This site is an always-in-progress repository for my thoughts and ideas. You'll generally find me writing about sustainability 🍃, urbanism 🏙️, programming 💾, vegan cooking 🍛, and whatever else pops into my mind.
🔗 The glaring flaws of Uber's "benefits fund" proposal
Published on Aug 11th, 2020.

In the most predictible of fashions after a potentially disastrous court order for their business, the CEO of Uber has written an Op-Ed in the New York Times claiming to have a fix for the exploitation of workers by companies who run “gig economies” (ie, Uber). After reading through it, I wanted to jot down a few notes on how obviously flawed this proposal is, even from the eyes of someone who knows very little about labor laws.

Here’s the first quote that stood out to me:

Uber would only have full-time jobs for a small fraction of our current drivers and only be able to operate in many fewer cities than today. Rides would be more expensive, which would significantly reduce the number of rides people could take and, in turn, the number of drivers needed to provide those trips. Uber would not be as widely available to riders, and drivers would lose the flexibility they have today if they became employees.

Sounds to me like classifying workers as employees would cause consumers to start paying the real price of what taking a taxi costs. That is, paying a price that accounts for basic workers’ rights such as paid time off, sick leave, and healthcare. In its current form, Uber and Lyft essentially act as a subsidy: it funnels money in the form of cheap rides to the companies and wealthier amongst us (ie those of us who can afford to take a taxi) at the expense of drivers who are left as the bag holders.

This argument also reeks of arguments I’ve heard for lowering the minimum wage. The essence of this argument is that creating a floor on wages causes employers to hire less people and interferes with a market by disallowing employees to flexibly negotiate their wages. Rather than a large amount of people getting paid $3/hr, we’ll have significantly less people getting paid $7.25/hr (and, by proxy, a higher unemployment rate). Dara proposes a variation of the minimum wage argument to us here: requiring Uber to provide benefits for employees will cause us to pay more per driver, meaning we’ll need to lower the amount of drivers we can hire and consumers will need to lower the amount of rides they take, meaning we’re all worse off.

I’ll leave the economic falsehoods of this argument as an exercise for the reader (there’s plenty of research that debunks these anti-minimum wage discussions and, in fact, support the benefits of increasing it). Instead, let’s focus on the assumption that people taking less rides is a negative. A few things wrong here:

  1. Uber and Lyft are companies fundementally based on fossil fuel infrastructure: the expansion of which is in nobody’s best interest but their own. There is a growing body of evidence that ridesharing companies are far more polluting than private car usage. Reducing our reliance on Uber and Lyft is a win for air quality in our cities, and the environment as a whole.
  2. There is an increasing amount of evidence that ridesharing increases congestion in the urban cores of American cities. Uber and Lyft’s own comissioned study sheds light on the contribution these companies make on congestion. As a sidenote, I find it suspicious that this study omits New York; a city with lower private car ownership and high public transit usage (which may skew the % of private car usage against Uber/Lyft’s favor even further).
  3. Cheaper and more abundant taxies are not the solution to our urban mobility problems: good public transit, increased density, and better cycling/micromobility infrastructure is. Bruce Schaller of CityLab describes the data behind this in a piece last year, which describes how automobile usage is growing in cities with dimished public transit (New York, LA, Boston), but shrinking in Seattle, which has seen its public transportation network grow lately.

Moving along, let’s take a peek at another telling quote from Dara, which comes after revealing his proposal of a “third option” for gig workers to receive benefits from “benefit funds” provided by gig economy companies:

Had this been the law in all 50 states, Uber would have contributed $655 million to benefits funds last year alone. Taking one example, we estimate that a driver in Colorado averaging over 35 hours per week would have accrued approximately $1,350 in benefits funds in 2019. That’s enough to cover two weeks of paid time off, or the median annual premium payment for subsidized health insurance available through an existing Uber partnership.

See anything awry with this? There’s a glaring or between “cover two weeks of paid time off” or “the median annual premium payment for […] health insurance.” Are we seriously going to accept the fact that workers should need to make the choice of having a paltry two weeks of paid time off per year, or health insurance? How is this even pretending to be a realistic solution to improve conditions for your workers?!

On top of that, I took a peek at what an insurance plan in Colorodo might cost given an average salary of $16/hr working 35hrs/wk for 52 weeks on the Kaiser Family Foundation’s health insurance calculator.

Given these parameters, a silver-level insurance plan would cost around $2,236 per year (close enough to the estimate provided by Dara’s quote, as there are plenty of variables I may not be taking into account here), but would also come with an out-of-pocket max of $6,500. This might not be too bad if you’re healthy, but if you’re dealing with any kind of medical issues you’re now looking at the potential for ~$8,736 of medical costs. Even with the benefit fund’s subsidy this is 30% of your pre-tax income!

Look, I could keep going on and on here. I’m sick and tired of these gig economy companies trying to evade paying workers their fair share. Especially since they’re getting away with this using a mountain of bullshit arguments to support misclassifying them as independent contractors rather than employees. I’m a firm believer that improving the conditions for lower-income workers is something that we collectively benefit from, and it’s been proven time and time again that tech companies aren’t willing to do this on their own. It’s time for the government to take action and reign in these exploitative gig economy companies, for the benefit of us all.

If you have any comments or critiques of any of my arguments here, please feel free to reach out. I’m always interested in hearing the other side of things, and am very open to linking to any retorts/follow-ups people may have.