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The worldwide Uber strike is a key test for the gig economy

Uber drivers can’t unionize. They’re striking Wednesday anyway.

Driver and strike organizer Nicole Moore speaks during a one-day strike against Uber and Lyft in front of an Uber office on Marine Avenue in Redondo Beach on Monday, Mar 25, 2019. Over 200 drivers marched with signs and protested a recent 25% deduction in
Driver and organizer Nicole Moore speaks during a one-day strike against Uber and Lyft in front of an Uber office near Los Angeles on Monday, March 25, 2019.
Scott Varley/MediaNews Group/Torrance Daily Breeze via Getty Images

Uber and Lyft drivers have been fighting for years for the right to unionize and negotiate better pay. So far, they’ve failed — but they’ve found another way to flex their power.

A loose network of ride-share drivers are on strike today, from San Diego all the way to São Paulo and Sydney. They’ve urged drivers to boycott ride-sharing applications for 24 hours Wednesday and to instead spend the day picketing to demand more money. They also want cities to regulate ride-hailing platforms the way New York City does.

The work stoppage comes two days before Uber’s long-awaited public debut Friday on the stock market, and that’s no coincidence. Drivers want company executives to know they are really, really unhappy.

Uber has been cutting driver pay rates in major cities to boost its bottom line as it prepares for its initial public offerings (IPO). That has infuriated drivers, who say they were already struggling to make ends meet. They are particularly incensed by the fact that Uber investors are expected to reap millions (even billions) of dollars from the IPO because of their labor.

“This is not fair; something has to change,” Karim Bayumi, a Los Angeles Uber driver, said in a video posted on Twitter. “What’s the point of flexibility if you have to work so much more, without getting paid more or overtime?”

Bayumi, who drives full time to support a family of three, is one of the drivers organizing the strike in LA with Rideshare Drivers United, an unofficial group of Uber and Lyft drivers advocating for policy changes. Other groups, like the Boston Independent Drivers Guild and Chicago Rideshare Advocates, are coordinating similar strikes.

What started with a call on social media has since spread to about a dozen US cities, including Atlanta, Philadelphia, Minneapolis, San Francisco, Washington, DC, and Dayton, Ohio. News of the strike has even inspired Uber drivers across the world. Groups of drivers in Kenya, Nigeria, Chile, Costa Rica, and the United Kingdom are striking too.

Each group has its own set of demands, but most want a firm cap on Uber’s commission from each ride, which varies widely but averages about 33 percent. Drivers in the US also want the company to reverse recent pay cuts, and to guarantee drivers $15 to $20 an hour in take-home pay. Right now, they earn an average of $10 to $12 an hour in the US, after expenses, according to several researchers.

An Uber spokesperson didn’t comment on the strike but pointed out to Vox that the company is giving drivers bonuses ahead of the IPO.

“Drivers are at the heart of our service — we can’t succeed without them — and thousands of people come into work at Uber every day focused on how to make their experience better, on and off the road,” he wrote in a statement to Vox. “Whether it’s more consistent earnings, stronger insurance protections or fully funded four-year degrees for drivers or their families, we’ll continue working to improve the experience for and with drivers.”

It’s unclear how many drivers plan to take part in Wednesday’s stoppage, and whether they will change anything. Yet the event’s swift spread to major cities across the world marks a pivotal moment for the so-called gig economy, which relies heavily on workers with no labor protections or collective bargaining rights. Gig economy workers are starting to recognize they can organize and exert pressure even without a formal labor union.

The strikes challenge Uber’s business model

Uber’s profit model, like all others in the gig economy, involves much more than providing a popular service to customers. It depends on all the money saved from skirting US labor laws.

By classifying drivers as independent contractors instead of employees, Uber doesn’t need to pay certain taxes, benefits, overtime, or minimum wages to tens of thousands of drivers. As self-employed contractors, drivers don’t have a legal right to form labor unions and negotiate contracts either.

Uber drivers have spent more than six years fighting the company in court, saying they’ve been intentionally misclassified. They argue that drivers should be considered employees because the company has so much control over their workday, including strict rules on their vehicle conditions, what rides they can take, and which routes to take.

Uber has fought back, maintaining that drivers are not employees because they set their own schedules and provide their own cars.

So far, the issue has not been resolved.

Last month, Uber settled the main court case with 13,600 Uber drivers, agreeing to pay them $20 million, but without changing their status as independent contractors. The other 350,000 drivers who were part of the initial class-action lawsuit had signed mandatory arbitration agreements, so a federal judge is requiring them to pursue their cases in a private forum, where they are less likely to win their case.

Any challenge to the drivers’ status as contractors threatens Uber’s bottom line, which is another reason the strikes are so significant.

Uber has been upfront with investors about the risk of a labor revolt. In a new Securities and Exchange Commission filing, Uber acknowledges that giving drivers the same legal rights as employees would “fundamentally change” the company’s financial model:

If, as a result of legislation or judicial decisions, we are required to classify Drivers as employees ... we would incur significant additional expenses for compensating Drivers, potentially including expenses associated with the application of wage and hour laws (including minimum wage, overtime, and meal and rest period requirements), employee benefits, social security contributions, taxes, and penalties.

It’s worth reemphasizing this: Uber doesn’t want to pay drivers to take 15-minute rest breaks every few hours because it would cost too much, even though all US employers are required to give hourly workers paid breaks under federal law.

In the filing, the company says that dissatisfied drivers could become a business liability, as recent protests in India, the United Kingdom, and the United States have interrupted business on the platform. Instead of outlining ways to make drivers happy, Uber suggests it will just get worse.

“As we aim to reduce driver incentives to improve our financial performance, we expect Driver dissatisfaction will generally increase,” the company stated.

That dissatisfaction is leading Uber and Lyft drivers to organize.

Los Angeles drivers launched the first major US strike

In March, hundreds of Uber and Lyft drivers refused to pick up customers for an entire day — part of a one-day strike to protest the company’s recent decision to slash pay rates for drivers in the area.

Uber had cut its per-mile pay by 25 percent in Los Angeles County and parts of Orange County. That means drivers are now earning 60 cents per mile instead of 80 cents. That decision pushed drivers, who were already scraping by, over the edge.

Hundreds of them swarmed the streets, chanting and picketing outside Uber’s office in suburban LA. They asked customers to use public transportation instead of using the apps.

“Help us end this neo-indentured servitude,” Sinakhone Keodara, one of the drivers organizing the strike, tweeted that day.

A spokesperson for Uber told me at the time that the company had revamped its pay formula so that drivers will earn about the same amount that they did before Uber last increased pay rates in September.

The latest strike comes at a key moment for the ride-hailing industry. Lyft recently launched its IPO, which converted the platform into a publicly traded company. Uber is next, and its initial public offering is expected to create a financial windfall for dozens of early investors who will turn into overnight millionaires. Meanwhile, drivers say they can barely make ends meet on poverty wages.

Bayumi and other drivers helped organize Wednesday’s strike with Rideshare Drivers United. The group has been active in Los Angeles for a few years and has organized strikes before, but their impact was limited by the small group of members. That has changed recently.

Within the past two years, the group has gone from 300 drivers to about 3,000. As part of their strike, drivers demanded that Uber reverse the 25 percent rate cut and guarantee drivers a $28-per-hour minimum rate.

That didn’t happen, but that doesn’t mean the pressure is dying down. Drivers in New York City have proven that forming labor unions isn’t the only way for workers to secure better pay.

New York City drivers forced Uber and Lyft to pay them a living wage

The explosion of ride-hailing apps has been great for the startups’ investors — but not so great for actual drivers. Researchers say drivers in the US earn about $12 an hour, after deducting car expenses and gasoline.

In New York City, the unrestricted growth of these companies put serious financial strain on the city’s taxi drivers and has made it hard for all drivers to compete and earn a decent living.

Economists at the New School and the University of California Berkeley published a report in July with some limited pay data, and discovered something alarming: Driving for ride-hailing apps in New York City is not really a part-time gig for people who want to earn extra cash.

More than half of their drivers are ferrying around passengers on a full-time basis, and about half of all drivers are supporting families with children on that income. But their earnings are so low that 40 percent of drivers qualified for Medicaid, and about 18 percent qualified for food stamps.

The New School report showed that the average hourly wage for app-based drivers in New York was about $12. “The app companies could easily absorb an increase in driver pay with a minimal fare adjustment and little inconvenience to passengers,” they wrote.

The report helped drivers persuade city officials in December to pass the nation’s first minimum pay rate for drivers working with the four largest app-based firms: Uber, Lyft, Juno, and Via.

Starting in January, ride-hailing companies were required to start paying drivers around $17.22 per hour (after expenses) — about $5 more per hour than the previous average of $11.90 per hour, according to the Independent Drivers Guild, which represents about 70,000 Uber, Lyft, Juno, and Via drivers in the city. The new pay rate is calculated per ride, but the guild expects it to give full-time drivers an extra $9,600 a year. (Lyft and Juno are now suing the city, arguing that the calculated rate favors Uber, but said they are using a different formula to meet the minimum hourly pay rate.)

Because Uber and Lyft drivers are considered independent contractors and not employees, they are not subject to the city’s minimum hourly wage, which is now $15 per hour. But the new rules essentially get around that loophole and ensure that drivers are earning at least the minimum wage, with a few dollars extra to cover payroll taxes and some paid time off.

Uber and Lyft have pushed back against the pay increase, saying it would hurt competition and discourage drivers from taking riders out of Manhattan. The current lawsuits suggest that Lyft and Juno are not done fighting it (Uber is not part of the lawsuits).

But if there’s any moment for drivers to demand more, it’s now. Companies are having a harder and harder time finding workers to fill jobs, which means the competition for labor is getting fierce.

Workers are now realizing how much leverage they have

The US economy is currently experiencing a major labor shortage. There just aren’t enough workers to fill all the available jobs.

For nearly a year now, the number of open jobs each month has been higher than the number of people looking for work — the first time that’s happened since the Department of Labor began tracking job turnover two decades ago.

At the end of January, the US economy had 7.6 million unfilled jobs, but only 6.5 million people were looking for work, according to data released earlier this month by the US Department of Labor. This was the 11th straight month that the number of job openings was higher than the number of job seekers. And each month, the gap has grown.

Employers have been complaining about a shortage of skilled workers in recent years, particularly workers with advanced degrees in STEM (science, technology, engineering, and math) fields. Nearly every industry now has a labor shortage, but here’s the twist: Employers are having a harder time filling blue-collar positions than professional positions that require a college education.

The hardest-to-find workers are no longer computer engineers; instead, they are home health care aides, restaurant workers, and hotel staff. The shift is happening because more and more Americans are going to college and taking professional jobs, while working-class baby boomers are retiring en masse.

So, for once, low-skilled workers have the most leverage in the current labor market. Uber and Lyft drivers won’t have a hard time finding other jobs in today’s economy — which means there’s no better time for working-class Americans to demand better wages, benefits, schedules, and work conditions.

The Uber strikes will also test how much leverage gig workers have in making these demands, and how effective it is to organize without a labor union.

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