Uber – the anti-union, “disruptive” high-tech darling of venture capitalists – got a bloody nose in London late September from public regulators who refused to issue the company a license and declared them “not fit and proper.” This wasn’t the first time Uber has clashed with governments in cities including Austin, Texas, Paris and Rio de Janeiro where there have been bitter conflicts. But London is Western Europe’s largest city, the region’s techhub and the biggest body so far to “dis” the “disruptive” technology giant.
Unions speak out
London’s rejection followed militant protests by taxi drivers in Paris, Berlin and Madrid. The decision was celebrated by local and international labor unions because Uber has compiled such a long record of worker and public criticism in such a short period of time, including allegations that workers were cheated, passengers deceived and labor standards lowered for taxi drivers.
Plenty of problems
Uber has been accused and sued for lying and concealing details about accident insurance and driver background checks. Drivers say the company cheated them out of fair pay, tips, benefits and employee status. Pedestrians and bicycle riders have complained that city streets are much more dangerous. San Francisco now has 45,000 new “ride-sharing” drivers on city streets, and they account for a majority of some traffic violations, according to SF police testimony in late September. “Walking on workers for profit” Paddy Crumlin, head of the Maritime Union of Australia’s (MUA) and President of the International Transport Workers Federation (ITF), a global body that includes the ILWU, praised London’s decision for getting tougher with Uber. “This is another nail in the coffin for a business model that walks all over the rights of workers and the safety of passengers in the name of profits. We are not opposed to new technology in transport, but we are opposed to a return to Victorian working conditions. Workers today need good jobs and strong regulation to keep corporate greed in check,” said Crumlin.
Business model based on subsidy
Crumlin’s critical stance is shared by business analysts who have questioned Uber’s behavior in the pages of Fortune, Forbes, the Washington Post and other outlets. They wonder about the company’s dependence on massive venture capital funding – $15 billion since 2010 – that sustains Uber’s massive losses in order to achieve their goal of dominating the marketplace for ridesharing today, and self-driving cars in the future. Critics say Uber has operated at a loss for eight years since it started, and may continue losing money for years to come. The company reported a loss of $708 million in the first quarter of 2016 and lost $991 the quarter before. But the losses are all part of a business model that subsidizes driver pay, lures riders with unsustainably low rates, and manipulates laws here and abroad to avoid regulations and taxes. Uber has ignored local ordinances in Virginia, Texas and other states where local governments tried to regulate Uber and other ride-sharing companies. Taxpayers foot the bill Uber’s funding doesn’t just come from private venture capital. Taxpayers in San Francisco and other locations are providing Uber and other hi-tech giants with big tax breaks. Two years ago in 2015, the city Controller estimated that Uber and other hi-tech companies had received $34 million in tax breaks that year, and the amount is probably higher today. Those tax breaks are going to companies that claim to be worth billions; Uber’s valuation alone is estimated at $68 billion, and some believe it will soon be $100 billion. Others say Uber is worth far less, but as a private company without public shares and public documents, an accurate valuation is hard to determine.
Tax avoidance
To qualify for special tax breaks, Uber established their headquarters building on San Francisco’s Market Street, a few blocks from the ILWU International offices. Now the company has added a new headquarters building in the Netherlands, believed to be part of a massive tax-avoidance scheme, similar to ones used by Apple, General Electric and other corporations to avoid paying billions in U.S. taxes. Ironically, the Netherland is now in the process of banning Uber from operating their car-sharing platform there, one of a half-dozen nations that are taking similar action.
Prices too good to be true
A recent ten-mile trip in the Bay Area may illustrate why the economics of ride-sharing may be “too-good-to-be-true.” The rider paid Uber $12.00 for a trek from Marin County across the Golden Gate Bridge into San Francisco. The company took 20% of the total, leaving the driver with about $9.60. But that was before the driver had to pay a $6.00 bridge toll, leaving just $3.60 to cover his wage plus the cost of gas, oil, maintenance and depreciation on an expensive automobile. Other drivers in different circumstances may do better, but this example illustrates why the system’s “success” deserves closer scrutiny. In 2015, one transportation analyst used Uber’s own financial documents to conclude that the company was charging only 41% of what their ride service actually costs to operate.
Rates will eventually rise
Analysts and Uber officials admit the company will eventually be raising rates, but probably not until they eliminate the competition and achieve their goal of market domination. One estimate last year put Uber’s market share at 78%, which seems impressive, but the company appears determined to capture an even larger share by quashing Lyft and other competitors.
Predatory behavior?
Similar business practices were once considered vile, predatory and sometimes illegal. During the turn of the 19th Century, workers and farmers organized against monopolies or “trusts” formed by oil, steel, railroad and grain companies that killed competitors and fixed prices. The result was social unrest, formation of worker political parties and anti-trust legislation. Anger against big banks and Wall Street rose again during the Great Depression in the 1930’s, sparking a new round of political action, mass organizing of workers by the ILWU and other unions, and more laws to control corporations and investors. Enforcement of these laws weakened after the crisis passed and corporate power grew in Washington. In recent decades, politicians have grown increasingly fond of Wall Street investors and high-tech companies in Silicon Valley. Trump’s new push to lower taxes for these and other corporations, along with super-rich individuals, is a new indicator of how far America has gone down that road.
Amazon’s similar strategy
Uber isn’t the only start-up that’s using massive funding from venture capitalists to incur losses while stomping out the competition. Amazon seeks to dominate retail and delivery markets. But unlike Uber, Amazon directly employs about 180,000 workers in the U.S. with many of them receiving benefits. Another 100,000 will be hired during the coming year, but even when that total hits 280,000 it will still be a small fraction of Walmart’s 1.5 million employees. Like Uber, Amazon also uses vast numbers of “independent contractors” to deliver products. In this way, both Uber and Amazon are cheating workers out of Social Security, disability, benefits or other payroll taxes for their allegedly “independent” workers. Both companies also share an appetite for soliciting hefty taxpayer subsidies as incentives to locate new facilities. Amazon is now soliciting bids to locate a new headquarters building somewhere in the U.S. that will employ thousands of workers; the highest bidder is expected to pay billions in public subsidies to win the contest.
Traditional organizing is tougher
Uber’s “independent contractor” model means organizing traditional unions is much more challenging. Ironically, taxi-drivers who face the same legal obstacles as independent contractors, were among the first to win improvements through organizing a “union” like New York City’s Taxi Workers Alliance. Uber workers have used a similar approach to successfully organize legal and political actions that have yielded some concessions and financial settlements. With anti-union courts now weakening labor laws covering traditional, organizing these “advocacy and action” groups may become more common and necessary. Unions that support and show solidarity to these non-traditional efforts may find themselves in good company with new friends, allies and some public support.
Privatization wedge
Another reason for all workers – not just taxi drivers – to be concerned about Uber, Lyft and similar examples of non-union “disruptive” hi-tech companies, is that they are now actively soliciting business from public transit systems, many operated by union members. The city of Altamonte Springs, Florida near Orlando recently decided to subsidize the cost of Uber rides for residents instead of offering public transit. Lyft says they’re already negotiating similar deals with unnamed “large city transit systems.” A city official at Altamonte Springs says his city allocated $500,000 in Uber ride subsidies for the coming year, that was motivated in part from the failure by local governments to provide decent public transit options for residents in the region. Before settling on Uber, the city considered operating a public van or small bus to shuttle residents, but the estimate of $1.5 million for that service made the $500,000 subsidy to Uber seem like a bargain. Gouged by the gig economy
“All union members, whether they’re in the public or private sector, need to be aware of these non-union ‘gig-economy’ companies who make claims that are “too-good-to-be-true,’” said the ILWU’s Vice President (Mainland) Ray Familathe. “At the same time, we have to help the workers at these new companies learn about their rights and support their efforts to organize for improvements. Our problem isn’t with the drivers; it’s with the owners and investors who are trying to profit on the backs of others.”