Chairman's Blog

Unions Take Uber Drivers For A Very Long Ride Down A Very Short Cul De Sac

June 02, 2019

A photo from the backseat of an Uber

Back in the 1950’s the United Steelworkers forced American steel companies to provide make-work jobs for workers those companies didn’t need. It was a practice known as featherbedding.

As a result of the increased costs to steel companies, U.S. steel prices skyrocketed, steel imports replaced American made steel, and steel jobs in the U.S. fell from 650,000 in the 1950’s to about 140,000 today. The big winner was China who now produces about half the steel in the world. American steelworkers, and their families, where huge losers.

Union bosses are causing something even more destructive to play out right now.

When someone decides to become a driver for a ride-sharing company like Uber or Lyft, they understand they’re becoming an “independent contractor.” That means you work the hours you want to work (pretty sweet); and you work the days you want to work (sweeter still.).

Of course, to become an independent contractor with a ride-sharing company, you must meet certain conditions. Generally, you have to pass a background check, and possess a good driving record. Your car can’t be more than 10 years old, must have seating for 4 or more people, and seat belts for each. Finally, the car must be properly licensed and insured, and your driver’s license must be valid.

In addition to paying you for the rides you provide, you get discounts on buying or leasing a car, discounts on fuel, the use of their proprietary technology, and, of course, the trusted name of Uber, Lyft, or whoever.

Bottom line, work more hours, make more money. Fewer hours, less money. Pretty simple right?

Not so fast. There is no simple idea that greed or the desire for power can’t complicate and screw up. That’s what the unions want to do with ride-sharing companies like Uber and Lyft.

Union leaders want ride-sharing drivers to go on strike demanding full-time employment status, full benefits, paid vacation, and all the other goodies unions can convince them they’re entitled to.

I use Uber on a fairly frequent basis and often talk with my driver because I’m curious how Uber works. Probably 99% of them have told me Uber is a great solution for them: they can work whenever they want and make pretty much what they want. For most, it’s part-time and they do it to pay their kids’ college expenses, buy a new car, move to a different location, or save up for retirement.

Enter the unions. Only 7.2% of private sector workers are union members today. That represents a steep decline from the double-digit membership unions enjoyed 20 or 30 years ago. It also means private sector unions don’t have the political muscle or the war chests they once enjoyed. But alas, they smell a ripe opportunity to gain both muscle and dues in the 2 million driver ride-sharing industry.

Union bosses are promising drivers they can boost their hourly take from the current average of around $9.50 to something over $15.00 per hour. No wonder drivers are interested.

What unions aren’t telling drivers is that as regular employees the government will take a big bite out of their checks — tax withholding, Medicare, unemployment insurance, etc… In addition, union dues will be deducted automatically. And they can kiss those flexible hours and days goodbye.

In fact, because of the increased costs ride-sharing companies will incur for payroll, administration, personnel, etc.., their price advantage over taxicabs and rental cars will vanish.

Ride-sharing companies may also force drivers to work fewer hours and make them all part-time employees. Then, they won’t be entitled to benefits. Along with all the new costs and deductions, that $15.00 per hour isn’t looking all that good if the most you can work is 20 hours per week.

If you think that’s bad for employees, wait until ride-sharing companies replace all their drivers with autonomous vehicles. Unionizing drivers will only rush along the process of automation.

And if the ride-sharing companies lose all the lawsuits their drivers will undoubtedly bring, that’ll pretty much be the end of them altogether. We’ll all be running to catch yellow cabs again.

Ride-sharing companies and their investors have provided millions of drivers the opportunity to make extra money, or even a living, working when and where they want. But the unions are doing what unions have always done - stoking resentment against the companies’ owners and managers.

They point to Uber’s expected $90 billion IPO and tell drivers the owners will get rich while they work for peanuts. Never mind that Lyft just announced a $1.14 billion loss in the first quarter of this year. In fact, they went public at $72 a share then started falling off and haven’t recovered since. As of this writing, Lyft’s stock price is down to $59.34.

Be assured if the union bosses get their way, that loss will look like kid’s play. They’re determined to take ride-share drivers for a very long ride in a very short cut de sac — the same thing that happened 50 years ago to the hundreds of thousands who lost their jobs in the steel industry.

When it comes to the motives of the human heart we learn once again; the more things change, the more they stay the same.

John Philip Sousa IV

John Philip Sousa IV is an entrepreneur, political activist, author and accomplished business person. John has worked in the financial services industry for over 40 years, built a highly successful marketing company, ran for congress at age 24, and in 2016 created and led the successful movement to draft Dr Ben Carson into his candidacy for President of the United States. John is author of John Philip Sousa, A Patriot’s Life in Words and Pictures and Ben Carson, RX for America.