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How companies like Uber work around regulations, avoid paying taxes, and shaft their workers.

For a certain class of urbanite, using Uber is a guilty convenience. You know you shouldn’t even if you don’t quite know why you shouldn’t—something about labor and privacy issues—but sometimes it’s late and it’s raining and you know it’ll be more expensive if you take a more traditional cab. Plus, it’s just one ride. It can’t be that bad, right?

Nov-15-Hill-Books
Raw Deal: How the “Uber Economy”
and Runaway Capitalism Are
Screwing American Workers

by Steven Hill
St. Martin’s Press, 336 pp.

If you already feel guilt pangs when using Uber, reading a few chapters of the journalist Steven Hill’s Raw Deal: How the “Uber Economy” and Runaway Capitalism Are Screwing American Workers may have you deleting the app entirely. Hill sets his sights even higher, hitting Silicon Valley darlings like Uber and Airbnb alongside the former online black market Silk Road, right-to-work laws, and factory robots all under the umbrella of “naked capitalism.” “You may not have health care from your job anymore, or unemployment, retirement or sick days, but hey, you are your own boss now,” Hill writes. “Congratulations.”

What makes a service like Uber so successful that it’s valued at more than $50 billion? The easy answer is that the company saw a broken, inefficient system—the taxi industry—and streamlined the process by designing a cutting-edge app. It’s a classic Silicon Valley origin myth. But it’s missing a key component.

A good idea and some tech savvy alone aren’t enough to raise millions (or billions) of dollars. Companies like Uber and Airbnb don’t just identify an industry in need of disrupting; they identify regulatory blind spots that allow them to operate with little government oversight. For all intents and purposes, Uber is a taxi company and Airbnb is a hotel company. But both maintain they’re just services connecting users with independent contractors (in these cases, drivers and homeowners). This shell game lets the companies avoid costly licensing, training requirements, and sometimes even taxes. By the time local governments move to regulate after a year or three of operation, there are already teams of lawyers and a customer base used to low prices ready to fight. The message is clear: face a lengthy legal and public relations battle or give up and let companies operate outside the rules.

The regulatory piece of the equation does not get by Hill. “In every location where the company has bumped up against regulations—which is pretty much everywhere—Uber has acted like a rogue operation that has refused to comply with local laws and tried to bully local officials,” he writes. “In many cases, it has been its own worst enemy, unwilling to make the least little compromise.” The focus, though, tends to be on finding more responsible companies rather than a more adequate government. But capitalism is like a liquid, filling whatever container it’s in. That means companies like Uber are going to seep into all the tax loopholes and regulatory cracks they can find unless someone plugs things up.

It’s hard to conceive of government, especially local government, as anything more than reactive. Airbnb shows up, property owners start kicking low-income tenants out of buildings in order to use them exclusively for short-term rentals, the city council realizes what’s happening, and (ideally) tries to stop it. But imagine a world in which a city implements stronger tenant protection before Airbnb gets big, or passes ride-sharing regulations before Uber becomes the norm. It’s a case not just for bigger government, but for more experienced government. This would require bureaucrats to be familiar enough with the tech sector to identify trends and make recommendations to lawmakers. With members of Congress so in the dark that they’re turning to Silicon Valley entrepreneurs to help them make heads or tails of the start-up economy, we’re unlikely to see that anytime soon. But focusing on strengthening government’s ability to proactively regulate is still more useful than focusing on why companies should be more magnanimous.

That’s not to say Hill is unfair to the likes of Silicon Valley; it would be better if more writers saw fit to call out the Ubers of the world. But lines like “There are ‘good’ ride-sharing companies and there are ‘bad’ ones. Uber is a bad one” oversimplify matters. Hill also focuses a little too much on Uber CEO Travis Kalanick, calling him “pompous,” “juvenile,” and “deeply disturbing.” That the rich heads of companies act like jerks is not something unique to the sharing economy, and it’s not something that’s likely to change.

Hill’s strongest chapters take on companies like Uber, but he has plenty of other targets as well. In fact his scattershot approach means that some of the connections between targets are a bit tenuous. Uber executives may share a libertarian outlook with former Silk Road owner Ross Ulbricht (aka “Dread Pirate Roberts”), but it seems unfair to lump the former in with the latter’s marketplace for illegal drugs and worse. Hill calls it “a different kind of ‘sharing,’” but he has enough research and interviews to back up his anti-Uber crusade without needing to lump in a separate entity—one that was shut down by the FBI two years ago.

All of this adds up to a dystopian vision of a not-so-distant future in which everyone is an underemployed contract worker constantly moving from micro job to micro job to make ends meet. Uber’s drivers are all technically independent contractors, while the entire purpose of apps like TaskRabbit is to match users with contractors to perform different tasks. As Hill explains, though, the rise of the “1099 workforce” is not limited to Silicon Valley; more and more traditional jobs in fields like manufacturing are turning to contractors to perform the same tasks full-time employees used to do. In addition to costing workers in benefits and safety nets, misclassifying workers as contractors costs federal and state governments billions of dollars annually in lost tax revenue. As Hill writes,

Some of the New Deal-type laws and policies that insured Americans against risk have been weakened or overturned. Others have become outdated and no longer fit the society we are becoming. Consequently, the New Deal society is slowly melting into the fog of history, like a once-glorious ship whose time appears to be passing across the sea. Unlike the talented generation of American politicians and business leaders in the 1930s, ’40s, and ’50s, who tackled head-on the challenge of forging a new deal for the country in the face of a paralyzing economic crisis, as well as a second world war, the current crew of politicians and business leaders have watched helplessly or worse, as the recent national collapse accelerated trends that are taking major parts of our economy backwards to pre-New Deal conditions.

That ghost of Franklin Delano Roosevelt hangs over all of Hill’s warnings about the “economic singularity.” For him, it offers a perfect contrast to the trends today: good, accessible jobs with benefits (and not an app in sight). The original promise of the freelance economy seemed to break out of this old-fashioned way of doing things. What if instead of answering to a boss as an office drone, you could be your own boss and help companies all around the country from your home office? What if instead of working at your grueling factory job, people could buy your products from you directly? But as Hill explains, these original assumptions were based on the most talented and entrepreneurial workers setting out on their own. Instead, it’s low-income workers with little other choice who are being hired as contractors, or plying their trade for as little as possible for a service like Uber or TaskRabbit. Rather than offering freedom and flexibility, the commitment-free schedule is instead a curse, requiring workers to head to jobs on short notice or risk wasting an hour or two with no pay.

So, Hill says, we need a new New Deal that can adjust to modern economic realities while preserving the goals of the original series of laws and projects. And to his credit, he spends the book’s final two chapters laying out aspects of this plan, with everything from expanded Social Security and freelancer tax credits to profit-sharing programs for Silicon Valley companies. A stronger safety net for workers—and a specific set of benefits that freelancers can count on—would be a big step forward. When tech startups can grow so massive so fast, though, governments need the ability to regulate on almost a moment’s notice. Having good, experienced officials making these policies can be the difference between Uber the $50 billion headache and Uber the convenient taxi app that still pays its taxes and does adequate driver background checks. And that’s a ride you wouldn’t have to feel guilty about taking.

Matt Connolly

Matt Connolly is digital managing editor of the Washington Monthly.