workers unfairly—is a much more open question. Clinton's remarks assume that they are: Her concerns about the costs of the sharing economy are targeted at the Taskrabbits among us who feel forced to work at the instruction of apps because of a lack of options or opportunity in the traditional workforce—not workers who actively opt-in to the sharing economy for its benefits.
On the other hand, Bush and other Republicans have good reason to believe that support for Uber will score political points. The company has, after all, grown from nothing to a valuation that's about the same as General Motorsin the span of six years—regardless of how you feel about Uber and its Objectivist founders, it's hard to deny theirs is a bonafide American entrepreneurial success story. Bush is also on the record saying that he believesAmericans need to work more hours, and the flexible hours offered by sharing economy companies are a reasonable way to get people working more, offering more choice, lower prices for consumers, and less regulatory burden than traditional businesses.
Republicans have fetishized Uber and other tech "disrupters," whose business models they see as shining examples of a free-market, anti-regulatory ideology, challenging government-sanctioned monopolies—on, say, taxis or hotels—that keep consumer prices higher they would otherwise be. That was the source of the riots in France: French taxi drivers, angry that Uber was taking their fares, protested, and things got out of control, giving Courtney Love an unfortunate scare; the French government responded by cracking down on Uber's UberPOP service, effectively protecting the country's licensed cab driver monopoly. AirBnB has faced similar issues in numerous jurisdictions, including New York City.
In short, the sharing economy has all the ingredients of a punchy campaign issue: It's a metaphor for a big shift that's been under way for over thirty years, neatly encapsulating a lot of complicated economics and policy into one symbol. And it's a jumping off point for an important election-year debate over what that "normal" American economy should look like after years of slow recovery from a massive recession. Plus, all the kids are doing it.
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