The Uber effect

Transformative transport

Person using Uber app to hail a ride as cars pass in the background
Using the Uber app to hail a ride. Image: Mark Warner on Flickr, CC BY 2.0

Why Uber?

Über: being a superlative example of its kind or class.

Uber – German for ‘great’ – has become an integral part of the everyday lives of many Australians. By pushing a button on our smartphones, a vehicle is almost immediately summoned to whisk us to our destinations.

Screenshot of the Uber app
Screenshot of the Uber app. Self-captured screenshot by Adam Herman, using iPhone frame from Apple

Pegged as a ‘ridesharing’ company, their app (available for Apple iOS and Google Android) allows passengers to be connected to drivers who drive their own vehicles.

Hailing an ‘Uber’ takes less than five minutes in metropolitan regions – and GPS (Global Positioning Service) functionality provides drivers with precise locations.

Payment for Uber rides (which are typically cheaper than traditional taxi services) is seamlessly done through the app, charging your credit card as soon as you step out of the car.

The company, based in San Francisco, United States, was founded in 2009 – but only launched a functional service in their hometown a year later. Today – after just 7 years of service, it is worth over US$72 billion, dominating the rideshare market with a 73 percent market share in the US.

It has since diversified its business model to include services such as food delivery (Uber Eats), logistics and freight (Uber Freight), and healthcare transportation (Uber Health). Uber is also a pioneer in self-driving car research – with a limited trial already rolled out in Pittsburgh.

In an almost utopian way, Uber has transformed the way that we think about transportation.

The gig economy

De Stefano (2015) defined the gig economy as comprising of so-called “crowdwork” and “work-on-demand”, characterised by platforms such as Uber connecting ‘an indefinite number of organisations and individuals through the internet”, where “work is channeled through apps managed by firms that intervene in the selection and management of the workforce.

It’s a much more flexible working arrangement, where there is no ongoing right or obligation to work for a particular company – rather, individuals may choose when, where and for whom they work via a variety of interconnected platforms.

Who is Uber?

Despite its humble beginnings as the brain child of two young entrepreneurs, Garrett Camp and Travis Kalanick, the company has since blossomed into a company serving more than 785 metropolitan areas around the world.

Given their rapid global expansion and user uptake (generating US$6.5 billion in revenue in 2017), Uber has changed the point-to-point transportation industry.

Previously monopolised by the taxi industry which is reliant upon hailing a ride at the kerb or by phoning a call centre, Uber has capitalised on continually advancing mobile cellular technologies to streamline the entire process.

Timeline of Uber's development and rollout.
Timeline of Uber’s development and rollout. Self-produced graphic by Adam Herman.

Uber has had a transformative effect in shaping our ‘smart cities’, by seamlessly integrating the immediacy of the mobile internet with tangible benefits of material applications such as getting a ride or having food delivered.

Their generally cheaper fares have allowed more people to access point-to-point transportation, including in less densely populated areas where taxis are less ubiquitous. In Australia, Uber has recently announced plans to expand into regional areas including Wagga Wagga and Tamworth before the end of 2018.

Our social and economic worlds have been transformed by the company – by bringing more affordable transportation to more people. But at what cost?

Uber’s business model

Although it may seem like a traditional taxi company, Uber’s structure within the greater ‘gig’ economy means that it doesn’t own any cars, nor does it employ any drivers.

Instead, it just connects passengers with drivers through its internetworked platform, as a de facto social networking entity.

Drivers are classed as independent contractors, and bear the full burden of all costs associated with driving for them. This structure has been one of the main points of controversy plaguing the company in recent years. Another point of controversy is Uber’s comparatively large cut on driver and restaurant earnings – taking a 25% cut on rides, and a 35% cut of sales from restaurant orders placed on Uber Eats.

Pie chart showing Uber's 25% cut on rides, and 35% cut on food deliveries.
Uber takes a 25% cut on rides; and a 35% cut on food delivery orders. Self-produced graphic by Adam Herman. Logos from Uber.

Ownership

Uber Technologies Inc. is a privately held company. As a start-up, it has received the majority of its funding through debt financing from private investment firms based in the United States and Asia. The major investors include Altimeter Capital (USA), SoftBank (Japan), Didi Chuxing (China), Tencent (China), and Toyota Motor Corporation (Japan).

Ecology

Uber relies very heavily on external entities to provide their service. Phone manufacturers, mobile service providers, car manufacturers, state and federal governments and web hosting services are just some categories of the organisations upon which Uber relies.

Much of this infrastructure is behind-the-scenes, and not immediately visible to the end consumer. However, each component of this relationship is crucial to the delivery of Uber’s service.

In a concentrated marketplace for transportation services, it also competes with other services providing similar methods of transportation.

Ecology map showing key parties which Uber relies upon, competes with, and is regulated by.
Uber relies upon, competes with, and is regulated by a number of companies – most of which are regionally specific. Self-produced graphic by Adam Herman, logos sourced from official corresponding websites.

Transformative transport

Social impact

Uber has allowed us to be more mobile thanks to the immediacy and seamlessness of the entire process – from hailing a ride to paying for it. Enabled by being internetworked through cellular technologies, it has enabled us to physically connect with others for work or leisure more quickly and efficiently.

For many international travellers, the app has also removed the language barrier that may have existed when booking conventional taxi services, or when navigating public transport in an unfamiliar city. Because Uber operates all over the world, users may select their preferred app language irrespective of physical location.

For example, a non-English speaking user travelling to Sydney would be presented with their native language on the app – allowing them to pick up a ride as easily as back home.

These affordances of the platform have been predominantly enabled by being internetworked. This blurring between the digital and material worlds has been highly transformative in expanding and simplifying our social world.

Economic impact

Despite Uber’s transformative social impact and cheaper fares for users, some argue that these changes have set a dangerous economic precedent for degrading employment and safety standards.

Uber’s main advantage is that it allows drivers to use its platforms as a supplementary source of income – particularly useful for those seeking work in addition to other employment, or students, for instance.

However, Uber’s business model means they engage its drivers as independent contractors. While this means that drivers retain full working flexibility in terms of location and hours, it also means that the following disadvantages apply (when compared with full-time employment):

  • No sick pay
  • No annual leave
  • No employer superannuation contributions
  • No salary packaging arrangements
  • Full liability for vehicle costs (including maintenance, fuel and insurance)
  • Full liability for income taxation obligations.

These mean that an Uber driver has much less to fall-back on in retirement or in sickness. While an employee would be entitled to leave and superannuation, an Uber driver would be left to themselves to have saved for such a situation.

Follow the ‘leader’…

Following in Uber’s footsteps, other ‘gig’ economy companies have similar arrangements which have similarly attracted criticism. Deliveroo (food delivery), Airtasker (personal assistant jobs) and Fiverr (freelancing work) are examples of other firms seeking to profit from the degradation of workers’ rights and benefits in the name of ‘flexibility’.

The Financial Times in London explored the first-hand impact of these working conditions on an individual in 2016, revealing that these arrangements result in a wage close-to or below the recommended living wage:

In Australia, the Fair Work Commission decided that Uber’s assertions were correct and lawful in January 2018: that drivers were not employees and are instead independent contractors. It is therefore highly unlikely that this stance will change in coming years.

Many view that the degradation of working rights is inherent in the proliferation of the ‘gig’ economy as employment patterns change.

Forced regulatory changes

While the Fair Work Commission sided with Uber in its classification of drivers, Uber’s transformative impact have necessitated the imposition of regulations from other legislative and governmental bodies around the world.

The taxi industry

The taxi industry has been vocally in opposition to the comparatively unregulated nature of Uber. In NSW, taxis are governed by Transport for NSW and the NSW Taxi Council – which previously allowed the industry to retain a monopoly on point-to-point transportation through its licensing system.

A taxi licence costs about $375,000 – while registering to become an Uber driver is free. The introduction and legalisation of Uber has drastically increased competition in the sector, significantly degrading the key benefit of operating under a taxi licence.

In response to taxi driver protest, the NSW Government has introduced a $250 million taxi compensation package in order to offset the reduced value of licences which previously guaranteed a monopoly. A levy of $1 plus GST is now charged for every trip made in taxis, hire cars and ridesharing services like Uber.

Other cities around the world, including New York City and Paris (below) have had similar outrage from taxi drivers, demanding to be compensated for the plummeting value of their plates.

Some argue that the introduction of additional competition from Uber is simply a demonstration of the free market in action, and is not unique to the taxi industry – arguing that a government ‘bailout’ is unfair.

What they don’t realise is that the state government charged for licences with the guarantee of access to a monopoly market. Now that Uber is formally legalised, this key promise is no longer relevant. As with any change to contract, compensation is necessary and reasonable.

Safety concerns

Because Uber drivers are not subject to the stringent background criminal and ID checks as taxi drivers are, some argue that Uber is less safe when compared to traditional taxis. A CNN investigation in April 2018 revealed that 103 Uber drivers have been accused of sexual assault or abuse over the last 4 years.

It is unclear how many taxi drivers have been accused of such offences over a similar timeframe, however an Uber spokesperson acknowledged that safety was an issue:

‘Sexual assault is a new priority for us, a priority that I expect to remain a priority for the foreseeable future. While Uber is not immune to this societal issue, we want to be part of the solution to end this violence forever.’
– Uber spokesperson, April 2018

Since the interview, the company has introduced a ‘Safety Toolkit’ within the app, allowing users to share real-time GPS tracking data with preselected emergency contacts, share details and call emergency services.

The effectiveness of the Toolkit is yet to materialise, however it is a small and obvious step to improving safety. The fundamental issue still remains however – a more relaxed background check, despite sharing the same proximity to customers and duties as a traditional taxi driver.

Self-driving vehicles

The company is also investing heavily into autonomous and semi-autonomous vehicle research. It has acquired several related companies (including Otto in 2016 for US$700 million), and has been trialling pilot programmes in cities around the United States.

In March 2018, an Uber self-driving car was in an at-fault collision (below) with a pedestrian in Arizona, causing injuries which later resulted in death. Since then, the US National Transportation Safety Board’s reports have resulted in Uber shutting down the programme in the United States.

This illustrates a key and fatal limitation of internetworked technologies: while they can be highly transformative and convenient, a premature application of technology can have dire consequences. Legislators must do more to adequately regulate such bodies to ensure that such incidents have legal recourse with protection for members of the general public.

Conclusion

Uber has had an undoubtedly transformative impact in our social and economic worlds, changing the way in which people connect and are transported. These advantages have been enabled by its internetworked nature, and through its heavy ecological dependence on third parties.

Despite these benefits in convenience and accessibility, the company has significantly contributed to the degradation of workers’ rights and employment benefits, introduced new safety concerns, and has directly caused the death of a pedestrian due to an immature introduction of its self-driving technology.

Although it is an innovator, Uber is not without its controversy – and may continue to introduce new points of concern as the platform continues to dominate the point-to-point transportation and food delivery markets.

 

 

 

References

 

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Adam Herman
About Adam Herman 3 Articles
University student studying Media.

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