Gig Workers, Regulation, and the City

Hi All,

I hope you all are doing well and welcome to Dozen Worthy Reads. A newsletter where I talk about the most interesting things about tech that I read the past couple of weeks or write about tech happenings. You can sign up here or just read on …

For those of you who’ve been reading for a while you know that I don’t really like the so-called Gig economy companies given the mainstream issues in the media with reference to worker treatment and pay. When Prop 22 was passed last year in California, I was one of those that wasn’t happy with Prop 22 being passed. I wrote at the time: 

Speaking of the election I have to say I was mighty upset that Prop 22 was passed. All the gig economy companies Uber and Doordash included had way more money. Interesting data point here is that most of the Bay Area counties did not vote in favor of passing Prop 22. 

The below graph is from The Times. 

The other very interesting thing to note about this is that Uber and Lyft used their apps to promote to no end Prop 22. From Andrew Hawkins at the Verge: 

But the gig companies’ digital reach and their use of in-app messages to reach voters was unique, setting it apart from ballot fights of the past. In the weeks leading up to the vote, Uber and Lyft served users with a pop-up message threatening longer wait times and higher prices if Prop 22 failed. They also claimed drivers would lose their livelihoods. In order to request a ride, users had to tap the “confirm” button on the message.

Uber and Lyft’s use of their apps to push a political message may be legal, but it still felt improper, said Erica Smiley, executive director of Jobs for Justice, a nonprofit that opposed Prop 22. “If anyone else collected data from people for one reason, and then used it for another political purpose, they would be in a world of trouble,” she said.

The fact of the matter is that people (as users) do love gig economy companies such as Uber and Lyft. What is not to love, it’s a beautiful, brilliant product that serves a user every time. 

To me it was illogical that Prop 22 passed. I mean why would you vote in favor of Prop 22 right? Last week a California Superior Court judge ruled Prop 22 unconstitutional, saying it violates the right of the state legislature to pass future laws around worker safety and status and then I saw this LinkedIn thread and multiple points of view on part time employment. Some examples:

Obviously, there are some people who’d prefer this to be a supplemental income versus a full time job for a variety of reasons - maybe its family commitments, maybe it truly is supplemental income after someone has worked a full time job and is trying to avoid working another full shift just to make ends meet. 

Nevertheless, I think there are three interesting things happening with/to gig economy companies and the supply side (the drivers, deliver drivers etc) 

Worker Activism, options, cheap rides

There have been various groups and communities formed around complaints against gig economy companies. You can find several Facebook groups and Reddit forums where workers can discuss the problems that they have pretty much going back years. What is new however is activism. The most recent one that I read was with reference to Gorillas, a delivery startup, based in Berlin. From Gorillas: The new WeWork?: 

The ease with which the company can fire riders and warehouse workers with no warning has been the underlying theme of many recent protests in Berlin. On June 10, strikes broke out due to a supposedly unfair dismissal of a rider known as Santi.

Similarly, on July 8, the Gorillas Workers’ Collective blockaded a warehouse at Checkpoint Charlie, after Berlin employees were “unlawfully” fired after their six month probation, a member of the collective told Sifted.

This is an entirely new class of problem for the gig economy companies. Additionally since COVID-19 happened these companies have found it hard to fill in supply (drivers or delivery folks) and as you might have noticed the price of your delivery/ride has gone up (at least in the United States). Workers working for these gig economy companies have realized that there are better, more well paid options if you are working as a “full time” contractor so why work “full time” with no benefits. So then should the part-time drivers get benefits as well? I think so, depending on how many hours you work as Uber’s CEO, Dara Kosrowshahi, has suggested. With everything, the devil is truly in the details! 

Driver bargaining power has gone up since a lot of the drivers have found alternative options for employment during COVID and are unwilling to go back and become Uber drivers. While part of the reason is the fact that we’re still in a pandemic, part of the reason is that there are better, lower risk jobs. These companies are not just competing against other gig economy companies but also against companies such as Walmart, UPS, Fedex, and Amazon. Granted that the service is not exactlyfungible but it's a good indicator that there are other options for delivery personnel/drivers. 

I think we’re going to see significant activism against the concept of “full time” contractors and in fact Uber’s suggested approach seems fair to me. For the truly part time workers they still have the option to drive (which might create downward wage pressure) but at the end of it, I think the overall “cheap rides party” is truly over and I really do not think that cheap rides are going to come back anytime soon. 

Local Regulation

Local governments have not always had a say in how gig economy companies and marketplaces (Airbnb for example) operate and at some point they started interfering especially when it concerned infrastructure. In London for example, TfL allowed Uber to continue operating because the citizens wanted Uber and TfL for all practical purposes had not much choice. Allowing them to operate within the confines of local regulation was the first step but what is happening now is that local governments at a city level are doing one of two things:

Passing Local regulations

Recently the New York City Council said it passed five bills meant to shift some of the balance of power away from food-delivery platforms toward “struggling mom and pop shops.” 

The bills cover several areas such as providing a restaurants’ direct telephone number to eaters, prohibiting platforms from charging restaurants for phone orders that don’t result in transactions, placing caps on the commissions food-delivery platforms can charge restaurants  (SF also passed permanent caps a few months ago), requiring delivery services to share monthly eater information with restaurants if restaurants request it (basically providing data to restaurants on where orders are coming from to determine if a specific delivery platform is worth it) 

Suing gig economy companies 

Chicago is one of the first to sue DoorDash and Grubhub for “deceiving customer and unfair business practices” related to how these companies advertise delivery services for their businesses without consent from the restaurant, conceal lower prices (quite similar to Apple not allowing app devs to advertise lower prices if you buy the sub outside of IAP!), sharing telephone numbers for customers to connect with restaurants, but charging the restaurants a commission for calls placed through those numbers even if no order was made 

The complaint list is quite long but the point is not the specific complaint but the fact that city governments are completely cognizant of such practices and rather than wait for state or country wide regulation are taking their own action to protect their local constituents. Now of course, I don’t know how many cities will pass such regulation/ sue these companies for underhand practices but one thing is becoming clearer is that all of these companies tried to use tech to obfuscate the underlying problems with VC money even where the unit economics likely didn’t make sense. Yeah, of course it's cool that you can click a button and get food, groceries, or a ride but underneath all that is the reality that this is not a tech problem but an infrastructure problem, a people problem and that has to be solved for.

Needless to say, I expect that this is going to get a lot worse on all three fronts - gig worker activism, local regulation, local lawsuits -- all of which will keep these tech companies busy. The key question in my mind is are these really tech companies or just real world companies that use technology to solve a taxi problem and a delivery problem? Adding in a middleman obviously has the problem of increased service costs as the middleman has to make $ but the end consumer will pay for it going forward -- which I think is fair. Simple demand and supply at play, with a much larger market than previously ever possible which is where the “tech” comes in. Will this mean that we’ll soon replace our cars just to use Uber’s all the time, which was the original plan? I don’t think so until self-driving cars are a reality, which, let's face it, is at least a few years away. 

Thank you for reading. Stay safe, be well! If you enjoyed reading this please consider sharing with a friend or two (or sign up here if you came across this or were forwarded this)