There was a time when both Uber and Lyft compete and fight to gain access and market share in a big city like Minneapolis. Times have changed. Now Uber and Lyft rule the cities, and it seems competition has turned into collaboration or collusion of sorts. I don't know a lot about the economics in ride for hire business. However, I found the latest news of Uber and Lyft threatening to leave Minneapolis by May 1st of this year if the local politicians don't stop the increase of minimum wage for drivers.
City council of Minneapolis has approved a minimum wage increase for drivers and it will take effect in May 1st. Now this minimum wage isn't something craze. It is only $15 an hour. After the massive inflation we have seen everywhere, $15 minimum wage for a big city seems more than reasonable to me. I don't even think this would be enough to live in there. Moreover I doubt that Uber or Lyft drivers earn less than this. If they have been earning less than this, I am not sure how they have managed so far. This kind of minimum wage is already de facto minimum wage in many cities. Free market won't allow people to take anything less than this given all the increase in cost of living. I am not sure what Uber and Lyft are upset about, so much so they threaten to stop their services in the city. It could just be a political move to persuade local politicians to reevaluate their decision or even bring attention from state politicians to take superseding actions.
In fact, state lawmakers are indeed trying to step in and come up with state-wide law that would side with Uber and Lyft's position and cancel city council's decision. There are many differences opinion in political space as well. The problem is I don't have confidence that neither state politicians, nor city council have competence in properly addressing the issue. I wouldn't be surprised if corruption was involved either. Uber and Lyft do not have the best reputations either. They are many dark stories about their business and how the operate. I believe they are driven by greed rather than innovation. They have been involved in buying out politicians, spending hundreds of millions in political campaign so that local and state politicians don't pass any unfavorable laws and rules for Uber and Lyft. One of the biggest ones has always been wether Uber and Lyft drivers should be considered employees of these companies or independent contractors. If drivers are designated as employees this would mean Uber and Lyft have responsibilities by law to take care of their employees. For a very long time they have enjoyed benefits of both. When convenient drivers are treated as employees and when convenient otherwise also treated as independent contractors.
Maybe in early days of these companies when they were indeed innovators and transforming the taxi space, the relationship between drivers and the companies were more of partners and drivers were more like independent contractors. Because drivers had many options. I don't think the same rules exist anymore. Uber and Lyft have monopolized the space, drivers don't have options as they did before. These companies are huge now, they are publicly traded, and have cash flow coming from around the world. This should put them in a position to be more responsible for drivers, their safety, passengers and their safety.
Threatening to leave the city because local council passed a small rule that may cut into their profits a little bit, seems childish and poor decision making. It would in fact be interesting to see them leave. Because this space can easily be filled with local businesses. The technology Uber and Lyft have is not innovative anymore. Anybody can create such infrastructure and apps. Perhaps there is no need for apps. There can always be old fashion taxi business models implemented. It wouldn't take too long to set up a business like this either, and I am sure there are many who love the opportunity to be in such business.
Free market should ultimately decide. Free market is efficient and can fix discrepancies in services and compensation. The problem is the lack of free market and active engagement and collusion by big money and politicians to suppress free market. When Uber and Lyft first started they had challenges, among the biggest ones were the opposition by already established taxi businesses and local politicians. Those oppositions were against free market. In free market better services, products and innovation would win as long as there are conditions for the customers to decide what is better for them. Uber and Lyft didn't win because of free market. They quickly realized the lack of it and joined the system and continued implementing similar strategies. Now that Uber and Lyft are de facto businesses for rides for hire, it maybe time for them to reevaluate their business practices and take more responsibility if they want to remain in this space.
These two companies do not have a "we are startup" excuse anymore. They own massive amounts of market share and have massive cash flow. With creative thinking and innovative approach they can improve the conditions for drivers and customers. Driver and customers are two parties they have obligations to, not the politicians. Instead of throwing hundreds of millions of dollars at politicians, they can utilize money to improve their products, services, and systems. They can invest in safety of drivers and customers. They can create more efficient systems. There are a lot more to innovate in this space. If they have forgotten the original vision, they probably do not deserve to be in the space. Greed does that to companies.
The issue is making sure drivers make at least $15 an hour. This seems to be a very easy problem to solve. Just because anything below $15 is not a viable wage for any big city, because of the crazy inflation and loss of dollars purchasing power. Part of the problem is greed. To gain more customers Uber and Lyft would want to have as many drivers as possible, so there are many drivers available in many locations at all times. That is great for Uber and Lyft and customers, because they don't have to wait and get services right away when needed. This completely in Uber and Lyft's control how many drivers available in various locations at various times. This can be managed more efficiently, so that there are too many idle drivers. Customers can wait a minute or two if need be. They have all the data available to them, analyzing these numbers they can make sure everything is balanced, fees are reasonable, and wages are decent. Forget $15, they should be earning much more.
I think Uber and Lyft are bluffing, regardless what kind of rules local or state politicians come up with, losing a market share would be a dumb decision. Those make these decisions will probably be fired. Because they lose another stream of income. What city council asking seems reasonable. Even if these companies left the city, it may actually be better because it will encourage restart of local business, which may care for drivers better than out of touch corporate executives in headquarters.
The future in the space will be transformed once more. Autonomous vehicles and services utilizing this technology are coming. This future is not too far away. Uber and Lyft are also ambitious to deploy driverless vehicles as well. I think they both will fail. I believe newer players will enter the market with something much better to offer, and Uber and Lyft will disappear from this space. Look at OpenAI. It wasn't any of the major software companies like Google, Microsoft, Apple, Facebook, Amazon, etc who brought us the first glimpse of AI technologies. It was OpenAI who started out as a research lab not too long ago. Sure others are catching up now, but just this example shows those who control the space something lose their core vision, and forget how to innovate. This may just be the case with Uber and Lyft.
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Uber and Lyft are operating on borrowed time imho.
As you stated, the tech behind their apps is not complicated or difficult. In fact, Oracle founder Larry Ellison famously said “they have an app my cat could have written.”
Why do drivers and riders need to pay a middleman. All they need is an open source app to connect riders and drivers and a peer-to-peer payment system, like Hive.
Maybe the DHF should fund that development.
Great point. I haven’t even thought about a peer to peer network solution. Another great use case for decentralized blockchain networks.
They are ideed.
Hello @geekgirl. I just found your article. It is amazing that the two companies are able to control the need based pick-up and delivery services. In Texas, I just learned that Lyft charges their already low-paying drivers a use fee of between 30 - 35K a year just to utilize the platform.
As you say, those drivers can just go work for a regular taxi service company. According to friends I know who work for the Uber and Lyft companies, they fear danger for their lives due to the open carry laws in our state. The passengers are always right.
Thanks for sharing this article.
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You've done well at highlighting the importance of balancing efficiency with fair compensation for drivers.
I also enjoy the fact that you were able to raise thought provoking questions concerning the future of transportation services, particularly in the context of emerging technologies like autonomous vehicles.
Price controls always have unintended consequences. I don't for a moment believe Uber and Lyft are run by virtuous people, but minimum wage laws and freelance work just don't tend to always work out as advertised.
It is not a good look for a company to be making threats in regards to the lowest legal wage a human can make being too high for them. In this era of heightened awareness, how tone-deaf is it to beat on the cogs that make a big city run?
Surely they are just lobbying. Can you imagine them having the same infrastructure and just deciding to pull out of a market like MSP with 3.6 million people?
Good riddance I say if not. Uber hasn't just competed with and all but replaced taxi companies, it has stripped the drivers down to benefitless giggers scraping for the next fare with no loyalty from an employer. Ruined things along the lines AirBnB has for the rental market in many places.
We need decentralized AI and direct payment/commerce models on the blockchain so there is no board of directors and millionaire executives pissing about minimum wage.
They pay peanuts, and many just do this on the side for some extra money, is hard to live being an uber driver.
Maybe a new solution will come in to replace it. It feels like traveling has dropped a lot anymore and honestly it's been years since I've personally used either. Not sure how fast people will be ok with driverless transportation lol maybe city
I can't even sleep while I'm in an Uber, for fear of something happening while I'm asleep. Imagine getting into a car without a driver.
I hope I don't see that day any time soon.
I’ll blame the municipalities. There is no way you give so much power to entities that they start feeling like they can get away with anything. Uber and Lyft have grown big. Headed and pride comes before a fall.
These companies have been growing on the toil of others. Taking advantage of people. The moment a slight increase is proposed they behave this way. Very ungreatful entities.
Uber and Lyft have gained way too much control that is why they threatening to hold the city hostage if their own pleasure is compromised
It is an illogical market, very powerful but rather fragile.
Those two started so well, they were a great solution, but little by little they have become the villain
Instead of competing and losing huge amount of cash. Better to cooperate !
This is a scare tactic. They can afford to pay drivers more & should be classified as employers.
The fact is that time and unforeseen situation do affect everyone, and the strongest do not win the battle all the time. For Uber and Lyft, it appears that they have outlive there effectiveness and relevance, and by extension sees the local laws as outrageous which if care is not taken will be the smokescreen that will catapult them out. What am concern about now is to see hive/leo who have far better existing web3 platform to begin to pull their resources together and comes up with the peer-to-peer payment system that will pay both the drivers and customers and benefit the platform. Remember that the unlookers plays the game better than the players sometimes.
Thanks for your post.
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These companies are doing good work and it will benefit people here in our country after a whole month only people get 100 dollars and they have to spend their entire month within that 100 dollars which is hundred dollar Pakistani money. I make 28 thousand rupees.
We all knew that the model was losing a lot of money and they were relying on investor money to run their model. At some point, they were going to try to turn that into profit and the model just doesn't seem to be working. I am not surprised but I am quite sad to see all of this happen.
Your government seem to be reasonable over there. They are being considerate and increased the minimum wage of drivers to $15 per hour unlike ours here that don’t even care about how the citizens are surviving
Most drivers in developed countries are imported from other countries and are underpaid, living in a big city costs a lot;. But they don't keep that in mind and pay less. Anyone can earn more by driving a taxi than this
I think what affected them is as time goes on, the competition increases
It definitely looks like the state Uber are really doing a great work in pushing it forward and making it to work