The arrival of the smart-phone application Uber has thrown the taxi industry into a state of disarray. First launched in June 2009 in San Francisco, the application has spread rapidly and today finds itself in over 300 cities in approximately 58 countries. While it offers many advantages over traditional taxis, including lower rates, it is having serious effects on the living conditions of taxi drivers.
In Canada, the opposition of taxi drivers to Uber was most recently seen in Toronto where taxi drivers blocked streets and one taxi driver was dragged down the street after confronting a suspected Uber driver. Last June in Paris, cab drivers blockaded access to the airport while in Nice and Nantes they burned tires in the streets to protest against the presence of Uberpop. These events are only the most dramatic in a series of reactions to the arrival of the Uber phenomenon around the globe.
Due to its generally lower prices as well as its innovative and effective technology, Uber has been able to secure its place in the taxi industry through stealing a big portion of their clientele from traditional taxi companies. The best example of this is in San Francisco, where the average number of trips made by using traditional taxis has fallen by 65 per cent since 2012. However, such a huge shift in the market cannot be explained simply by the arrival of a well-designed application.
Uber has been able to create competition in a field that is particularly archaic. Driven by the blind profit motive of the capitalist system and ruling over a quasi-monopolistic market, large taxi companies have had little reason to invest to improve customer service. Rather than upgrade their system to adapt to a clientele that has evolved in the technological era of smartphones and social media, they have chosen to continue using an inefficient and outdated system.
The attraction of the novelty
Uber is a transportation system that is part of the “sharing economy” which has become vogue in recent years. As is with the app AirBnB, Uber allows its users to avoid the usual commercial channels by using the Internet as a tool to make direct commercial agreements with other users.
If you want to go somewhere with Uber, simply login to the app with your smartphone. Within seconds, Uber will offer you a choice of drivers nearby. These drivers are other users like you or I who do not have to pay for any special licence. All they need to do is undergo some legal verifications and a have valid driver’s licence. You can choose your driver based on the reviews that have been given to them by other users and then you leave your own review after you are done. The fare is set by Uber, which you pay by credit card through the smartphone app. After that, the company retains 20 per cent of your payment and the rest is transferred to the driver.
Uber users claim that the service is faster, better and is up to two times cheaper than a traditional cab. It is therefore no surprise that this company which began in San Francisco has been growing freakishly fast as its service spreads like wildfire across the entire planet. Uber is now worth more than $40 billion (US).
It is also no wonder that this has given the taxi industry a headache. In Montreal, cab companies are complaining that they have lost upwards of 30 per cent of their clientele to UberX.
Taxi drivers therefore find themselves in a precarious situation. In France, in cities such as Paris and Marseilles, drivers are unionized. Working for Uber is therefore a way to circumvent the collective bargaining agreement and submit the unionized drivers to unfair competition. This is undermining the solidarity of the workers fighting for better pay and better working conditions. In most countries however, taxi drivers are not unionized - far from it. In Canada for example, the working conditions of cab drivers are quite miserable.
Low pay and long hours
First and foremost, the taxi system in Canada requires that drivers purchase a permit. These permits are of a limited quantity depending on the city. In Montreal, there are currently 4,437 licenses in use.
Taxi drivers therefore have two choices: buy a taxi permit and work for themselves or rent a car connected with a permit owner.
The limit to the number of licences goes hand in hand with the law of supply and demand. More permits means lower prices, fierce competition and increased stress for the drivers. Fewer permits means a scarcity of cars for clients, higher prices and above all, a skyrocketing price for the taxi permits themselves.
In Montreal in 1992, the price of a taxi permit for downtown Montreal was fixed at $25,000. In 2007, it had climbed to over $230,000. Although the organization Fintaxi allows drivers to obtain loans easily, they still have to pay this huge sum at an interest rate of 10.95 per cent. This is a cheaper interest rate than the big banks, but it is interest nonetheless.
And how do cab drivers manage to repay these loans? To use Quebec as an example, according to Industry Canada, 69 per cent of drivers earned less than $20,000/year. Some drivers do earn more, somewhere between $30,000-40,000 but this is usually due to working upwards of 70 hours a week. Between interest, gas and taxes, take home income is thin and loan repayment stretches over many years.
A concealed monopoly
The newspaper Star Phoenix recently shed light on the taxi system in Ottawa and showed the concentration of the industry in this city. The company Coventry Connections owns nine tenths of the cab companies in Ottawa including Blue Line, DJ’s and West-Way. In addition to this, the vice-president of Coventry Connections, Marc-André Way possesses 87 taxi permits himself.
In Vancouver, according to the magazine The Dependant, the four main cab companies – Yellow Cab, Blacktop/Checker Cab, Maclure’s Cabs and Vancouver Taxi – collectively own all of the 588 taxi permits issued by the Passenger Transportation Board.
These companies subsequently resell their permits for a total of $800,000 for a whole taxi. Usually they divide the permit into two daily work shifts of 12 hours – one for the night and one for the day. To obtain half a permit, it therefore costs $400,000. The purchaser can be anyone who holds a valid driver's licence and has enough money. The purchaser, following this, in order to make maximum profit then rents the taxi licence out to those who do not have the means to own one at the cost of $2,500/month for a “half-cab.”
These intermediate buyers thus inflate the price paid for a taxi as the driver needs to ensure that they have enough money to cover the rental, gas, insurance and at the very end of the list, a living wage. Uber has gotten around all of this.
In Toronto, investigations made by some of the big daily papers like The Globe and Mail have addressed the monopoly of taxi companies and permits. Journalist Peter Cheney revealed a few years ago that Mitch Grossman and his family possess over 100 of the permits distributed by the city. When a driver wants to use one of these licences, Grossman makes them buy an overpriced taxi cab, financed by his family firm, Finance Symposium, at interest rates up to 28 per cent. None of these licences are in the name of Grossman himself, but are in the name of different cab companies in order to circumvent regulations on the owning and renting of taxi licence plates.
In Toronto, among the giant holders of taxi permits are big investors who live in Florida and Israel. In just five years, more than 30 per cent of all revenue in the taxi industry was found in the pockets of foreign investors.
Metro News and the Edmonton Sun have also uncovered the existence of taxi monopolies in Edmonton and Calgary.
Uber arrived on the scene as an unwelcome guest, with its advanced technology, light years ahead of the archaic methods of the traditional cab companies. The taxi industry in Canada has sat back on its laurels for decades. Uber’s innovations (the mobile platform, the ability to rate drivers, online payment etc.) are ideas that cab companies could have established themselves easily, but due to lack of competition and with many politicians in their back pocket, they had no reason to do so. Why invest in new technology when they already control the market?
Under capitalism, companies do not act in the interest of providing the best service to the customer, but rather in the interest of securing the maximum profit possible and a bigger market share. This means that once a company has a monopoly on the market, it does not need to invest to improve services, which would just mean unnecessary added costs. On top of this, the company does not need to fear that customers will abandon it for its competitors. This is why the virtual monopoly exercised by cab companies has contributed to the obsolescence of their system. Seeing the decline of the industry and its inability to get out of this rut, even Montreal Mayor Denis Coderre recently modified the taxi regulations to make them accept pioneering technology such as accepting payment by card!
Now that Uber has threatened the market share of the big cab companies, these companies have started to adjust. In response to Uber, Diamond Taxi in Montreal recently launched an application which allows clients to pay via smartphone. A little late!
Is Uber the solution?
Many people have welcomed Uber with open arms. In countries like Spain, France or Italy where the labour market has only worsened since the global economic crisis of 2008, working for Uber seems like an ideal solution for many people. The majority of people who drive for Uber are students who are struggling to pay for their studies or workers who are looking for extra income each month. More and more, even traditional cab drivers are working for Uber in their free time as well.
Uber defends itself from the many accusations launched at it by claiming that it helps the economy reduce unemployment, “We want to sit down with mayors to help with growth, to help create jobs. This is not too much to ask: we only want to help others support each other and abandon archaic laws,” said Travis Kalanick, founder of the app. Listening to him say this, one gets the impression that Uber is driven by pure altruism. The reality is quite different.
Although Uber only takes 20 per cent from each trip, we must emphasize that Uber considers its drivers as contractors and not as employees. This allows the company to save massive amounts of money in benefits and insurance. This model has been challenged before the California Labour Commission, which ruled that an Uber driver is in fact an employee, and not a contractor.
As contractors, Uber drivers have no bonuses for driving at night or on holidays. As well, their contract can be revoked at any time. The only real advantage that Uber drivers enjoy is the minimal job requirements as opposed to taxi drivers who must obtain a permit.
Who is opposing this?
Taxi drivers oppose Uber because they are losing their customers. For those drivers who do not own a taxi permit, the decline in clientele further erodes their already limited income. For those drivers who do own a permit, they are victims of a double edged sword: a declining customer base and a free fall in the value of the permit, which they purchased at the full price.
More and more, cab drivers who do not own their own permit are abandoning traditional cab companies and are joining Uber. According to Slate magazine, an Uber driver in the United States who works between 16 and 34 hours a week makes an average hourly wage of $17.24. In New York City, the average income rose to $28.47 per hour. The meager $13 an hour that cab drivers in Quebec make, according to the Institut de la statistique du Québec, pales in comparison. Joining this application as a driver thus seems to be the solution for many.
However, the problem is much deeper. The arrival of Uber allows anyone to be a driver and bypass the regulation of the market created by the licencing system. In other words, Uber has created an imbalance in supply and demand. Taxi drivers now have to compete with everyone and anyone who can drive and not only other cab drivers. At the moment, driving for Uber is more profitable than working for a cab company. However, if drivers continue to join Uber, supply will exceed demand and it will eventually be more difficult to obtain a satisfactory income.
The real losers are always the workers
There is now an ongoing war of taxi drivers and cab companies against Uber. We've seen demonstrations, road blockages, intimidation and violence. But at root, both Uber drivers and traditional cab drivers all want the same thing: to support themselves, feed their families and pay their debts. While this is all going on, the big taxi barons and Uber continue to line their pockets with massive profits. These giants are engaged in a fierce battle where the real losers are the workers, whichever camp they are in.
Proponents of capitalism argue that their system encourages entrepreneurship and diversity of businesses. The reality is really quite different. Under capitalism, competition forces each company to crush others in order to grab a larger market share which is generally accomplished by maintaining lower operating costs and prices. Especially in a situation of economic crisis like one we find ourselves in, those who cannot compete are swallowed up by the bigger fish who eventually monopolize the market. The natural development of capitalism is towards concentration. Rather than diversity, the capitalist system ends in monopoly.
Monopoly control like this acts as a constraint on technological progress. As mentioned earlier, innovations in customer service are unnecessary for companies which already dominate the market without contest. Thus cab companies have found themselves powerless faced with Uber as a competitor. At the same time, the arrival of Uber is not exactly a blessing which is going to free us from the domination of the taxi industry dinosaurs. Due to the pernicious drive for profit, the technological advancement under capitalism doesn’t have as its goal the improvement of services for the customer or the bettering of conditions for the workers. In fact, the drive for profit often means the development of technology runs counter to the interests of workers as well as consumers.
Under capitalism, the technological development of the means of production, despite the obvious progressive aspect, at the same time often leads to negative consequences for workers. In Capital, Marx describes how at the dawn of the capitalism, the development of more efficient weaving looms led to rioting by the workers in Germany and Holland. As production becomes more efficient, the number of workers required to produce the same amount of merchandise or the same level of service is reduced. Businesses can therefore increase their profits by replacing part of their workforce through mechanization and in the process they throw some of those workers onto the streets. The development of technology therefore, always appears to workers as a threat to their jobs. This very phenomenon that was observed by Marx exists to this very day. There are in fact numerous examples available, such as layoffs caused by the development of self-service cashiers in supermarkets.
So why do we have to choose between technological progress and jobs? Why can’t technology be developed to serve the needs of working people? Self-service cashiers should make it possible for supermarket workers to work less and have a better salary instead of losing their jobs.
This conflict shows clearly the ridiculousness of transportation under capitalism. Capitalists see transportation simply as a way to turn a profit and only secondarily as an important vital need of our society. Transportation represents an important portion of the expenses of workers who are increasingly pressured by falling wages, the constant increase in the price of public transit as well as the cost of gasoline (despite the fall in the price of oil). Therefore, we can see why the ease-of-use and cost of Uber for some workers offers temporary respite.
But we should not have to choose between the two. Instead, we stand for a program of massive investment in public transportation, with the goal of providing a vast network of green, efficient, free and accessible public transit for all, at all times and with guaranteed, quality jobs for the workers who keep it running. However, to create such a system requires us to profoundly change the way our society organizes production - only a socialist system could make this possible.
Source: The Uber controversy reveals the rottenness of the taxi industry
