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Uber’s Allies

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Uber is a “ride-sharing app”: It connects people with cars to people who need rides, and it handles payment for those rides via credit card. As far as technological advancements go, perhaps it isn’t all that revolutionary, considering that people have been using phones to call cabs for decades.

But Uber has been devastating to established cab companies, as it circumvents laws that long kept out the competition. Through its struggles against state and city governments, the company has exposed the tangled web of regulation that often traps those who try to run a business in this country, and its efforts to break free have won plaudits from conservative and libertarian commentators.

Joining this chorus now is Uber-Positive: Why Americans Love the Sharing Economy, a 37-page monograph from Manhattan Institute fellow Jared Meyer. Uber-Positive is an excellent, highly readable introduction to the promise of Uber—but it’s somewhat hamstrung by its focus on New York City, because Uber’s most interesting and challenging fights have occurred elsewhere. As a result, Meyer only tangentially addresses some of the most uncomfortable questions about the company.

The case for Uber is easy enough to make. It’s convenient to riders, as they can hail a cab from anywhere without looking up a local company and making a phone call. It’s safe, because Uber keeps track of riders’ and drivers’ identities, allows riders and drivers to write reviews of each other, and handles credit-card payments behind the scenes so no cash is exchanged. It’s good for drivers, because they get to pick their own hours. And it’s good for the market as a whole, because Uber’s “dynamic pricing” algorithms set fares in a way that matches supply to demand.

Drawing on a more academic analysis he published previously, Meyer also makes the case that Uber has been good for New York in particular. The data clearly show that Uber does a better job of serving New York’s poorer residents than the city’s famous yellow cabs do.

New York City, however, is a less-than-ideal focus for a pro-Uber monograph. “A law that was created before the Internet cannot possibly be construed to cover ride requests made through smart phones,” Meyer writes at one point of the city’s requirement that certain cab operators obtain expensive medallions. But in fact, New York City’s preexisting regulations have worked pretty well—albeit with a handful of adjustments—and Uber’s struggles in New York have been minor relative to what it has experienced in some other cities.

In New York, Uber cars are regulated as for-hire vehicles. Unlike yellow and green cabs, which require medallions, these cabs are not allowed to pick up people who hail them in the street—they are limited to rides that have been arranged from afar. However obnoxious that restriction may be, it’s hardly fatal to Uber, the entire point of which is to arrange rides via smartphone.

Uber’s problems in New York mainly stem from efforts to depart from that structure in response to the app’s success. Mayor Bill de Blasio, for example, tried to blame Uber for increased congestion and floated the idea of capping the service’s growth. (A city analysis revealed that Uber is not to blame for more traffic.) Yellow-cab interests, meanwhile, have tried to force Uber out of New York with dubious lawsuits, thus far unsuccessfully.

Much trickier, both for the company and for its conservative defenders, are the obstacles Uber has faced in other cities and states.

Three pages from the end of the book, Meyer writes that “Uber’s business model is to start operating first and work with regulators later.” In other words, Uber doesn’t feel constrained by the laws that apply to everyone else. As the Capital Gazettenoted last year in the context of the company’s fight with Annapolis, Md., Uber has a habit of operating where it is forbidden and then simply paying any resulting fines, something it has done everywhere from Portland to Paris.

This behavior is, at a minimum, less clearly laudatory than are Uber’s efforts to serve the underserved and provide flexible employment to young drivers. Some conservatives like their anti-regulation campaigns with a side of lawlessness; the rest of us might want to temper our enthusiasm for the company’s “disruptive” and “permissionless” innovation.

Union organizing, which Meyer addresses in some depth, raises a similar question: Is Uber’s rise a chance to rethink labor law, or does that law not apply to Uber? Uber drivers are considered “independent contractors” rather than employees of the company, meaning they don’t have a right to bargain collectively. If these “sharing economy” arrangements are indeed the way of the future, a broad definition of independent contracting could become a gaping hole in American labor law. In response, the city of Seattle has granted Uber drivers collective bargaining within its borders, and some legal actions have sought to reclassify the drivers as employees. (It’s a complicated gray area.)

Meyer writes that unionization could force drivers into agreements they don’t like, increase prices, and keep Uber from firing underperforming workers. Those arguments are all true, but they’re also true for other companies. Even critics of current labor law—and I count myself in that group—should be leery of undermining it by expanding independent contracting, which gives companies like Uber an unfair advantage over traditional employers.

As for the path forward, Meyer concludes that traditional cab companies “need to become more like Uber—not the other way around.” This is a worthy goal, but the devil is in the details, as the experience of Milwaukee (unmentioned by Meyer) shows.

Following an adverse court decision, and seeking a level playing field for services like Uber, the city council voted in 2014 to eliminate Milwaukee’s cap on the number of taxis—a rule that had driven the cost of a cab license into the six figures. Cab drivers sued, alleging that destroying the value of their licenses was an unconstitutional “taking.” They lost.

The cabbies’ legal argument was ridiculous: anticompetitive regulation is not property. But the government did create expensive long-term licenses and then make them worthless, costing those who complied with the law a ton of money. This should evoke at least some sympathy. If conservatives hope to deregulate the cab industry, they need to address difficult situations like this one.

Should the right embrace the sharing economy in general? Absolutely. But maybe in an Uber-neutral, instead of Uber-positive, sort of way.

Robert VerBruggen is managing editor of The American Conservative. Twitter: @RAVerBruggen

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