Uber and the False Hopes of the Sharing Economy

Not long ago arrived word of a new startup, 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 the New York 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 by 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 effect 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 going to go forward only 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 half a 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 to establish.

We are a long way from figuring out how to disrupt disruption.