The Wall Street Journal had a surprising story over the weekend, How Everyone Gets the ‘Sharing’ Economy Wrong, with the subtitle, “Uber isn’t the Uber for rides—it’s the Uber for low-wage jobs.” While the Journal maintains separation of church and state between its rabidly right wing editorial section and its news sections, I’ve been close enough to some stories to know on good authority that the Journal has refused to publish some stories (and reported sections of stories) because they were deemed to be too business-unfriendly. So what does one make of the Journal giving prominent placement (first page above the fold in the digital version) that depicts Uber and its ilk i the manner you’d expect to see at Salon or Huffington Post, as mainly in the business of crushing wages? Is it that the Journal is skeptical of new economy hype? Or is it that the rental extraction aspects of the “sharing” economy are so bloomin’ obvious that the editors didn’t see it as controversial to depict them in an unvarnished manner?
The article goes after the canard of the feel-good “sharing” branding:
The first thing everyone misses about the sharing economy is that there is no such thing, not even if we’re being semantically charitable. Increasingly, the goods being “shared” in the sharing economy were purchased expressly for business purposes, whether it’s people renting apartments they can’t afford on the theory that they can make up the difference on Airbnb, or drivers getting financing through partners of ride-sharing services Uber and Lyft to get a new car to drive for those same services.
What’s more, many of the companies under this umbrella, like labor marketplace TaskRabbit, don’t involve “sharing” anything other than labor. If TaskRabbit is part of the sharing economy, then so is every other worker in America. The only thing these companies have in common is that they are all marketplaces, though they differ widely in the amount of control they give their buyers and sellers.
A quibble: while author Christopher Mims is technically correct in calling these services “marketplaces,” that is arguably a term that is so broad as to wind up obscuring what is distinctive about these services. It is that they are (or at least aspire to be) networks and subject to network effects, meaning disproportionate returns to scale to the dominant players. The other reason I am not keen about “marketplace” is that markets occupy a sacred spot in economics and neoliberal ideology, so treating Uber and its kin as sponsors of “markets” gives them more of a halo than they deserve.
But the key part of the article is where Mins describes how sharing services drive wages down:
In the minds of critics, perhaps the worst offender in how it controls its labor force is Uber. Uber sets the prices that its drivers must accept, and has lately been in the habit of unilaterally squeezing drivers in two ways, both by lowering the rates drivers are paid per trip and increasing Uber’s cut of those wages….
Boosters of companies like Uber counter that they allow for relatively well-compensated work, on demand. When I asked them for comment, Uber officials pointed to previously released data suggesting just that. The most recent report, a collaboration between Uber and economist Alan Krueger, paints a fairly rosy picture of Uber’s job-creation abilities. Uber has said in the past that world-wide it is hiring 20,000 new drivers a month, and in this report it claims that in major American cities like Los Angeles and Washington, D.C., drivers are averaging more than $17 an hour.
But this data doesn’t reflect what Uber drivers actually make, for the simple reason that it doesn’t include drivers’ expenses. Work by investigative journalist Emily Guendelsberger, for example, shows that Uber drivers in Philadelphia, a fairly typical city for the service, are probably earning only a fraction of that. According to Ms. Guendelsberger’s admittedly limited sample of 20 drivers, including herself, it was around $10 an hour after expenses.
It isn’t minimum wage, but it’s a far cry from Uber’s previous claims about what drivers make, which reached the height of absurdity in May 2014, when the company claimed that the median income for drivers in New York was $90,000 a year. Months of investigation of that claim by journalist Alison Griswold yielded not a single driver in New York making that much.
What this all means is simple: Uber and its kin Lyft, which is more generous with its drivers but has a similar business model, are remarkably efficient machines for producing near minimum-wage jobs. Uber isn’t the Uber for rides— it’s the Uber for low-wage jobs.
Mins also makes clear that Uber is producing McJobs in another sense: they are only part-time, forcing Uber drivers to cobble together other work to make a living. Over 80% either have other jobs or are seeking them.
In case you’d like to depict the Brave New World of more sorta-self employed people (more accurately, what amount to disposable parts for shafting services like Uber) is somehow a boon to them, the data says otherwise. Over the weekend, Bill Mitchell summarized a new OECD study on inequality that discuses how the shift towards “non-standard work,” as in employment arrangements other than full-time jobs, hurts workers and the economy overall. From Mitchell:
How does inequality hinder growth?
The OECD consider that:
… the biggest factor for the impact of inequality on growth is the growing gap between lower income households and the rest of the population. This is true not just for the very lowest earners – the bottom 10% – but for a much broader swathe of low earners – the bottom 40%. Countering the negative effect of inequality on growth is thus not just about tackling poverty but about addressing low incomes more broadly.
The new element they introduce into their evolving awareness that their past emphasis on the supply side might be missing the point – although they don’t express it in this way – is the problem of temporary and part-time jobs in causing rising inequality.
They note that:
Promoting equality of opportunities is not just about improving access to quality education but also ensuring that the investment in human capital is rewarded through access to productive and rewarding jobs … the potential for this to happen has been undercut by the gradual decline of the traditional, permanent, nine-to-five job in favour of non-standard work – typically part-time and temporary work and self-employment. More (often low-skilled) people have been given access to the labour market but at the same time this has been associated with increased inequalities in wages and, unfortunately even in household income.
Which means that not only does the government need to ensure there are enough jobs but also that the quality of jobs increases.
The OECD trot out the usual ‘technological determinism’ argument that the “development of non-standard work is related to technological changes and the associated evolution of labour demand”….
But that only applies if we assume there are no lower skills jobs remaining to be done. I could design millions of such jobs which would advance human well-being, protect the environment and allow workers with lower levels of education to fully participate in meaningful work and earn a solid living.
The assembly-line factory jobs might have gone in many nations but there are millions of jobs available in personal care services, creative industries, environmental care, community development – and the list goes on….
Even the OECD is sensible enough to say:
Since nearly all job losses, regardless of the type of task, were associated with regular work, while growth in employment took place mainly in the form of non-standard employment, technological advancement alone cannot be the only explanation for job polarisation. Labour market institutions and policies have also probably played a role …
And the New York Times’ Maureen Dowd over the weekend pointed out another way that Uber is not living up to its hype. It is supposed to improve the user’s experience by requiring them to rate drivers. However, drivers also rate users. That allows drivers to punish users who are demanding, even if they might by objective standards be not unreasonably demanding (after all, demanding customers serve to enforce higher service standards). Dowd, who found Uber drivers weren’t terribly willing to pick her up by virtue of her having a low rating (by virtue apparently of having made some drivers wait for her), is dealing with that by colluding with drivers to boost her rating by colluding with drivers to boost theirs. In other words, the driver rating of passengers is debasing the entire ratings process by forcing users to give drivers high ratings to assure that they get high ratings. This form of grade inflation of course works marvelously for Uber, since over time everyone will be in on the con. All drivers and riders will have sparkling marks irrespective of how good they are, which serves to maximize how many drivers and users will be deemed to be acceptable when requests come into the system.
As Dowd wrote:
Standing in front of the Sunset Tower Hotel, I tapped my Uber app and saw five little cars swarming around my location. But, suddenly, they scattered in the opposite direction…. Finally, a car pulled up, and the driver waved me in.
“Do you know why no one wanted to pick you up?” he asked. “Because you have a low rating.”…
Uber began to feel less like a dependable employee and more like an irritated boyfriend…
It was starting to have the vibe of friending, liking and sharing on Facebook, and that always gives me acid flashbacks to the ’80s when I was forced to go to my brother’s house and watch slides of his wedding. Finally, my nephew explained that I didn’t need to grovel or gush. I simply needed to say, as I got out of the car, “Five for five.” If I promised to give them five stars — even in the Wild West of Uber X, where the drivers often seem so unfamiliar with the local terrain it’s as though they’ve arrived from Mars — they would give me five stars.
Bribery. Lies. Cover-up. My Uber app turns out to have all the usual Washington vices.
As in also being a vehicle for rent extraction, as critics have pointed out.