Exploring the Dark Alleys of ‘Sharing’ Economy
-Rajesh K. Jha
In Delhi, more than 1.5 lakh Uber ‘affiliated’ drivers went on strike on 10th February claiming to be victims of low wages, non-remunerative incentive structures, back breaking working hours among many other problems. Uber drivers in Bengaluru also went on strike. In Kochi, the drivers would be on strike from the night of 26th February to 27th February. Though the strike in Delhi has been called off till February 27 on the assurance of Delhi government, the unrest among Uber drivers has brought into sharp focus a number of questions relating to the emerging models of economic relations that work behind the veil of digital transactions.
The voices we are hearing in India today are not unique. Indeed Uber has to face similar charges in many other cities of the world. A few days back, Uber drivers in UK told a select committee of MPs that they are forced to work for more than 90 hours a week just to cover costs including purchase of their cars. Earlier in 2014 , protests had taken place in London, Paris, Madrid, Milan and Berlin against this app-based ridesharing company. A major point of these strikes and numerous lawsuits against Uber concerns the status of drivers working for Uber. According to the company, the drivers are not its workers but self-employed contractors. Drivers, however, have been demanding status as workers so that they get various benefits like insurance, paid leave, minimum wages, fixed working hours etc. while they operate Uber.
Uber has been the shining star of the ‘sharing economy’ model that has been making rapid strides all over the world. Set up in in 2009 in San Francisco, USA, Uber started operation as a ‘ridesharing’ company in 2011. By 2016, it has extended its presence to more than 580 cities in 80 countries. Though it is a privately held company, its valuation is estimated to be worth $69 billion. It is touted as a shining example of ‘sharing economy’ which is making giant strides on the back of IT revolution. However, serious questions have been raised about its financial viability or claim to innovativeness. The company has been losing money on a grand scale since it started operations in 2011. For the year 2015, Uber’s losses were estimated to be $2billion (on a revenue of $1.4 billion) which are now estimated to go up to $3 billion for 2016. Despite selling its operations in China to the Chines ridesharing company Didi Chuxing in 2016, Uber’s losses have not been reversed in any significant manner. Uber has not been able to earn profit in any market where it operates, though its founder Robert Kalenick had claimed that it would become profitable in the North American market in the first half of 2016. In such a case, how does Uber continue its operation all over the world? It is actually being subsidised by its funders in the hope that it would attain a dominant monopoly position in the various national markets and then start earning profit by exploiting its monopoly position.
The strategy adopted by Uber in the beginning was to bring the fares down to a very low level to attract the customers. However, it also needed to bring more and more drivers onto its platform with higher earnings. The pay-out system of fare plus incentives to drivers was designed accordingly. Powered by massive funding it got, Uber subsidised both the drivers as well as passengers. It led to a big influx of drivers onto the Uber platform. Like other cities in the world, in India too the sunshine was short lived. Within two years of starting its operation in Bengaluru in 2014, Uber started cutting down on the pay outs in a gradual manner. As Uber added more and more taxis to its platform the waiting period for the taxi drivers to get a passenger call during non-peak hours increased. They were now required to work for up to 12-14 hours a day and even then they could not earn what they had been earning just a few months back. While the middle classes loved the reliability, comfort and cheap fares offered, rumblings started in the Uber driver community. It finally exploded in the recent strike of Uber drivers in Delhi as also in Bengaluru and Kochi.
Uber’s claim to innovativeness is also not substantiated by facts. Contrary to the claim of Uber that it would lead to decongesting the city roads as more and more people opt to put their cars for ride-sharing (turning drivers in their off hours or on week-ends probably), there has been a sharp increase the number of taxi-cars on the streets. A large number of these are new additions based on the booming consumer demand due to low fares offered by Uber. Since there is no cap on the number of taxis that can be registered in cities, the congestion on the roads is set to worsen as more and more taxis start operating.
Uber has used the absence of well-defined laws in cities governing the transport sector to push its way through. As a well thought out strategy, Uber starts operation in cities without getting into the legal requirements and forces the hand of the municipal bodies to come out with regulations which often work to the advantage of Uber as it is already present as a dominant player in that market.
A look into the economic model adopted by Uber would make it quite clear that without raising the price of the ride, Uber can’t hope to become profitable. Surge pricing is one such strategy where the price of Uber ride goes up multiple times when there is high demand for its services. In the beginning Uber offered high level of incentive payment to drivers to lure them away from their traditional models of working for a taxi stand or local company. Simultaneously, it also transferred all other costs such as vehicle maintenance, security, and insurance to the drivers. Mostly, the drivers also did not take into account costs such as interest on car instalment and depreciation in calculating the actual benefit accruing to them. Once it realised that the cities have become hooked to Uber and its competitors in the form of traditional taxi agencies are almost finished, it started cutting down the driver payment. The condition for incentive pay out was also made more and more difficult to achieve. This created huge resentment amid the taxi drivers which is reflected in the ‘strike’ in Delhi, Bengaluru and now Kochi.
Many of the start ups in the world such as Airbnb and Uber lay claim to a new form of ‘sharing economy’ which imparts them a certain respectability. Use of the word ‘sharing economy’ actually helps these companies in hiding the fact these are merely exploiting the ‘on demand’ economy to their advantage often by trampling upon worker’s rights like minimum wages, fixed working hours, leave and other facilities. Uber’s claim to innovation lay in the assertion that on an average an individual car is operated only for about 56 minutes a day. Uber makes it possible to utilise the car for ‘ridesharing’ providing income to the part-time worker. It simply does not hold true in a country like India. Uber has only offered an efficient app which has connected the drivers and passengers on a digital platform at a (till now) cheap rate. Hardly any individual uses his car to become part time Uber driver. It was a publicity pitch and has remained so. Another indicator that Uber does not represent any new model of business is reflected in the fact that it has remained massively unprofitable despite being in business for six years now. Its supposed innovativeness and ‘disruptiveness’ are not leading to any level of improved efficiency or cost reduction.
In all of this however, the most crucial point relates to the status of the people who work for companies like Uber. As more and more activities come under the ambit of gig economy where people are supposed to work as contractors, part time labour or professional, self-employed persons on specific projects and activities, there is a need to guard against the threat of what is called ‘uberisation’ of the workplace which does away with the basic rights of the workers in terms of minimum wages, social security, medical support, paid leave and other benefits? With more and more services and works being offered through the use of digital platform, it has become extremely important to expand the scope of laws governing labour relations to regulate such ventures without compromising the advantages they might offer to the society.
It is all too easy to argue that since these people have offered to work of their own free will, it does not really matter if they forego such benefits or rights of the workers. But the fact remains that the opaqueness of worker-employee relation in the digital economy is becoming all too stark even as the ‘sharing economy’ or ‘on demand economy’ expands by leaps and bounds. People working for Uber and similar other digital based companies don’t know who they are working for, who decides their work condition, how exactly the incentive structure and payout work. It is hard to know if it is someone sitting in Gurgaon or San Francisco or simply an algorithm that decides the fate of the worker? It generates a feeling of anger as they feel more and more like slaves than citizens enjoying certain rights guaranteed by constitution.
The argument is not to ban services like Uber. The benefits that accrue from the digital innovation could certainly become a source of increased welfare for the people only if these are shared widely and equitably. The joy of a happy ride in Delhi or Bengaluru within five minutes of pushing the button on the smartphone can be sustained only if the person driving the cab is also part of the happiness and he does not feel like a slave chained behind the opaque digital veil.
The Article appeared on DailyO on 27th February 2017. Link is here– Uber is treating its drivers as slaves in name of ‘sharing economy’