Take a cue from New York: A better deal for Uber drivers
The man who runs Uber, Dara Khosrowshahi, dropped by Tuesday for a visit with the Sun-Times editorial board. He explained to us that Uber drivers are paid pretty well, and the company is refining its app so that drivers can find riders faster and earn even more money.
He explained that Uber can’t simply raise fares so as to pay drivers more. If Uber were to do that, he said, fewer people could afford the service. This would be bad for Chicagoans who need a more convenient way to get around town, and drivers would earn less.
And he reminded us that Uber drivers are not employees, but “partners.” This, he said, allows them to come and go as they please.
“A driver gets on Uber because they can drive whenever they want,” Khosrowshahi, who is Uber’s CEO, told us. “They are their own bosses. They can drive for two hours. They can drive for 50 hours.” Here’s our issue: Most of this is nonsense. And the New York City Council on Wednesday saw right through it.
After hearing from dozens of ride-share drivers who work full time but can’t pay their rent, the council set a schedule of minimum wages.
If Uber and other ride-sharing services fail to create a more equitable pay structure, Chicago should follow New York’s lead and do the same. The ride-sharing industry is young, and now is the time to demand that greater fairness be built into its business model.
Our city and nation don’t need another gigeconomy industry that makes a small percentage of top executives and investors extraordinarily wealthy by exploiting the labor of ordinary workers.
Khosrowshahi argued that drivers are reasonably paid. In truth, they earn about the minimum wage in Chicago, or even less, and receive no benefits — no health insurance, no pension or 401(k), no paid vacation.
According to a study conducted by Uber’s chief economist and a Princeton economist, drivers for the ride-share company in Chicago earn about $16.23 an hour. But expenses per hour — for gasoline, the wear and tear on the car, auto insurance and the like — run about $4.70 an hour.
Subtracting expenses from earnings, the typical Chicago Uber driver’s take-home pay is roughly $11.53 an hour.
The minimum wage in Chicago is $12. Perhaps this is where we should mention what Khosrowshahi is paid. According to the Business Insider, he will make $120 million next year if he meets certain incentives, such as taking the company public.
Khosrowshahi says Uber drivers gain advantages by being independent contractors — “driver partners” — rather than employees. But it is because they are not employees, technically speaking, that Uber can pay them less than the legal minimum wage. And it is because they are not employees, technically speaking, that any talk of health insurance and other benefits is off the table.
Khosrowshahi likes to emphasize that “market forces” set the pay of drivers, who are free to quit. But this denies the reality of the burgeoning American service economy, where for millions of workers the only alternative to a low-paying Uber job might be a low-paying McDonald’s job.
All across Chicago, men and women are working two or even three modest-paying service jobs to provide for their families.
The ride-share industry is both a creation and creator of the gig economy, where millions of people work on short-term contracts as independent contractors, often for modest pay, and denied benefits and job security. They are “consultants” and “freelancers” and “on-demand workers.”
Last June, the Bureau of Labor Statistics, in its first survey of the gig economy, estimated that some 16.5 million Americans are working in “contingent” or “alternative work” arrangements. They work for the obvious gig economy leaders, including Uber, Lyft and Airbnb, but also in such industries as coal and steel — and wherever else an employer can contract out a job to save a dollar.
The potential for even greater exploitation is very real. Earlier this year, the Sun-Times reported on the case of Cloverhill Bakery on Chicago’s Northwest Side, where some 800 workers were designated as “permatemps” for years, even decades, which allowed the bakery to pay them only $10 an hour. Many of the workers were undocumented immigrants and not about to squawk.
But in paying Khosrowshahi $120 million while paying drivers as little as possible, Uber is hardly an outlier among big American companies, where lopsided compensation structures are the norm. In 2016, as reported by Bloomberg News, the leaders of S&P 500 companies were paid 347 times more than their employees, up from 41-to-1 in 1983. The average CEO pay was $15.6 million.
It doesn’t have to be this way. Top executive pay in other nations is not nearly so out of whack. A Bloomberg analysis earlier this year found the pay gap is at least two times bigger in the United states than in any other nation. CEOs of the biggest publicly traded U.S. companies are paid more than double that of their Canadian counterparts and 10 times more than those in India.
The result is a hollowing out of the middle class. The richest 1 percent of Americans now owns more of the country’s wealth — 40 percent — than at any time in the past 50 years. Bankruptcies among older Americans, who are less likely today to have an employer-provided pension, are booming.
Uber has never made a dime of profit. None of the ride-share services have. They live on huge infusions of money from venture capitalists as they seek to find a profitable business model.
It is questionable whether they’ll get there, but every employee should be included on the ride.
Even “driver partners.”
IN PAYING KHOSROWSHAHI $120 MILLION WHILE PAYING DRIVERS AS LITTLE AS POSSIBLE, UBER IS HARDLY AN OUTLIER AMONG BIG AMERICAN COMPANIES.