Narrative: Uber Treats Drivers Badly
Each narrative page (like this) has a page describing and evaluating the narrative, followed by all the posts on the site tagged with that narrative. Scroll down beyond the introduction to see the posts.
Narrative: Uber Treats Drivers Badly (Jan 28, 2017)
Written: January 28, 2017
Uber has two major stakeholders – its passengers and its drivers. Its customers pay the bills, and it arguably treats them pretty well, but its drivers and their cars are the infrastructure of the service, and it has arguably treated them far less well.
The major complaint against Uber from its drivers is that it refuses to treat them as employees, worthy of benefits and other protections. Instead, Uber treats even full-time Uber drivers as contractors, requiring them to buy their own insurance, offering no guarantees of income, and providing no meaningful benefits as most employers would. This obviously serves Uber well – it has much lower costs and far fewer assets on its books than it would if drivers were employees and their cars belonged to an Uber fleet. Uber effectively operates as a pure digital layer on top of physical infrastructure it doesn’t own.
But the complaints go beyond employment status – drivers have complained that Uber reduces fares constantly, squeezing their incomes until they either have to work longer hours or give up. Surge pricing and other features are intended to make up for the shortfall in some cases, but can’t be relied upon. Some drivers have taken to sleeping in their cars at nights between shifts in order to reduce their travel time and costs so they can make ends meet. The Uber Pool service has reduced fares even further for shared rides, and this has been another source of complaints from drivers.
In some ways, Uber’s relationship with its drivers is similar to Amazon’s with its warehouse workers (see related narrative): both companies offer employment to those who might not otherwise be able to find it, but do so under conditions that many of them find intolerable, often imposing significant physical costs in the process. Both companies argue that they provide net benefits to local economies through both the employment opportunities they offer and the services they provide, but not all employees agree with that rosy perspective.
Uber Talking to SEC About Giving Drivers Equity (Jun 29, 2017)
According to Axios, Uber has been meeting with the Securities and Exchange Commission to discuss giving drivers equity in the company. As the piece notes, this was something recently-acquired ride sharing startup Juno promised to do, but which it found legally difficult given SEC regulations. Of course, if drivers were employees, there would be entirely standard ways to deal with stock-based compensation, but the combination of the fact that Uber is a private company and drivers are contractors rather than employees make this more complex. Given the historical meteoric rise of Uber’s valuation, I could certainly see the appeal for drivers of getting a stake in the company, though the attraction will have waned a little as there have been reports of shares selling at lower prices in the private markets over recent months. Longer term, there are still big questions about whether Uber’s valuation will continue to grow if it doesn’t have a clear path to profitability and doesn’t seem to be winning decisively against Lyft and other big competitors in its important markets. And its big investment in autonomous driving is another potential huge cash sink which isn’t guaranteed to pay off, especially given the distraction and uncertainty created by the Waymo lawsuit and the departure of Anthony Levandowski and Travis Kalanick in recent weeks. Still, Uber does seem to be genuinely interested in trying to find ways to improve its relationship with drivers recently, and this is another potential step in that direction.