They believe they can bear the expense of this policy better than their competition, and in particular they don't want to compete with lower-cost-lower-quality firms. So it's both a (presumably sincere) ethical position and a form of anti-competitive regulatory capture. I think most minimum wage laws have some of this Baptists-and-bootleggers effect.
Similarly, Wal-Mart has been lobbying for increasing the minimum wage for years. Most minimum wage earners in retail work for small businesses. Whereas Wal-Mart averages nearly double the federal minimum wage.
Wal-Mart knows that hiking minimum wage would help it kill mom-and-pop stores that it competes with.
The more money Walmart customers make, the more they can spend at Walmart. As long as they don't make enough to forego Walmart altogether. So it's a double win for Walmart.
I talked to many independent coffee shop workers, and they used to get minimum wage. While Starbucks offered better wages, access to health insurance at a certain level, and now even tuition assistance. Starbucks probably had more unpredictable scheduling, not sure if they have changed that bit.
> Roughly half the minimum-wage workforce is employed at businesses with fewer than 100 employees, and 40% are at very small businesses with fewer than 50 employees.
"Some of these businesses are small diners or independent grocery stores; others are franchisees that own a handful of stores affiliated with a recognizable brand. (For instance, over 80% of McDonald’s locations are owned by franchisees.) In either case, the profits and executive pay at the country’s largest businesses have nothing to do with the stark economics these small-business owners face: single-digit profit margins."
If over 80% of McDonald's locations are owned by franchisees, then it's likely that MANY of these are franchise-related (also, profits and executive pay at McDonald's would certainly have something to do with the related economics of franchise fees and the back-end of the supply chain).
I wouldn't assume it comes from an ethical origin. It's more about killing competition. As soon as the competition is dead they'll be talking about how non-viable $21/hr is.
Also, a high minimum wage for drivers really bumps the value of their self driving car arm.
>As soon as the competition is dead they'll be talking about how non-viable $21/hr is.
Won't even have to do that, wait for inflation to take hold (I believe inflation is very likely to explode in the next few years) and just ride it out.
I'm not talking about weimar republic style hyperinflation my feeling is more on the order of 5 - 12% (maybe not even by CPI standards). Essentially 1970's style stagflation again. CA wages are already high a few years of that and Uber will be back at baseline.
A $21/hour wage in SoCal wouldn't have any noticeable effect on inflation compared to the effect of Silicon Valley and all the tech companies in San Francisco, and the north half of the state has few enough Uber-ers that it wouldn't do anything there either.
1. Money is essentially free at current interest rates and I don't see a sign of that reversing course.
2. Large firms are hording cash and have more than they know what to do with. They are at the point where they are buying their own stock because that is the most productive thing they can do with that money.
3. The democratic party is running on minimum wage increases. While it is debatable if that will have a huge impact it certainly isn't a deflationary measure.
4. Democrats are also running on the green new deal, universal income and medicare for all that I predict will not actually result in higher taxes for the wealthy in any meaningful way but instead the printing of money in order to fund those programs as that is what seems to happen every time. Even if taxes were implemented as discussed, moving money from investment vehicles (where the wealthy have it) to consumers will still probably cause inflation in terms of housing and consumer goods.
5. China is sitting on about 3 trillion dollars that is currently effectively out of the money supply and they will likely deploy that as a weapon in the trade war.
1. Interest rates have been low for a decade now, causing no real inflationary crisis. The localized housing issues are due mostly to income disparities, lack of space for development, foreign investment, and zoning regulations.
2&3. Democrats "running on" some policy does not at all mean it will happen. In the current political climate, it's quite likely their holding a position means it won't happen.
4. Large firms have already been using record low interest rates to finance stock buybacks. This has been going on for years. The last three or four years of stock price growth has been fueled by financed buybacks, with every year breaking the previous year's record. At some point will need to stop.
As an aside, these buybacks are likely going to be the cause of our next stock market calamity.
5. This is sort of legit fear, but 3 trillion dollar is not really enough to make a market-wide impact and selling their bonds would just push interest rates lower, serving to help the US achieve their current monetary policy. They could use this money to selectively certain industries though.
Its more than housing inflating massively in costs, its education and healthcare too. It may be the only reason that consumer good prices arent inflating is because money is being drained away by the aforementioned 3 major factors faster and faster.
And its not just housing in downtown San Francisco, even housing in middle america podunk nowhere has soared
Why single out the Democrats? The people _currently_ running the government are acting as if money grows on trees; just look at the federal deficit over the past couple years.
While that is true it is printing money for distributive purposes that I'm more worried about. Spending a few billion on bombs to blow up houses on other continents, or to prop up the stock of oil companies for example won't really move the inflation needle in regards to consumer goods as much as printing it to throw it out of a helicopter would in my estimation.
Right now the vast majority of money printing is being given to banks and then placed right back into the Fed and earning interest for those same banks.
Just look at the M2 monetary velocity[1]. It fell off a cliff in 1997 and never really recovered. It's now at an all-time low. For all intents and purposes we're operating on a light version of MMT.
So downward movement in that chart can be triggered by two things. The price of TIPS falling or the price of t-bonds rising. That was caused by the price of t-bonds jumping up due to a flight to safe money, much of that flight contractually obligated.
So I don't think it was due to people honestly thinking the average inflation would be .5% but just an idiosyncrasy of how we estimate market expectations of inflation.
"The market can remain irrational longer than you can remain solvent."
That someone failed to make money on the market doesn't necessarily mean they were wrong, it may just mean nobody gave them a pile of money they could afford to risk.
The Big Short is a fantastic read due to watching somebody who you know is right, and knows that he's right, almost get wiped out because the market teetered on the edge of the precipice for over a year.
With something like inflation over a 10 year period this isn't true. In ten years either it was lower than you thought or it wasn't, and you can make lots of money based on the spread of inflation-protected and non-inflation protected assets.
Being right doesn't mean very much. A broken clock is right twice a day. If I say something will go up I have a 50% chance of that being true. That doesn't mean anyone should take my advice on the future.
I was about 13 years old I didn't have much capitol to invest. I just put together the two pieces of the puzzle that housing prices were rising much faster than wages and that a products price can't continuously rise faster then the consumers ability to pay for that product. I guess the "smart money" missed that.
Now we have a bunch of presidential candidates that tell me they are going to print money all day long and a bunch of people who "know better" telling me that won't cause inflation to spike. ¯\_(ツ)_/¯
Before we saw a huge inflation, we'd see very low unemployment then inflation would uptick to 2%. And in the current interest rate environment we could probably use an inflation rate closer to 4%.
The democrats can never seem to manage to tax the wealthy (themselves effectively) when push comes to shove. I'm not trying to be partisan, Republicans similarly are unable to cut spending. Perhaps this time will be different but I'm betting against that personally.
Also it is my belief that moving money from investment vehicles to consumers will have a inflationary effect on consumer goods. The slow trickle of subsidized Uber rides for example probably has less of an effect than a direct cash transfer that happens more rapidly. More so much of that money is invested internationally, by increasing taxes on the wealthy we may be in effect increasing the total money supply in the United States.
That was different. If you think inflation is about to sky rocket it's easy to make a bet that pays off if that happens.
It was much more difficult for housing. The Big Short tells a story about how even if you knew housing was over valued it was very difficult to short, and the ones who did almost lost everything.
But Uber's opponents seem to be arguing that $21/hr is too low, and it'd give drivers a worse deal than passing the law. If that's true, passing the law will kill Uber's competition even more effectively.
It's $42k annually and that's before the insurance, maintenance, depreciation and fuel, so down to the mid-to-high 30's. That seems like it would be poverty level in many California cities.
Not to mention most of those hypothetical 40hrs a week (assuming they can get that much work) would be unsociable hours because that’s when demand is at its greatest (eg people leaving the pub).
> is that really too low for driving around a car?
Depends how you look at it. If you're looking purely at supply and demand of drivers, it's fine. If you think people working 40 hours a week should be able to afford decent housing and health insurance it's probably too low.
I'm not familiar with US salaries I guess it greatly depends on the state/city you're in. But in the UK I don't think this amount is uncommon for some doctors or software developers, especially outside of London.
After tax it's probably closer to $2800, and health insurance is around $600/month for a pretty average plan. For a family of three this leaves you $1000 left over, and even the crappiest one bedrooms in California in small towns start around $1300/month.
Comparing different countries’ wages just isn’t a good comparison. Consider the typical health insurance premium and student loan burden for US workers and you’ll already see why a UK comparison would be apples and oranges.
A 30 minute ride already costs me about $18. I assume an hour ride would be around $40 or so. As a rider I would seriously wonder where those other $19 are going... Not to mention I would still feel the standard pressure to tip.
I don't follow, is this a "perfect is the enemy of the good" situation where they think the minimum wage should be higher and are opposing a half-step toward that?
For political reasons that can make sense, it's hard to push for a minimum wage bump right after a different one, but I am unaware of other cab companies advocating for a higher minimum wage prior to this.
> I wouldn't assume it comes from an ethical origin.
It's always hard to say where an idea in a company "comes from". We probably don't mean literally the human being who said it out loud first. Most ideas have been around for a long time before they become policy, waiting for circumstances to change or politics in the organization to favor them. If the politics in an organization favor an idea for a combination of reasons, both ethical and self-interested, it might not be fair to say which reason "gets the credit" for the idea.
This is not an uncommon pattern. Regulations hurt experimental young companies challenging a status quo. Evading regulations (not a taxi, not an employer, etc.) allowed uber to become a large incumbent. Regulations tend to lock the status quo in place, and the status quo now is that Uber is a large incumbent.
I'm fairly sure they meant evading regulations. One means to structure your business in such a way that current laws are not directly applicable. The other means to ignore them completely. Unless you were trying to make an argument that Uber did not evade regulations and in fact broke the law?
It doesn't take a triple digit IQ to understand that Uber has operated a fundamentally illegal business model that does not respect the localities in which they operate.
In the past (pre-Uber), if you made this amount of money by engaging in large-scale, coordinated law breaking, you were called a gangster and got a big old nice RICO charge.
Don't be confused or blinded by the valuation. That is a byproduct of breaking the rules. The rules were not broken because they were unfair - that's a meme - you don't get to pass arbitrary judgement of which laws you do and do not respect (in theory). As a business, if you do not like the legal environment (rules) of a certain location, the logical (and respectable) choice is to not operate in that region/location.
My view is 10x more harsh on companies breaking the law in a coordinated manner than compared to an individual person.
> The rules were not broken because they were unfair - that's a meme - you don't get to pass arbitrary judgement of which laws you do and do not respect (in theory).
Thank goodness it was only in theory. The taxi industry was and is terrible, the only thing propping it up is regulatory capture.
> As a business, if you do not like the legal environment (rules) of a certain location, the logical (and respectable) choice is to not operate in that region/location.
As a consumer, I'm glad that the rules were systematically broken in a way that benefitted everyone except the taxi industry.
I can definitely get aboard the taxi hate train, but do bear in mind that there has been a higher incident of sexual assaults tied to uber drivers over taxi drivers - it's not a free win for everyone, they broke both rules intended for regulatory capture and those intended for public safety.
This is counter to my experience. Every one of my female friends prefers Uber to taxi's because they feel much safer. They've all had at least one taxi incident where they were afraid for their well being but haven't had a single one with Uber despite using Uber far more.
This makes sense to me because it's far easier to track down the an Uber driver than a taxi driver.
I'd love to see the statistics. That aside, the taxi industry collects zero feedback from customers on their drivers, so taxi drivers had no incentive to be polite, keep their vehicles clean, etc. The worst uber driver I've had was about on par with the best cab drivers.
Not sure about other jurisdictions, but in Chicago, you can call 311 to report a taxi driver. Just need the cab number. I called a few times when cabs nearly struck me as a pedestrian in a crosswalk with a walk signal. Couple of them, I was close enough that I was able to smack a window. Don't know if anything ever happened from those complaints, you dont get feedback after a complaint.
> higher incident of sexual assaults tied to uber drivers over taxi drivers
citation with statistics? I don't know what world you lived in, but there was no lack of local news stories involving crimes by taxi drivers pre-ridesharing and there is a reason why taxi drivers were commonly suspects on crime drama shows like Law&Order.
The lack of meaningful comparison in every article on the topic always bugged me. I'd believe Uber was worse. I'd believe Uber was better. I'm reading your article partly because I want to know which.
Not necessarily true. Uber the company maybe operating at a loss but rides are not operating at a loss AFAIK. Kind of like Amazon in its earlier days, where they reinvested their revenue in growth.
There are no real magical accounting tricks. At the end of the day (quarter) you will be forced to account for your cashflow. Cashflow always gives the at the moment reality of the company. Before folks reply - Amazon doesn't count. Amazon is an enigma.
Not a big fan of Uber, but on the other hand a lot of cities were operating crony "taxi medallion" rackets that were enriching vested taxi interests and speculators, but hurting drivers and riders.
Ridesharing is more convenient, safer, cheaper, and more environmentally friendly. There's less idling, less aimless driving, less congestion, more carpooling, no clumsy exchange of cash or credit cards, the reputation of drivers is visible, and the ride is fully tracked so your whereabouts are known.
> The rules were not broken because they were unfair - that's a meme - you don't get to pass arbitrary judgement of which laws you do and do not respect (in theory).
This is really problematic for me. If you restrict the scope rightly to only democracies that are truly representative (which many regulatory capture environments are not) I might be able to agree. But many governments in the world are not nearly legitimate enough to deserve this respect.
I have no issue with individuals, businesses, revolutionaries and other for profit or not for profit companies trying to undermine the dictates, decrees, laws or rules or whatever you want to call them of oppressive or authoritarian governments.
Taken to a logical extreme, this justifies for profit companies supporting and entrenching dictatorships, under the excuse of “we were just following the law”.
This is an intensely slippery slope, allowing companies to pick and choose which laws to follow is dangerous - would you be okay with sweatshops existing in the US because it allowed the companies to make more profits? What about outright slavery?
Laws are the social contract that we've all agreed to - I am totally in agreement that a lot of laws were created through corrupt government action, but giving free reign to any private entity to ignore laws they find onerous pretty much removes lawful society.
>Laws are the social contract that we've all agreed to
We have? I may go through the actions of consenting because I fear the repercussions of not doing so, but no part of me consents to giving the average person the right to harm me because of their personal beliefs.
You have, yes. It's one of the oddities and tyrannies of human society but you are beholden to the laws of your locale without ever explicitly agreeing to them - as a dual citizen it was really interesting for me when I went through the process of agreeing to a new set of laws.
The tyranny of this process is that all of the activities you go through on a daily basis are only possible because of this contract and, having grown up within this contract, if you were to leave it it would require you to invest massively in self-sufficiency (the real kind, not "I can grow a garden"), a skill that is not only excluded from general education (both within a scholastic setting and within more traditional knowledge passing routes) nearly everywhere in the world - but is often actively discouraged by societal norms.
This, I think, is a pretty good thing, because all of us being hunter gatherers who fought over bountiful locales would be a lot less interesting than knowing things like agriculture, computers and boats exist.
I hope you can see the issue telling someone they consented when they tell you they have not.
>you are beholden to the laws of your locale without ever explicitly agreeing to them
And yet we are free to break them as long as we are not caught.
>if you were to leave it it would require you to invest massively in self-sufficiency
I doubt so, because I find avoiding society is not an option. I guess if you can build your own rocket and launch yourself into space it is possible, but anywhere else in the world and you are subject to the local laws generally set by whomever has the biggest stick. I'm not exactly sure when it happened, but there was one day, not too long ago on the historical scale, where the ability to really live away from people self sufficient became impossible.
I guess there are some places you might be able to move to, not pay taxes on, and be so remote that they don't bother enforcing the laws on you. But that still depends on the idea of breaking laws as long as you can avoid any punishment you find unbearable.
>This, I think, is a pretty good thing, because all of us being hunter gatherers who fought over bountiful locales would be a lot less interesting than knowing things like agriculture, computers and boats exist.
Society has it's benefits, and yet I do wonder if every law was fully enforced would it continue to function? Think of work to rule, at national scale. Laws seem to be a sort of selectively enforced tax that helps keep society from crumbling, but even that isn't guaranteed since it seems to also give us the ability to crumble society in a way that hunter gatherers could never imagine.
All you are saying is the laws are enforced (to some degree) not that we agreed to them, and the fact that I live within a system of rules doesn't mean I agree with all of those rules. Show me a social contract with my signature on it and I will agree with you. Otherwise, I will happily subvert those rules I disagree with where safely possible. Jaywalkers of the world unite!
>This is really problematic for me. If you restrict the scope rightly to only democracies that are truly representative (which many regulatory capture environments are not) I might be able to agree.
Even then I cannot. The majority can be wrong at times and a bad law, even one with majority support, is a bad law. In such cases the only value to following such a law is to reduce risk of enforcement (and there is plenty enough evidence that following the law is no defense against being harmed by those who enforce the law).
It is my understanding that many places distinguished between hailed services and on call services, but Uber was able to do on call at an unexpected scale?
I am sure you can dig up illegal acts, but the secret sauce was the new dynamic that bent what people thought was possible at scale.
>In the past (pre-Uber), if you made this amount of money by engaging in large-scale, coordinated law breaking, you were called a gangster and got a big old nice RICO charge.
I'm thinking this isn't actually true. In some cases you definitely were. In others, you become the dominant player and enjoyed becoming wealthy.
What exactly divided the former from the latter? I wish I understood that better.
If they had been operating an illegal business model then they would have long ago lost in court. That they've succeeded means that it's fundamentally legal...
They had a thing going for a while in Philly where UberX (the normal-car service, as opposed to the limo-type service) was disallowed by the city, but Uber promised to pay any fines if drivers were caught and tried to prevent cops from using the app.
I'd say that's firmly on the "breaking the law" side of things.
Evading a regulation is almost always a violation of the law (the exception being weird industry group things like voluntary audits that result in certifications).
I think most people consider onerous regulations to construct a barrier against entry aimed at any new market entrants[1] to be a different sort of law breaking than normal law breaking (more... morally and ethically acceptable). IMO Uber has flagrantly ignored a number of regulations regarding driver background checks that have allowed it to become less than safe to ride in, especially for single women, there have been a plethora of stories about women being stalked by uber drivers - even within the water-cooler talk at my office.
So technically they've broken a bunch of laws - and ethically they've acted in bad faith.
1. Please note, I think what regulations would be in this group varies extremely across HN, with the more freebretarian folks placing all regulations here, while others may consider labour regulations or environmental regulations to provide real value - and I really don't want to get into this discussion, I just think we can all mentally place a line _somewhere_
Breaking a regulation is not the same as breaking a law. We have two types of law in the US, civil and criminal law. Civil law is enforced through lawsuits by the aggrieved party using the legal concept of tort, criminal law is prosecuted by the state in a process we're all more familiar with due to media attention.
Regulations are enforced by regulatory bodies that operate under a different legal basis than civil / criminal law. Regulatory bodies are not legislative in nature but rather executive. Being sanctioned by a regulatory body is a very different thing than getting prosecuted.
For one, a regulatory body does not enjoy legitimate use of force, and cannot imprison individuals. They can only sanction according to their mandate. If you refuse to pay a sanction, this may escalate to a prosecutable criminal infraction. But simply breaking regs isn't a crime.
For instance, if you're operating an illegal home-based business, you may be subject to sanction by the zoning authority and the entity that you were supposed to register with. Like the local real estate board if you were providing realtor services without a license.
Only in rare situations is it a criminal offense to provide commercial services without the proper licenses, such as providing legal or medical services. It is not, as you say, the norm.
Even in the case of environmental regulations, rarely are they elevated to the status of crimes under criminal law. More usually you'll get contacted by the appropriate environmental protection administration and fined. I recall hearing about one company who would simply call up the authorities whenever they needed to dump into the river and pay the token fine.
First they evade regulations, then they propose a new policy that is enticing to potential employees (or whatever they call them) - but the policy is so generous that most competitors would have issues keeping up.
How many companies can afford to pay 21$/hr minimum for example?
So somehow it's both a great step forward and terribly anti-competitive at the same time.
I think another question no one is seriously asking is can Uber afford it? They're already hemorrhaging money. I understand they want to eliminate the competition but they might just accelerate the demise of the rideshare industry altogether.
Uber paying their employees $21 is very competitive. Uber lobbying for their competitors to have to pay their employees $21 is anticompetitive. The latter is what is happening here.
Uber paying their employees $21 doesn't make sense, they will get undercut on pricing by race for the bottom competitors. There really isn't anyway to grant a viable minimum wage except via legislation. Paying more to the driver isn't the same thing as paying more for top-tier engineer. It isn't like getting a nascar driver in the seat is going to justify higher wages. So what do you recommend?
>> they will get undercut on pricing by race for the bottom competitors
If Uber unilaterally increased minimum salary, then those competitors would have to do the same, otherwise they would lose all their drivers to Uber. So, if Uber really cared about drivers they would just do it. Instead they are making PR stunt by "demanding" government regulation.
I don't think that is true, they'd have a bunch of drivers sitting around not getting paid to give rides because they are being undercut by the competition. It is not skilled work so its always going to be a race to the bottom, the bottom has to be set by some governmental body. Without some reasonable minimum drivers are being sucked into quicksand.
> It is not skilled work so its always going to be a race to the bottom, the bottom has to be set by some governmental body.
It's not actually a race to the bottom because it's still a competitive market. Even unskilled people have a choice between being Uber drivers or janitors or stock clerks or fast food workers, or anything else that someone will pay them to do. If Uber pays less than Walmart then people can quit Uber and go work for Walmart. That creates a floor for the pay of Uber drivers independent of anything the government does.
And if the government is going to do something, it's much better to raise that floor, which minimum wages can actually do the opposite of because people have non-monetary job preferences. If a $21/hour minimum wage appears then you have to pay Uber drivers $21/hour, but suppose they have $15/hour in expenses (fuel, wear and tear), so that's really only $6/hour. Meanwhile a work from home job might have paid $10/hour -- a real $10/hour -- but now that's well below $21, so is no longer available. So now you're paying $15/hour to make $21 instead of paying $0 to make $10, which means you make less, and Uber gets to pay $21 when they would have otherwise needed to pay $25 to actually be competitive. And the same thing (to various degrees) with ordinary commute-to-work jobs vs. stay at home jobs, or jobs with longer vs. shorter commutes or in higher cost of living parts of the city or that require some training or other expense that ultimately has to be paid for out of wages, or the job is just downright less of a grind and people are willing to accept less money in exchange for easier work. By removing options people used to have, you only make them more desperate for the remaining ones and require them to accept worse options even if they're better on paper.
I don't necessarily disagree. This could be a net good for drivers, I'm just trying to point out the validity of the anticompetitive angle here. Regardless I certainly don't think you could argue that Uber is being more competitive by doing this unless they are willing to take the initiative themselves first.
Yes. That's how a disruptive companies operate in outdated regulatory environments, and that can be a win for all. Call it corporate civil disobedience?
Case and point: Uber was basically a (hugely popular) mediator for illegal cabs in my country. They had to shut down, but as a response the government introduced new vastly relaxed regulations to the whole taxi industry, setting the rules under which services like Uber could operate. I am not yet sure if it will actually result in lower rates, but at least they catalyzed a historical change.
>Call it corporate civil disobedience
No thanks, I'll call it corporate law breaking.
It's offensive that anyone would equate a corporation breaking the laws of society for MONEY with the emancipation of oppressed human beings.
This seems to be a reaction from Uber because they specifically do not want regulations to come into force on the issue. To me that takes it out of the baptists & bootlegger territory. Absent regulations getting involved, this is simply Uber offering better compensation.
I think you're right (and the article is right) about the particular timing, but I also think Baptists-and-bootleggers is a good way to understand why Uber would prefer this policy over the other regulatory proposals it's reacting to.
Competitive forces prevent them from raising wages unilaterally, because their customers are extremely price sensitive. They're not going to commit corporate suicide over their ethical preferences, any more than most people would.
>because their customers are extremely price sensitive
The proposal suggests to me that they think their customers are not extremely price sensitive but they're also not loyal to a specific supplier. In other words, they'll take almost as many rides even if the price goes up but they'll still go with whoever is cheapest.
I’ve read somewhere ride share companies make more total revenue when prices are cheaper, and people use it less when its more expensive. Since these companies make more money with more total revenue, i’m guessing its in their interest to make it cheap.
It makes sense, if something is cheaper, you use more of it. If its more expensive, you start using substitutes, as the benefits of rideshare gets dwarfed by its extra cost. It’s literal econ 101
It depends on what the price elasticity of demand is. At least in the simple case, there is some price point at which revenue is maximized. Higher prices drive demand down faster than they drive revenue up. Lower prices drive revenue down faster than greater demand drives them up.
They may in fact think their customers are price sensitive (the majority of customers are for any mass service; we already know that most of Uber's customers are price sensitive), while their aim is to capture their customers in a regulatory manner so that they have no or few alternatives.
If they can establish a regulatory framework that favors them (Uber), they can raise prices as competition is further restricted, to more than offset the $21 / hour. Their ideal has to be to establish that favorable competition environment, enabling considerable price increases that get them closer to profitability (ie exceeds the wage cost increase by a large margin). In the current situation, Uber is facing a bankruptcy scenario with their low sales growth, extreme burn rate and with a competitive market where they can't freely increase prices. That tells you what their goal has to be.
If they were certain their customers were not price sensitive, Uber would have already spiked their pricing far higher to push toward profitability.
>If they were certain their customers were not price sensitive, Uber would have already spiked their pricing far higher to push toward profitability.
Many/most Uber customers would use a materially cheaper equivalent service if available because the switching costs are low.
However, that's not the same as price elasticity (of demand) which is what the term usually refers to. Price elasticity is about how much less they'd use any price-competitive service as the price increases.
I'm honestly not sure what that curve looks like. Within reason, pricing wouldn't affect my usage much at all. But I'm a light user of these services and use them almost entirely for business. Certainly I'm a very different profile from a young urban professional who doesn't own a car.
ADDED: Between surge pricing and other pricing experiments I'm sure they conduct, I would imagine that Uber has a pretty good idea of what demand and driver supply curves look like.
They think they can survive doing it, but their competitors can't (or can't survive it as well). They probably can't survive doing it if their competitors don't have to. Whether they're sincere about thinking it's a good thing or not is irrelevant to the practicality of the suggestion, and the suggestion only makes sense for them to make as a law.
At the end of the day, if it's part of compensation that they have to pay, doesn't matter? And losing $1.3B is not inconsequential no matter how you look at it.
That's what I mean. Taxi services are lower quality but much higher cost (including to the drivers). Lyft (in the markets I travel) is more expensive and higher quality. So I'm struggling to ascertain who is this mythical Wal-Mart to Uber's supposed Target?
