In case you haven’t heard yet – Seattle is the first U.S. city to give Uber, and other contract drivers the power to unionize. The Seattle City Council voted 8-0 Monday afternoon to enact Councilmember Mike O’Brien’s ordinance giving taxi, for-hire and Uber drivers the ability to unionize.
Surprise surprise…how long did we think that this so called new-age sharing economy, growing and profiting on the backs of ‘contractors’ would last? Seattle may be leading the way in this specific ruling, but many cities in the U.S. and across the globe have had issues with ride-share companies and it is no surprise.
Ride-sharing is when a company acts as a so called broker, collecting demand for transportation and then providing registered drivers with the option to pick up a person or package and drive them to the required destination. The company does not actually schedule the ride, as in they don’t pick which driver should do that job and then assign them to the job. Rather they ‘post’ the job and the first driver that wants it, gets it. Because of this model, there is inherently significant waste which leads to congestion, fuel burn and emissions that aren’t required. Why?
If I as the company, don’t control my resources (as in drivers with their cars), rather I just propose jobs to them, then in order for me to ensure I have the ability to provide quick pick up for my customers, I must have multiple empty cars driving around waiting for the ‘app to ring’. The resulting challenge is twofold – more cars burning fuel and rubber on already packed roads; and a much larger pool of drivers roaming the streets hoping to make some money on a much smaller pool of demand – a pool of demand that if handled by an optimized network of vehicles, would require fewer drivers, each actually earning a decent income.
Lets look at a fish bowl – if I only have a set amount of fish food to throw into the bowl each day, then the more fish I add to the bowl, the less each fish will eat on average. What happens in reality is some fish eat fine, while others starve to death.
In the fish bowl of our streets, demand is set. It of course fluctuates, but overall the same number of people are requesting a ride or delivery on any given day. If you have too many drivers trying to make money on that, some drivers do fine, while others…don’t. In the meantime the ride-sharing company makes out phenomenally well since it takes a cut of the revenue without taking the risk of the costs.
Any wonder they want to unionize!?
The challenge is what the response will be to unionizing. Ride sharing companies may choose (or not have a choice) to simply stop doing business in markets that allow it and thus everyone loses; or they can choose to control their resources i.e. actually schedule their drivers, and thus be able to meet demand efficiently. The obvious downside is that less drivers will be needed (unless demand grows) but in turn each driver will make the money they should be making and the ride sharing companies still make their cut too.
And what about the argument that by having less ride sharing cars on the road, the passengers will now have to wait longer for service – thus it is bad for the community? Well, if transport companies continue to behave the way they do today, that is probably a fair argument. But if the taxi companies, and ride sharing companies, start utilizing advanced dynamic optimization software, that enables them to operate truly on-demand, then everyone will benefit.