This doesn't always result in an optimal outcome. Market power, externalities, information asymmetry, etc.
This is why we have regulations. Forcing the society and Uber to pay for drivers to be treated as employees seems like a very reasonable outcome. If they don't like it they can hire less drivers, but the ones that remain will at least have some minimum standard of living that developed countries pride themselves for.
I have trouble being upset that fewer people will want to afford higher Uber prices. People managed before Uber and it's mostly a luxury good anyway. To be honest, when Uber's management changed, the sensible thing--VC money notwithstanding--would have been to start pricing the service at what it cost.
Even before the gig economy became a big deal, businesses like yoga studios would attempt to classify their skilled teachers as independent contractors so they could pay them well below minimum wage, but take away their ability to teach at the location if they taught somewhere else as well. Hair salons and yoga studios sometimes go so far as to charge their independent contractors rent, which would make sense if these people were truly renting the space and could freely take their clients elsewhere, but these businesses also frequently limit the contractors' ability to collect personal contact information.
When I volunteered to help people with their taxes, a large number of Uber/Lyft/DoorDash/etc. drivers were surprised to learn that not only did they have to pay large amounts of income tax that would usually be automatically deducted from their pay check, but they also had to pay double the social security and medicare taxes because they had to pay the employer and the employee portions. Companies that classify their workers as independent contractors in this way are taking advantage of the fact it can take people up to a year to realize that taxes and car maintenance will take what little income they have made.
When I drove pizza delivery, I discovered car maintenance took what little income I made. I was a W2 employee, paid less than minimum wage, because I earned tips. Independent contractor status isn't the only method for surprising people.
I take issue with the paternalistic idea that an employee is more deserving than other types of people. The commenter above said, "This is why we have regulations." I interpreted that as beginning a discussion of what regulations we should have. If that was incorrect, I'm sorry for causing confusion. If that was the intent, then I'll reassert that focusing myopically on the distinction between an employee and a contractor is ignoring much better solutions.
If you hire a company to fix your car or build you a shack, they are not your employee, they are your contractor. You are not responsible for their healthcare or minimum wage or sick days. They are a business, they provide healthcare and all that stuff to their own employees who actually do the work. And this is perfectly fine, everyone ends up happy.
The problem is when individuals try to be a business, working as independent contractors. There is no "minimum profit" similar to "minimum wage", and you are essentially your own employer. Government can't force you to pay yourself minimum wage as a business owner because you'll be able to fudge it easily if you wanted to, being both the employer and employee.
What the government can do however is disallow corporations from hiring contractors for roles and in situations where in reality the contractors are businesses only on paper, where they actually are functionally just employees, like in Uber's case.
Would it be great if healthcare was paid by income taxes rather than employer? Yes, but since we don't have it yet, and since there are other issues differentiating employees from contractors / businesses, this seems like a decent approach.
From what I understand, that would be unamerican.
tl;dr - "employees" enjoy a lot of benefits & protections, both legally required and provided by their employer, that non-employees (like contractors) simply don't have.
It's part of the current US economical ideology where individual responsibility is taken as a mantra.
I completely agree with you, it's a good soundbite that any simple analysis and some thinking show how stupid it is.
Well, instead of abstract descriptions about trends of mis-classified flex-workers and abused loopholes such that nobody can argue about it... I was trying to steer the conversation towards concrete cause & effect.
Let's look at another worker-owned driver rideshare -- Local Driver Co-op: https://localdriver.co/
It costs members/drivers $100 to join. They are trying to undercut Uber and excerpt of verbiage from their webpage: "Riders save up to 20% versus competition -- Enjoy unbeatable rates, guaranteeing your money supports the drivers and their families."
Some questions of morals and decency:
- Should a judge (or new legislation) force LDC to treat drivers as employees with minimum hourly wage and unpaid time off? Since LDC contractors are trying to undercut Uber, a proposal to force LDC re-classification to "employees" would cause some drivers to protest this. So bottom line is... should drivers even be allowed to declare themselves as independent contractors and form a platform to chase after passengers?
- If LDC drivers don't get decent pay -- and we can predict they won't because history shows that taxi drivers and rideshare drivers in every country don't get enough dignified pay to put kids through college and save for retirement and cover the wear&tear on their car -- who is to blame for "abusing* them? LDC? (That would mean the drivers are abusing themselves.) Or the customers/passengers?
- Should LDC be completely shut down and that business "should not exist" (as some commenters put it) because it pays too poorly?
Let's talk in concrete terms of how "driver protection" laws would realistically affect outcomes. Let's talk about game theory of economics where customers may not willingly play along with the intentions of well-meaning laws and will just avoid paying higher prices. Some drivers themselves may not want to play along with "drivers must be employees with minimum wage". These are the aspects we don't discuss enough.
I don't think it would be much of a stretch to assume that in this situation you would have sleek, more expensive "luxury" services competing against more humble, but cheaper, community run services. Sounds like a much more equitable arrangement that provides greater choice for both riders and drivers.
But that's not quite it, I believe. The point isn't that customers choose the cheaper of two options, it's that non-users don't become users of a service until there's a super cheap option. Taxis/Yellow cabs were a thing before Uber, but they're more expensive than what lots of people were willing to pay.
It's not "do I want to buy X for $5 or $2?", it's "I won't buy X unless it's $2 max".
If you increase Uber's prices to those of Taxis, few people will use them. That's not necessarily a bad thing, but it's a thing.
Generally I'd argue that society/customers, and in particular employees/'contractors' don't have all that much leverage over big companies, especially ones that capture a market. That's why we have regulation.
Blaming the customers for not keeping track of everything and going for the cheapest option is like blaming climate change on the consumer. It's technically sort of true, but practically speaking it makes no sense.
Consumers will keep buying cigarettes, marketeers will keep marketing them via entertainment channels, and tobacco companies will keep rolling in the money and do everything they can to encourage all this. But taxes, anti-smoking campaigns and government-enforced restrictions on where you can smoke have made a /ton/ of difference over the years.
There seems to be a trend to have 'flex-workers' (contractors) where in practice they all quack like employee ducks, without many of the benefits and guarantees. It mostly feels like a loop-hole and /of course/ the average consumer will go for cheap and convenient when they can. doesn't mean it's a good thing for society (and in particular the workers).