Proposed Bill to change the driver app business model

Investment Analysis Clubs Macro Economic Trends and Risks
1

I hope that this post is allowed as it discusses proposed legislation in MA but may also have wider ramifications ie METAR. Let me know.

I sit on the board of the local Chamber of Commerce and we have been asked to endorse some pending MA legislation that would really change the “look and feel” of the entire employee/independent contractor relationship starting with the driver app platforms (Uber, Lyft, Doordash, etc.)

This bill retains the rights of the drivers to continue to be “independent contractors” in many ways like choosing their work hours, work geography, work frequency, etc. But it does REQUIRE the App platform companies to maintain rigorous and accurate records of work hours, customer fees, tips, etc. and report these numbers to the State. This bill also requires the App platform companies to accrue sick time, contribute to the State run Obama Care program for healthcare and pay for other “employee-like” benefits.

This seems like a messy situation as the driver service contractor does not have the ability to set his own rates unlike plumbers, electricians, graphic artists, programmers and other “truly independent” contractors who can. In that way, I’ve never really thought of an Uber driver as an independent contractor - more like a freelance employee who gets paid by the amount of services that they clock in.

But this proposed legislation has the potential to change the existing dynamics wrt the driver / platform cost structure and I would have to assume that any additional costs that are incurred by the App platform re: providing for healthcare, disability and other benefits will only get passed along to the end consumer.

I worry that if this bill passes, and the App platforms either to take their business elsewhere (would they?) or raise the rates for services so high that the consumer demand of said services are reduced, then the drivers lose in the end because there is reduced overall demand.

I also think about the other side of the coin for those independent contractors who are truly independent today (plumber, electrician, etc) would they be able to lobby for some type of “employee-like” benefits paid from who knows where?

Are other states grappling with this issue?

Cheers,
'38Packard

https://independentmass.org

1 Like
2

When it comes to Doordash the mom and pops were hiring all of these drivers. The pay was better with the mom and pops and the prices were not higher on the menus. Doordash is a middleman who ads to the expense. Kids with daddy’s money order through doordash and do not realize how much of the bill goes to the company not the restaurant or the driver.

Worse it costs the restaurants to work with Doordash. The entire thing cannibalizes their business.

Similarly taxi drivers used to make money. Uber and Lyft have taken the profit entirely out of it for the drivers. Most drivers after the car bills are losing money. Or making so little that after their meager living expenses they can not replace their work car. Uber also extends credit to their drivers to buy a car. That leaves drivers working 85 hours a week to get by if that is possible. It is dangerous.

3

So why do they drive for those companies?
Are they innumerate?
There must be some sort of perceived benefit to them.

2 Likes
4

The entire thing is higher wages than minimum wage on the surface of it. But car costs are not factored into that until later. Burn out your car but get paid.

Why deliver newspapers. Worst deal there is. Sign a contract to do it for year and they own your car.

We are talking people who face employment challenges. We are talking DoorDash or Lyft taking advantage of them. Not all of them see it that way but when the transmission fails…

Have you priced used cars lately?

5

Innumerate, yes, based on my gently interviewing many drivers. They simply have no idea how to do the math or no interest in doing so. What do they get out of it? They get to live in the delusion that they are making money, or at least making their way in the world. When their car croaks they are close to homeless.

Not that that is all that different from all kinds of low paid work in USA.

david fb

5 Likes
6

Who else? There is no free lunch.

The driver app business is disrupting the taxi business model. Robo-taxis will disrupt the driver app business model. In time the state will intervene to solve problem adding cost and complexity because there is no free lunch.

What drives taxi drivers? Maybe the feeling of independence which also comes at a cost, again no free lunch.

Who said it? “It’s the Economy, stupid!”

The Captain

7

I think they are making some money. There’s no way so many people would be regularly doing it otherwise.

My grandfather before retirement and after retirement would drive a cab at night for a few hours to bring in some extra money. It wasn’t his cab, it was the cab of a guy that drove it in the day hours, as part of a cab company. He only got a small part of the fares - the cab company took some of the money, the dispatch company took some of the money (this was in NYC in the 60s/70s/80s when many cab companies used separate dispatch companies that had good well-publicized telephone numbers) . He had to pay the daytime cab driver part of it (it was “his” assigned car getting extra hours on the road at night, and it was him who brought my grandfather into the business), and he even had to give the individual dispatcher on duty each night a “piece” (so they would give him good fares). It didn’t bring in much money, but it did bring in a little extra money in addition to what he earned at his day jobs, and that extra money was needed to cover their expenses.

1 Like
8

Until the first tax cut/restructuring in the early 1980s companies could write off cars for businesses like cabs and delivery.

9

Back when Mrs. Goofy was young she was a waitress. The money was OK, she didn’t enjoy the work, but she got paid every night (tips). That “instant gratification” is a reward, even if it isn’t big dollars.

3 Likes
10

The difference is that Uber driving isn’t a career like plumbing or graphic artists. I read somewhere that the average length of continuous employment is measured in months, not years. Driving Uber is just a transient way of making some cash when you have the need or time. It has the very tangible benefit of very flexible hours, unlike most part-time jobs.

I guess you folks in MA have to decide whether there is a need for such a service, a way for people to make quick money on a transient basis. The best analogy that comes to mind are garage sales. I think the consequence of the MA proposal will be the same as imposing a sales tax on garage sales. The business activity will go away.

1 Like