Will Uber Crush These ‘Ethical’ Alternatives?

Uber alternatives promise benefits and pensions to drivers.

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May 27 2016, 3:44pm

Illustration: Bernard Lee

When Uber made its explosive entrance into cities across North America, with its promise of cheap and flexible transport, workers' rights were the barely audible background noise. Now, the plight of drivers who make up Uber's shifting network of mercenary taxis is firmly in focus.

Can more worker-friendly alternatives compete, and will a critical mass of people really be arsed to choose a more "ethical", and possibly pricier, alternative if it means the person driving us around can put food on the table?

Uber promises its drivers the freedom to work when they want, where they want. It's a good pitch, and one that could almost be copied and pasted onto the site of any company dealing in the so-called "gig economy." But some drivers don't buy it.

"Freedom" and grocery money are fine, but they also want benefits, protection from unjust termination, and more control over the terms of their non-employment. Meanwhile, workers in the more traditional taxi industry are worried that Uber is eroding their livelihoods and turning their careers into a casualty of the gig economy.

Even so, Uber—which has been valued at upwards of $50 billion—has fought tooth and nail to prevent drivers from seeking these perks through unionization.

"Anyone who doesn't like a union often says that it becomes unprofitable for a private company to be unionized"

In an emailed statement to Motherboard, the company defended its treatment of drivers.

"Ridesharing allows a flexible labour model that empowers drivers to work as little or as much as they want," it said. "More than two-thirds of active Uber drivers in North America have other full-time or part-time work and choose to partner with Uber to increase their income. This makes a meaningful difference in driver-partners lives."

To some onlookers, Uber's labour troubles are also an opportunity. If Uber is seen as the greedy baddie, then new companies can play the David to Uber's Goliath—or the fair trade coffee to Uber's Costco brand beans—by positioning themselves as the nice guys. So far, two main competitors have appeared: Juno in New York City, and TappCar in Edmonton.

Notably, TappCar recently expanded into Calgary, a major Canadian city that Uber pulled out of after a long and unproductive squabble over city bylaws. Uber is also not currently operating in Edmonton, due to delays with the required insurance, but the company's eventual return looms over TappCar.

Despite this early and highly tenuous success, a few huge questions hang over these upstarts' debuts: can ethical Ubers be profitable, and how ethical are they anyway? And will customers rally behind them in large enough numbers to challenge Uber?

Image: Flickr/abrackin

The main argument against driver unions is that a unionized Uber is an unprofitable one—and possibly a pricier ride for its users. If you accept this as true, then the people behind TappCar and Juno must seem like they're driving right off the financial cliff in a rideshare.

TappCar spokesperson Pascal Ryffel, perhaps unsurprisingly, doesn't see things this way. His company is in the final stages of arriving at a collective bargaining agreement with a union represented by the Teamsters, he told me.

"Anyone who doesn't like a union often says that it becomes unprofitable for a private company to be unionized," Ryffel said. "It's the same argument that's used by companies like Walmart. I think it's a spurious argument."

To TappCar, the appeal of a unionized workforce is two-fold. First, unionization and a more driver-focused environment will attract better drivers. Second, better drivers will result in a better customer experience, which will translate into more business.

The reasoning is the same for Juno in bustling New York City, far away from the cowboy oil town vibe of Calgary and Edmonton.

"If you're getting a better driver, then as a rider you're getting a better experience," founder Talmon Marco said. "We've pretty much attracted every Uber VIP to the Juno platform."

Uber "VIPs" are Uber drivers with a rating of 4.7 or higher (Uber drivers with a rating below 4.6 are at risk of deactivation)—a requirement for joining Juno. Marco says that more than 7,500 drivers have signed up to drive for Juno, which is still in the beta phase.

But Juno and TappCar will ultimately have to make a better sell to drivers if they want to pull them away from the behemoth. So, let's break it down.

Uber promises drivers average earnings of $19.01 per hour, after the company takes its 25 percent cut of every fare. But this figure does not factor in the cost of vehicle upkeep, gas, or insurance, which must all be shouldered by drivers. Uber also doesn't provide benefits.

After factoring in vehicle upkeep, BuzzFeed News found in 2014 that two of the Uber drivers it consulted only made roughly $10 and $4 per hour. In 2015, Metro did some rough calculations and concluded that drivers in Toronto can expect to make $11.50 per hour, and in the same year, CNN estimated that Uber drivers in New York made $7.20 per hour.

Uber has already proven that it will go to great lengths to crush the competition

TappCar, in contrast, charges drivers a flat weekly fee of $250, which covers insurance, union dues, pension payments, and healthcare. TappCar takes no fare cuts, but charges a $1.50 "tech fee" to cover the cost of the app. Ryffel estimates that TappCar fares are about five percent higher than what Uber charges. As with Uber, all gas and car upkeep costs are shouldered by drivers.

After some back-of-the-envelope number crunching*, Motherboard arrived at a figure of roughly $16 per hour driving for TappCar.

This figure appears to be above most estimates for Uber's wages, although it does not factor in any vehicle upkeep. The cost of upkeep would significantly reduce that number—perhaps closer to what BuzzFeed, Metro, and CNN estimated regarding Uber—although the added benefits and pension may make up for it in the long run.

As for Juno, the company takes a 10 percent cut of drivers' fares, compared to Uber's 25 percent. Juno's fares, Marco told me, are the same as Uber's. As with the other two services, drivers must pay for all associated costs to their personal vehicles. So**, Juno drivers stand to make $22 per hour, minus vehicle upkeep.

Juno, unlike TappCar, doesn't provide benefits or pensions. However, a press spokesperson told me, it will eventually offer the option for drivers to become employees, benefits and all, but only if they agree to drive solely for Juno. The company has also pledged to set aside 50 percent of its "founding shares" for drivers who join up.

As for how this is playing out in the real world, Twitter user and Juno driver Farrukh Khamdamov recently posted a photo of his weekly Juno haul, amounting to $336.87. Khamdamov, who also drives for Uber and Lyft, said that he made that amount in 10 hours of driving, which works out to $33.69 per hour.

"Hopefully Juno will get super busy and I won't need to switch between the platforms anymore," Khamdamov wrote to Motherboard in an email. "I choosed [sic] Juno because of their policy (10% commission fee and partner stock), [and] approach to the drivers (you really feel that you are a part of the company)."

Juno and TappCar may very well offer a (slightly) better deal for drivers when it comes to an hourly wage and benefits. In terms of attracting drivers, at least, they might just have a shot at taking down Goliath.

Whether this will actually register with users and translate into more business, or a stellar market valuation, remains to be seen. Attracting more drivers is one thing. Attracting customers is often quite another.

Riders may balk at TappCar's slightly higher fares, even if they see the company as a more ethical alternative. Ryffel said however, that Uber will also raise its fares when it reopens in Edmonton to account for the higher cost of commercial insurance to drivers. Then again, all Uber would have to do to beat out TappCar is undercut its fares, and the company has already proven that it will go to great and dubious lengths to crush the competition.

As for Juno, even if customers are swayed by its so-called VIP fleet of drivers and its "nice to drivers" branding, one wonders how long a business strategy of simply taking in fewer funds than the competition will last.

"Maybe you cannot quantify this in dollar and cents," Marco said, "but it's very important that the overall attitude that the company shows to drivers is different from everybody else."

Image: Flickr/Scott L

The most important difference between TappCar and Juno, in terms of what it means for the workforce, is their approach to unionization. While TappCar is about to finalize a collective bargaining agreement, Juno CEO Talmon Marco was less bullish when I asked if he would welcome a unionized driver fleet.

"At the end of the day, the people we're here to serve are the drivers, and not necessarily a Teamsters union," Marco said. "I'm not saying anything bad about the Teamsters, but we're here to make the drivers happy, and that's what we're going to focus on."

Uber drivers' largest gripe isn't necessarily with the money they make, but with the powerlessness of their situation. When Uber decided to make cuts to its fares, drivers were up in arms. Too bad. When Uber deactivated a driver without adequate explanation or notice, folks were mad. So sad.

"Unions give us, at least, the right to say that something isn't right," said Peter Kuel, a Seattle Uber driver and elected board member of the Teamster-backed App-Based Drivers Association.

"You have to make it very careful to make it so that the company is commercially viable or else it won't be very good for the union either"

"Even if I make more money, it is still important to have a union," Kuel continued. "Without a union, I can still be deactivated at any time. I won't have any voice. It's very important, whether there's more money or less money, to have a union for job security."

This is why, after Uber agreed to let drivers in New York City represent themselves during disagreements with management through an Independent Drivers Guild, labour advocates weren't pleased. The guild falls just short of union status, and so drivers can't negotiate the terms of their pay, vacation, health benefits, etcetera.

In this regard, Juno is a lot closer to Uber than TappCar. At Juno, fare rates, and cuts, are set by management. If and when Juno begins accepting drivers as employees, the terms of their employment will be set by management.

At TappCar, fare rates are also set by management alone, but this could change. During the next round of collective bargaining, drivers could push for control over every level of their working conditions, including fare-setting. Ryffel wasn't so keen on this idea.

"Theoretically anything can be on the table," Ryffel said of driver fare-setting, "but you have to make it very careful to make it so that the company is commercially viable or else it won't be very good for the union either, of course."

The benefits of unionization outweigh the risk, he continued.

"Everyone needs to make a living and support their families. I think it's a business practice that should be done everywhere," Ryffel said. "If a company is set up in the sharing economy purely to exploit cheap labour, then I don't think it's a positive thing for society as a whole."

Image: Flickr/freestocks.org

The rise of companies positioning themselves as ethical Ubers is a response to popular thinking about work in the gig economy. A supposedly revolutionary business model is facing, head-on, the supposedly outdated notion of workers' rights.

Which will win out? As corny as it sounds, it will be up to customers. Uber's arguably anti-labour approach to business has already generated some semi-organized backlash in the form of "Uber abstainers"—people who choose cabs over Ubers because they believe Uber is, well, bad for society.

But these people are in a minority. For businesses like Juno and TappCar to realistically take on Goliath, a large number of us will have to switch our rideshare app of choice and, in the case of TappCar, accept that our ride home from the bar might cost a few bucks more.

So will anybody care?

"There are so many different reasons why people choose to use a certain company when it comes to vehicles for hire," said Ryffel. "Some people will choose purely based on price, some like the fact that we're a local company, and others like that we treat our workers well."

"Everyone makes a different value judgement."

* If we take Uber's average hourly wage of $19 (rounded) and bump it up by five percent to account for higher fares, re-add the 25 percent cut that Uber takes, and subtract the tech fee (assuming two fares per hour), then we arrive at an hourly wage of $22, before the weekly flat fee. If we assume a 40-hour work week, then a TappCar driver can expect to make $628 per week, after the $250 subscription fee. Broken down by the hour, that amounts to roughly $16.

** If we add back Uber's 15 percent cut.

Uber Earth is Motherboard's exploration of the ways Uber has already changed the world and how it stands to do so in the future. Follow along here.