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NY Times, August 10, 2018
Uber and the False Hopes of the Sharing Economy
By Ginia Bellafante
Not long ago arrived word of a new start-up, Wonderschool, which as its
website explains, is a “network of boutique, in-home early childhood
programs” — the Airbnb or Rover of preschool. Already established in San
Francisco, Los Angeles and New York, with significant capital behind it,
the venture aims to rescue talented teachers from the stingy hands of
institutional employers, turning them instead into “edupreneurs.”
How many will be lured? The passage of extensive legislation by New
York’s City Council on Wednesday, curtailing the previously unchecked
powers of Uber and other ride-hailing services, suggests the extent to
which the false promises of the sharing economy are becoming better
understood and, how much more aggressively they still could be counteracted.
From the beginning, Uber appealed to drivers on the premise that
partnering with the company would allow them to do what they really
wanted to do, which was not ferrying 24-year-olds to beer halls or
actuaries to the airport as a means of full-time employment.
A series of Uber ads that ran in conjunction with the Grammy Awards this
year showed some of the artists nominated, in cars, with drivers who
were singers and producers themselves. Other ads introduced us to
drivers who were nursing students or aspiring businessmen — Uber could
fund your creative and professional ambitions, or make it easier to go
to Disney World or buy new appliances.
The reality though appears quite different. A study released last month
from two economists, James A. Parrott and Michael Reich, indicated that
in New York City, Uber’s largest domestic market, nearly two thirds of
drivers who worked for ride-hailing services did so full time. They held
no other jobs; approximately 80 percent bought cars for the purpose of
making a living by driving them. Many were in debt from those
acquisitions and making very little money.
Nine out of 10 drivers are immigrants and approximately 54 percent are
responsible for providing more than half of their family incomes. Beyond
that, the study found, the number of drivers for ride-hailing services
grew 10 times faster than the rate of blue-collar employment, or
employment in the city overall.
The gig, in effect, was the lifeline and the lifeline was insufficient.
One of the bills passed by the Council is intended to ease the financial
hardship of drivers for Uber, Lyft and other similar companies in a
saturated market, where jobs for uneducated workers are hardly in
abundance. A minimum wage of $17.22, after expenses, has been set, which
would increase driver earnings by about 22.5 percent on average.
But this figure must be considered within the context of the broader
economics of a city where just to live affordably (which is to say,
spending a third of your income on rent) in any of its five cheapest
neighborhoods — all of them in the Bronx, all of them with median listed
rents of $1,500 to $1,600 a month — you need to earn between $54,000 and
$58,000 a year. The minimum wage does not get you there.
What is astonishing about the current legislation is how tepid so much
of it actually is, and how ferociously it was fought by the companies
involved. The cornerstone of the Council’s work caps, for just one year,
the number of cars that can operate in the city. Currently there are
approximately 100,000 — an increase of 37,000 just since 2015. During
the year the cap is effective, the city plans to study the economic and
environmental impact further and it is allowing the various services to
add wheelchair-accessible cars and vans in the meantime.
The cap does absolutely nothing to address the crisis at the heart of
professional driving in the city — the devolution into poverty of so
many conventional yellow-cab drivers whose livelihoods have been
devastated by ride-sharing. Some who owned medallions and were paying
them off saw an enormous devaluation of those medallions. Six
professional drivers killed themselves during the past several months,
most recently, Abdul Saleh, a Yemeni immigrant who was found dead in a
rented room in a Brooklyn apartment in June. He had been struggling for
months to make payments on a leased cab.
At some point preceding the passage of the legislation there had been
discussion, led primarily by Lyft, of a hardship fund to be set up by
the various ride-hailing companies to alleviate some of the suffering
conventional drivers have experienced, but that was only going to go
forward if the city agreed not to impose a cap. When I asked a spokesman
for Lyft if that idea might be resurrected, he said that the industry
could not make such a promise with little sense of how regulation would
affect its revenues. And yet regulation does not change the current
status quo much at all.
If rates for ride-hailing apps were to increase, as Uber has suggested
as a possibility, then perhaps this would give yellow cab drivers a bit
of a competitive edge.
The city and state could also, theoretically, create their own fund to
aid drivers — just as they could create more good jobs by adding more
bus lines to areas underserved by public transportation, which would
reduce a reliance on Uber. In Queens Village, to cite one example, only
9 percent of houses and apartments are within a half mile of a subway
station. But an arcane state law about gifts, which prevents the doling
out of money to particular sets of people, makes such a fund very hard
We are a long way from figuring out how to disrupt disruption.
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