In the so-called “sharing economy,” it isn’t the profits that are being shared. What is being shared are ways of putting old models of weakening labor protections in new “high tech” wrapping.
“Sharing economy” enterprises designating employees as “independent contractors” so that workers are left without legal protections, and undercutting competition through insisting that laws and regulations don’t apply to them, really aren’t new or “innovative.” But it’s Silicon Valley companies that are doing this — so, hurray!, it’s now exciting and, oh yes, disruptive! Quaint, archaic standards such as minimum wages and labor- and consumer-law protections are so old-fashioned that Silicon Valley billionaires are doing us all a favor by disrupting our ability to keep them.
That “sharing economy” enterprises are focal points of a new technology-stock bubble is another reason to question the hype surrounding them. While waiting for the right moment for an initial public offering, the poster child for the “sharing economy,” Uber Technologies Inc., has had no trouble attracting investors, and is now valued at US$51 billion. Not bad for a company that claims to be nothing but an app — except for when it claims to be hiring drivers when its interests dictate. (More on that below.) To put that valuation in perspective, it is higher than 80 percent of S&P 500 companies — an index selected from among the largest companies listed on U.S. stock exchanges. This for a company founded in 2009.
How Uber’s valuation matches up with its income is impossible to say as the company does not reveal its financial results. A report in TechCrunch says that Uber may be pulling in more than $1 billion in gross receipts per year, and estimates Uber’s cut of that revenue to be about $213 million. (Uber takes a 20 percent cut from its drivers, but some drivers say it takes an additional cut for “fees”) Between its revenue and the $5 billion in funding it has received, the company could afford to hire its drivers as employees, but instead spends its money on attack advertising.
The company launched a multi-media fusillade of attack ads last month when New York City Mayor Bill de Blasio dared suggest regulations observed by others might apply to it, including a bombardment of television ads and robo-calls. (I received two. They didn’t work.) True to form, Mayor de Blasio, the Obama of New York City who is carrying out former billionaire Mayor Michael Bloomberg’s fourth term, backed down.
Uber vehemently opposed a proposed one-year cap of one percent growth in its drivers (which would have applied to all companies) despite already having more registered cars than all of the city’s yellow-cab companies combined, and in contrast to the hard cap that exists on the number of yellow-cab permits. When not attacking the mayor, Uber’s attacks were concentrated on yellow-cab companies and drivers.
Driving down wages for low-wage taxi drivers
Who are the taxi drivers whom Uber wishes you to believe are privileged and should be subjected to more competition? A New York City yellow cab driver pays the company that owns the cab $100 or more at the start of a 12-hour shift, pays for gas and is subject to consumer regulations. The driver spends the first hours of his or her shift covering these daily expenses. The New York Taxi Workers Alliance summarizes the situation for taxi drivers this way:
“Drivers are earning less and working longer, some days earning below the minimum wage. Right now, after 12-hour shifts, with no overtime pay, taxi drivers make $10-12 an hour in take home pay. More traffic and more cars competing for the same fares will drive incomes deeper into poverty levels. … In its ‘disruption’ playbook, meanwhile, Uber tells drivers to pick up illegally as a way to overwhelm local enforcement and break down regulators, and promises to pay the fines. Drivers desperate for work risk time in jail and for immigrants, loss of naturalized citizenship, while brand Uber claims innovation. Drivers are used and discarded. …
Uber seeks to decimate the regulated taxi industry and replace it with a transportation monopoly of no consumer protections and no full-time work for drivers. For Uber, drivers aren’t just Independent Contractors, they, quite frankly, are not workers at all. Why tip, or require commercial insurance or registration, or comply under federal or state transportation or labor laws when this is ‘just a side thing.’ Low Uber fares — when they are not price surging — are aimed at out-competing taxis and justified by calling the income supplemental. Taxis aren’t the only target, as they also aim their sights on dismantling public transportation, by proclaiming to be cheaper than buses in Chicago and LA and faster than an ambulance. If they gain a monopoly, the purpose of low fares will have been served and price surging will be the norm.”
The “disruption” or “innovation” that this promises is the Wal-Martization of transportation. In fact, the corporate law firm that Wal-Mart Stores Inc. used to successfully defeat a discrimination class action (Wal-Mart v. Dukes) by women employees, Gibson, Dunn & Crutcher, has been hired by Uber to fight its California drivers who say they are improperly classified as independent contractors instead of as employees. Not exactly the defender of working-class drivers Uber claims to be in its propaganda.
A San Francisco federal judge and the California Labor Commission separately ruled earlier this year that Uber drivers are employees, rulings the company continues to contest. But when it was sued for alleged text spamming, Uber claimed the messages were legal because they were hiring solicitations. But how can Uber “recruit” if it is nothing more than a software provider as it claims?
The degradation of working conditions through the “sharing economy” is of course not limited to one company. A provider of home-cleaning services, Homejoy, has closed itself rather than contest lawsuits seeking to have its “independent contractors” be re-classified as employees. Grocery-delivery service Instacart and courier Shyp have reclassified some of their workers as employees in the face of lawsuits.
A lottery economy facilitates inequality
The founders of these companies and the speculators who sink millions into them hope to be the winners in what has become a lottery economy. Only a minuscule percentage of inventions become commercially successful — a director of public affairs for the U.S. Patent & Trademark Office said a decade ago that 99.8 percent of issued patents are not commercially viable. A small number of those commercially viable ideas are worth millions or billions to its creators. This is similar to the art world, where a minuscule number of artists sell works for millions while the overwhelming majority of artists earn little or nothing.
But are the entrepreneurs who win the lottery really worth so much more than everybody else? None of these corporate lottery winners created their successful company on their own. There are engineers who design the product’s physical form, assembly-line workers who assemble the product and advertising agencies that create the demand for the product. Then there is the social structure that enabled the millionaire to become wealthy through an invention or the creation of a popular product or through rising to the top of a large corporation or simply through being a popular entertainer or athlete (although most inherited their money through luck of birth).
The mythology of the solo genius justifies massive inequality because the “solo genius” single-handedly created a popular product and thus single-handedly brought prosperity upon the land. For such selfless services, the solo genius must be compensated with fantastic wealth. But why should Facebook founder Mark Zuckerberg amass $18 billion and so many others get nothing? Why should Apple Inc. accumulate unprecedented wealth while conditions in the sweatshops that produce its gadgets are sufficiently grim to cause a wave of suicides?
Why should those who stand to make gigantic fortunes from whatever “sharing economy” enterprise is the one that wins the lottery make fortunes on the backs of working people struggling to survive?
At the end of the day, what computers and apps do is shift consumer spending from one merchant to another. The rider who uses an Uber black car is substituting that service for a taxi; the shopper who buys online is substituting for a local store. Just as Wal-Mart seeks to monopolize low-end retail, thereby sending money into the bulging wallets of the multi-billionaire Walton family instead of re-circulating the money through local spending, “sharing economy” enterprises are seeking to vacuum up as much money as possible, with speculators salivating over the potential profits.
Billionaire Silicon Valley libertarians are attempting to become wealthier at the expense of working people. That’s not disruption, that’s capitalism as usual.