Uber, Lyft, and the Micro-Businessman

UberAs a micro-businessman, I can tell you: I hate a lot of government regulation and taxes. In particular, I hate certain zoning requirements and I hate inventory taxes. Maybe it is just that I am selfish, but I think the society has a vested interest in not making the bureaucracy too much of a burden on very small businesses. On the other hand, it isn’t people like me who are out there complaining. It is always quite large and wealthy companies who can not only afford to pay their taxes, but who can hire accountants and lawyers to deal with regulatory requirements.

What really burns me is how the “largest bookstore in the world” has managed for years not to pay taxes that I have always had to pay. Why them? Well, there are some historical reasons for this, but mostly it is because Amazon is so large. (Please buy your Amazon Stuff from the links of my pages; it goes a very small way to pay for the hosting of his site.) But big companies getting sweetheart deals from the government isn’t anything new. We need to do something about it, but I don’t think I need to tell you about it.

LyftBut the issue of Uber and Lyft are rather different. In case you don’t know, these are basically freelance taxicab companies. There is much nice to say about them. In most cities, the taxicab system is terribly corrupt and unjust. But are these companies really the answer? A couple of weeks ago, Dean Baker brought up a few questions, Economists and Uber. He wondered if these firms were really competing on an equal footing with the traditional cab services. Do they really have the same safety and insurance requirements? Do they provide handicapped service the way that traditional series do according to federal law?

More important to me is what this does to workers. In the old days, “freelance” was just another word for, “Pay me three times what you pay your salaried workers.” But that isn’t true anymore. Our economy has become so messed up the last three decades that “freelance” is now another word for, “A better way for companies to screw the worker.” Baker noted:

Some economists might also like to see some rules on labor conditions applied to Uber and Lyft. For example, should their drivers be able to organize unions like employees? Also, should there be a guarantee that drivers earn at least the minimum wage after covering expenses? It seems rather foolish to have minimum wage laws if companies can just evade them by setting up their employees as independent contractors.

There is another aspect of this. It is the old “creative destruction” aspect of it all. The “pure” economic take on the situation is that the extra taxis on the road will drive down prices, that extra money saved by consumers will go into other areas of the economy, and everyone will end up richer. But if the last thirty years have taught us anything it is that this “free market” narrative is nonsense. Most of the savings will go to the richest people and they will just sit on it.

I’m not against Uber and Lyft. But I think any enthusiasm for these companies should be moderated with our understanding of how these things go. I’m sure a lot of what is making these companies successful is that they have managed to push off a lot of the costs of the business onto their freelancers. And what we will see in the long run is that customers get a slightly better system with slightly lower prices, the drivers see their already poor paying jobs pay even less, and the owners make more money than ever. I’ll be happy to be proved wrong.

But my biggest concern is the way that Uber and Lyft create yet more micro-businessmen. They must have their own late model car of a specific level of attractiveness, “Car needs to be free of body damage and dents… Air conditioning and heat need to be fully functional.” They must have their own insurance. (Lyft, at least, adds extra liability to this, although that doesn’t cost much to add to the mandated base.) So the major start-up costs of these companies are all placed on the freelancers. And there is basically no way Uber or Lyft can lose money, unlike their drivers.

Again, and for the last time, these companies may work out great. But I’m not expecting great things from them. They are just another step in our journey to turn all workers into freelancers who have no stability, no benefits, and ultimately, no rights. This has been and continues to be the wrong direction for our society to go. But there can be marginal improvements in our current bad status quo. Maybe Uber and Lyft will provide that. But they aren’t some great new approach to capitalism; they are just another step in the path we’ve taken for the last four decades.

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

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