Thursday, August 13, 2015

Sharing the work

I’m pretty good at sharing. As kids we’re all taught to share but that doesn’t always translate to adulthood. Thanks to technology the sharing economy is one of the greatest growth areas in the economy. I think that Uber is one of the best inventions ever. Uber (and Lyft) allows people to request and drivers to provide rides via its smart phone application. It has disrupted the traditional taxi and limousine services, causing protests, a slew of legislation and the company has a nearly $50 billion valuation. For me it’s an absolute life saver living in a city like Boston where people who don’t live here rave about how easy it is to walk around.

In my recent travels the difference between traditional taxi services and Uber is stark. Arriving in Los Angeles and getting myself from the airport into downtown as a default I opened Uber and requested a car via the least expensive service – Uber X. No cars available because the City Council of Los Angeles has banned the ride sharing service at the Uber X level. So I went to the taxi stand and waited 15 minutes for a taxi to come. $70 dollars. On my next trip I opted to request an Uber at a more expensive level. 5 minutes later the driver arrived, $60 dollars and he had a bottle of water for me in his leather apportioned high end vehicle. On my way back to the airport using the Uber X service the cost was $25 and it was less than a 3 minute wait to be picked up.

In the college town of Cambridge which has a dearth of parking spaces and getting around from point a to point b is a particular challenge, Uber is banned from picking up passengers, though you can be dropped off. On August 4 cabbies went on strike in the city to protest services like Uber and Lyft. There are a number of issues around the strike – inconsistent regulations and concerns about background checks and safety are the most visible and passionate. They’re also the most legitimate. The answer is applying the same rules across the board – and the sharing economy is a great opportunity to minimize the regulatory process.

A more fundamental objection to the services by the taxi’s is economic. Medallions are issued by cities giving taxi’s the right to pick up and drop off customers. There’s a limited number so there’s an inherent value of supply and demand. In cities like New York and Boston medallions can be passed down generation to generation and many drivers count on the value of the license for their retirement. Services like Uber and Lyft have disrupted that – to the point that medallions have lost a significant part of their value.  In New York a medallion that went for $1 million is now worth half of that, and in Boston not one medallion has changed hands in 2015, indicating a crater in valuation.

The Democrats have seized upon the rift as a political issue. Candidate Hillary Clinton outlined her economic policy last month characterizing  “the on-demand economy as committing wage theft.” Companies like Uber and Lyft classify their drivers as freelancers – not as employees, saving on payroll taxes and a range of other costs. The drivers choose when to work, where to drive, how long to drive, etc. California’s Labor Commission ruled recently that Uber drivers are actually employees since the company controls the workers ability to earn a living, determines their skill set and appropriateness for the job, etc. It’s a determination that could upend the economic model of not just Uber, but the entire shared economy.

James Surowiecki in The New Yorker makes an excellent point: “The real problem here is that Uber drivers don’t quite fit into either of the traditional categories. Declaring them independent contractors or employees means forcing a square peg into one of two round holes. We’d do better to create a third legal category of workers, who would be subject to certain regulations, and whose employers would be responsible for some costs but not others.”

The shared economy is a hybrid  at its core – it takes the public’s demand for a service (room for rent, car ride, repair , etc.) and matches it with an individual who’s willing to provide the service outside of a significant corporate structure. Creating a hybrid work and compensation model that combines employee and independent contractor statuses and rules makes a lot of sense. 

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