Why Austin Should Seize the Means of Transportation
By Adam Simpson
Uber and Lyft have pulled out of Austin, Texas after voters rejected Proposition 1, the legislation that the ridesharing companies financially supported to the tune of $9 million. There are many regulatory features to bill, but the main sticking point was that Austin voters wanted a background check system that required fingerprints, which Uber and Lyft reject. The companies already require background checks for drivers, but resist the idea of using fingerprint verification. Uber claims the fingerprinting processes are unreliable and perhaps discriminatory; a more convincing take is that it gives their drivers another flag to wave while arguing that they are employees rather than “independent contractors.” However, the background check system isn’t really the broken part of the industry—it’s the relationship between capital and labor. The format of background checks is irrelevant, and as automobile manufacturers and ridesharing giants alike race to deploy and utilize autonomous vehicles, so too will the distinction between independent contractor and employee become irrelevant. The most important fight in this industry, far beyond Austin, is about equity and co-ownership of these businesses for the drivers.
Currently, companies like Uber and Lyft operate in a libertarian paradise, thriving on rolled back or manipulated regulations with few obligations toward the people that work for them. Industry giant Uber is valued at a grossly inflated $62.5 billion, and due to their labelling drivers as “independent contractors” they are under no legal obligation to ensure their wages at any level or provide health insurance, worker’s compensation, sick leave, paid vacation, or overtime pay. It’s true that Uber does guarantee income levels ($30-40 per hour for certain times in certain cities), but this doesn’t include the amount taken out for Uber’s 20-25% cut or state taxes. Factor in fuel, car insurance, and maintenance costs for the vehicle—which ridesharing apps don’t subsidize—and the net take home drops further. Perhaps more problematic is the fact that these companies can cut fare rates and raise their share without any input from their workers. When these workers protest, the response they receive is that reduced rates will result more fares—i.e., drivers should work longer hours to recoup the losses imposed upon them.
The plight of drivers is already viewed as a potential crack in Uber’s domination of the industry. Juno is a new ridesharing startup that aims to recognize their drivers as employees, provided they drive exclusively for them. They’re also pledging to take a smaller cut of fares. In exchange, drivers will be recognized as employees, and after two years of work they’ll get equity in the company.
Meanwhile the 10,000 drivers that Uber and Lyft say they’d signed up in Austin since 2014 seemed to be less than an afterthought when the companies decided to vacate the city. To be clear these “independent contractors” will receive no unemployment benefits—they’ve simply been abandoned. Other opportunists have descended on Austin to fill the ridesharing void, but these are essentially smaller Uber-clones with more to gain than lose in continuing operations in the city.
Rather than buying into a new ridesharing company that’s based on the same operational premise as those that abandoned them, drivers should consider the ground gained in other industries based on worker ownership. Worker-owned cooperatives have been gaining ground recently; two high-profile cases being New Belgium Brewing and Chobani who have granted their employees either complete or partial control (respectively) of their companies via employee stock ownership plans (ESOPs).
There are other initiatives in the sharing economy looking to incorporate worker ownership into their enterprises. Beyond Care and Si Se Puede! Women’s Cooperative are both New York based, worker-owned enterprises specializing in child care and household cleaning that will be featured under an app called Coopify. This platform was designed by Cornell students looking to “leverage the sharing economy to benefit low income workers.” Austin is neither short on socially conscious tech entrepreneurs nor drivers looking for more reliable and equitable opportunities, and there remains a market still willing to pay for the service.
But it’s not difficult to see where the wind is blowing: Uber is now testing autonomous vehicles in Pittsburgh and GM has a $500 million investment in Lyft’s autonomous rideshare component. The priority here is not for ridesharing giants to recognize their independent contractors as employees, but rather that drivers should recognize themselves as owners. This would be a natural antidote to any perceived threats to automation (and labor displacement more generally). While Austin has been criticized for being backward and regressive over the Prop 1 fight, it now has the opportunity to leap forward. Drivers in Denver, Colorado are pursuing a similar plan that would facilitate the loans for drivers to buy-in to the ESOP, enable a suitable public-private partnership to invest in the worker ownership, or at the very least work to ease regulations for such a locally-based, worker-owned enterprise to develop. The absence of ridesharing giants Uber and Lyft only further enables the city of Austin to lead this industry toward a more sustainable future.
Credit where credit is due: the ridesharing app titans’ innovative business model has met a social want better than the traditional taxi service at reduced cost, but the model nonetheless fails its workers. As it stands now with drivers far removed from decisions made by executives, the burgeoning gig economy represents a market fated to a race to the bottom. Why take only 25% from drivers when you could automate that workforce and take the whole pie? Building a profit sharing structure would not only incentivize workers’ performance, but could also set an example of a tech-enabled industry that lives up to the promise of a decentralized, more democratic future—one that is insulated from the coming wave of automation that could benefit only the elite while abandoning workers. In other words: Austin all over again.