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Comment by boh | Hacker News Reader

It's becoming abundantly clear the real innovation from on-demand services (including ride-sharing companies), is their ability to transfer more money from labor to capital with complex pay structures. For many if not most of these companies, its their only means towards profitability. For instance, any rise in revenue Uber experienced in the last 3 years was exclusively due to cuts in pay for drivers. Tech has long lost the glow that prevented the public from scrutinizing whether a VC subsidized, underdeveloped business model is good for society. So far the answer seems to be no.

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I expected to see something like this here.

I had a period where I wasn't doing any class work but didn't have my degree and couldn't get a job because of that. The ability to trade time and tires for some of the extra VC money was kind of awesome honestly and I'd imagine it gives people who are in worse situations options they really need (essentially borrowing against car components.)

I know in a few years it will change when they try to become profitable but there will be another thing by then.

The article points out that for many DoorDash workers, they aren't getting paid a positive sum, even if they count their time as worth zero.

Look, we have the technical ability to handle millions of people as hourly workers on timescale granularities of seconds. Require these companies to treat their "contractors" as part-time employees being paid minimum wage: start paying them when they accept their first job on day, pay them for periods of up to ten minutes between jobs, and stop being reviled by everyone who hates slave labor.

I'll agree you absolutely have to watch what you're doing and count miles and whatnot, but having the option is a powerful thing (even when you're making negative money) and I wonder if regulating it too aggressively might take that away.

I am 100% ok with using regulation to take away the ability to earn negative money.

I have 0% trust in regulators ability to do this without doing more harm to workers than good

Obviously. But are you going to do that so neatly it doesn't trigger unintended consequences? Which have the potential to make things worse.

It's easy to say "let's do X to make Y better", but it's not that simple with any real world complex system.

Look at bill AB5 for an example currently in progress and ostensibly about helping gig workers. Here's a sobering sample of second order effects:

https://twitter.com/ms_andiloveall/status/120670581104242278...

https://twitter.com/delightedbite/status/1216834042881949697

Imagine all the alternative ways this valuable human time could be used. Do you really think the majority of people feel empowered and freely do this, or is it rather that they are stuck in a negative loop and can't get out.

Also to highlight that currently the government is subsidising these companies by paying food stamps and Medicaid (in the case of the US), and the workers are subsidising them by taking any and all economic and personal risk (injury, accident, car breakdown, long term health issues, etc.)

"Empowered" is a spectrum. Do I think the majority of gig economy drivers find their job empowering in some cosmic sense - no, probably not. But I'd certainly be much happier as a driver for Doordash than a sales clerk at Walmart, and the reasons are empowering things like "I don't have to spend 100% of my time around annoying customers" and "there's no manager who will come yell at me if I play around with my phone for a few minutes".

I agree human time is undervalued in the modern economy and it’s often waisted, but I think door dash because of its flexibility might actually be part of a change that results in it being more valued rather than less.

>The article points out that for many DoorDash workers, they aren't getting paid a positive sum, even if they count their time as worth zero.

This just doesn't pass the smell test. It's much, much more likely that their method is flawed than it being the case that a bunch of workers pay DoorDash to work for them.

Instead of posting your personal idea that this must be wrong because it seems extreme, you could read the very lucid and clear article giving exact numbers on how they calculated this and why they are confident in this calculation.

The article says they gathered their data from a non-random sample of 200 drivers. I think the “smell test” is more accurate. Or DoorDash’s own claims, that drivers make $18 an hour.

Their sampling is biased, but DoorDash muddies their own claims by saying that pay is per "active hour". It's possible they're not counting time that drivers still need to allocate towards their work, making it inaccurate. I imagine you at least have to spend time pulled over to look at and accept an order (or break the law) so even that time getting in and out of traffic is probably not counted in "active hours". Imagine working retail and your employer only counting your time actually spent at the till when they say you're paid $20 an hour. You could be doing a whole lot more work than that but they don't consider it in that calculation.

They use the IRS 0.58$/mile tax deductible to estimate the car related costs. This is probably on the high side, especially for a small car.

Both things can be true. The gig economy can provide people with the kind of flexible work that wasn't possible. It can also utterly fleece workers that would like to having full time jobs but cannot.

Taking a few delivery jobs while being relatively well off isn't the same as people picking this up as a 2nd or 3rd job and depending on it.

I can't believe I have to point out that most of the people being affected negatively by this aren't by-and-large "wealthy" or "secure" people to begin with.

You'd be surprised how prevalent that attitude is, the people with good paying jobs doing it for "extra cash on the side" say they don't care about the pay rate or unionizing or anything and so the going rate for these little delivery contracts is super low.

They advertise that you'll make well over minimum wage when in reality you'll hardly ever even meet min wage. They could easily guarantee a min wage, which should be no problem if the drivers are all really making so much money, but they obviously don't.

People say "well the drivers shouldn't do it then, they should get different jobs. if it doesn't pay and they keep doing it they're stupid", and then go on to order food from the app and tip $0.50 bc "hey, I only spent $5, that's 10%!"

Drivers are essentially depending on tips to live just like a waiter. They might take home $4/hr from the app. So every time you order you have the chance to make it right for the driver and pay them for doing their job by giving a decent cash tip. IMO $3 is the absolute minimum, $5 is normal. If your reaction to that is "whoa that's way too much what did they do to deserve that?" you're a cheap bastard.

Sorry for the rant, I just did this job for a while and got treated like dog shit by the customers and the companies for efficiently and politely indulging their every whim on demand at any hour, and it makes me sick to hear people who aren't starving living in their cars depending on work like this to survive talking about it in abstract terms like they have any idea. We really should have a period of compulsory food service work for every teenager in this country, seriously.

in the meantime, they've driven competitors out of business with predatory pricing, and are the only game in town

This was not the case where I live, when door dash didn’t pay me what I wanted I’d deliver with Postmates instead and vice versa.

the real innovation from on-demand services is their ability to transfer more money from labor to capital

DoorDash hasn't transferred any money to capital! They are still private. In fact, it is the opposite. Transfers have been from the capital of their investors to labor and to consumers.

There is plenty of innovation here - Uber is a lot nicer than phoning up the taxi company, and DoorDash is a lot nicer than phoning up some small restaurants to get food delivered. The lack of innovation is not the problem.

The problem is that there is no moat. DoorDash, Uber Eats, Postmates, and GrubHub are all providing the same service. There are millions of people capable of being a driver for these services. So competition is currently squeezing profits to zero or negative, and squeezing worker pay. Competition isn't helping the VCs, it's helping the consumers.

Eventually, if some of these companies go out of business, the remaining ones will be able to raise prices, which will be worse for consumers but better for the investors and perhaps better for drivers.

Most of the gig economy companies are Movie Pass but with a longer runway.

How could cutting drivers pay without cutting prices to increase demand raise revenue? It would raise profit possibly or in Uber’s case reduce losses.

The cost to Uber users is not the same as revenue to Uber corporate. Uber corporate revenue is net of driver pay.

revenue is all monies before any kind of expense...

While money after expenses (“profit” to the layman) is “income”

You pay Uber and Uber pays drivers. Revenue by definition is money that Uber gets before expenses.

Uber does not pay drivers. Passengers pay drivers who pay Uber to use their platform (otherwise they'd be employees which Uber is fighting to avoid).

That may be how Uber wants to phrase it, but I'm pretty sure the thing that shows up on my CC statement is Uber, not the driver's name... IE, if they're claiming that, it's a legal fiction. Whether that legal fiction would stand in court is up to the court.

> I'm pretty sure the thing that shows up on my CC statement is Uber, not the driver's name

That just means that Uber is acting as a payment processor for the driver. If you buy an app or make an in-app purchase in the Google Play Store then Google's name appears on your statement; that doesn't make the app publisher Google's employee. The same goes for non-app vendors using Google Pay or similar services such as PayPal. The point of Uber is to connect riders with drivers and provide standard systems for payment and review—the actual transportation is up to the users.

Uber paying drivers does not make the drivers employees. When I have worked as a software developer as a 1099 contractor and someone bought the resulting software, does that mean that the customer who bought the software was paying me? Would the payment for the software be counted as revenue for the company?

When I was a part time fitness instructor, I taught at corporate gyms where the employees had free memberships. I got a 1099 every year from the gym. Did the employees pay me? Would that be an expense of the corporation?

Currently the prevailing legal arguments against Uber attempt to categorize drivers as employees, not contractors.

There're like three sub-threads to your comment now of people getting it wrong. What you are describing is Gross Bookings. If you don't believe me, Uber's quarterly financial results are here and you can see for yourself.

https://investor.uber.com/news-events/news/press-release-det...

This is not how the actual GAAP accounting works for a company like Uber. The total the customers pay is referred to as bookings. There was a similar issue with Groupon when that was the hot stock of the day:

https://dealbook.nytimes.com/2011/09/23/groupon-changes-its-...

They increased their share of the passenger revenue, taking a greater percentage. Uber defines drivers as consumers of their app, not employees.

And on their P and L they also count as expense “driver incentives” where they pay drivers more than what riders pay for a ride.

For any less shady business, drivers would be considered contractors for Uber. Uber is merely trying to get around riders being considered employees.

I recently got into EconTalk and burned through a few of their podcasts [0]. Roberts mentions his 'distain' for the minimum wage a fair bit during the shows. Many economists do not like the minimum wage at all for many reasons.

However, with these gig economy jobs, there effectively is no minimum wage. Yes, things are murky here about the definitions of wage, employee, boss, etc. But the effective hourly rates are all well under the minimum wage. So, these companies can uncover the 'real' minimum wage that the market will deal with (again, suuuuuper murky definitions).

It turns out, that number is very low, so low that most people aren't rationally taking those jobs. Factoring in depreciation, I often hear that they loose money to work (not always, but damn close).

I wonder what Roberts has to say on how the minimum wage and the 'wage' that these gig-econ companies pay relate.

It seems to me that having run the experiments now, the theories that the economists that Roberts is like, well, maybe they should update those ideas.

[0] Excellent deep dives with interviewees, highly recommended: https://www.econtalk.org/

If you change slightly the economic assumption and go from a completely competitive labor market (where workers get paid the marginal revenue productivity) to a monopsony labor market (there is only one employer), then the minimum wage can increase employment and wages. https://open.lib.umn.edu/principleseconomics/chapter/14-2-mo...

A monopsony labor market is highly unlikely to happen, but something similar can be said of a highly competitive labor market.

There's no such thing as "real" minimum wage since the factors that result in having minimum wage must be included (taxes/regulations/cost of living etc). Just as looking at the wages of illegal immigrants doesn't represent the "real" economy, the gig economy, whose companies largely operate under artificial, VC inflated markets, and depend on heterogenous labor markets,can't gage "real" wages.

If you're wondering how low a wage can be and still retain employees, the answer is pretty close to zero. Even baring the no/very low wages that predominated human history, in the 20th century mining companies were able to avoid paying their employees money at all and instead provided tokens serviceable in stores the mining companies owned. The goods in those stores were sold with inflated prices, essential making the cost of labor close to zero.

The case against minimum wage is largely based off of highly isolated factors typically favoring shareholder economics.

Average wage for a day laborer in mid 19th century US was roughly equivalent in purchasing power to what you today get in food stamps. The UBI is already here, you just have to go back to mid 19th century lifestyle.

"Bad statistician drowns in 10-inch-average deep river."

It turns out, that number is very low, so low that most people aren't rationally taking those jobs. Factoring in depreciation, I often hear that they loose money to work (not always, but damn close).

This is simply hard to believe. There are over a million driving for Uber. An overwhelming majority of them must be making money, because the idea that any significant fraction of a million of people is in the red at the end of a year simply is ludictious. Sure, they might be making less than they think after accounting for operating costs, insurance and depreciation, and they might be making less than they would had they got a regular job, but they cannot possibly be actually losing money.

>> It turns out, that number is very low, so low that most people aren't rationally taking those jobs. Factoring in depreciation, I often hear that they loose money to work (not always, but damn close).

> This is simply hard to believe. There are over a million driving for Uber. An overwhelming majority of them must be making money, because the idea that any significant fraction of a million of people is in the red at the end of a year simply is ludictious.

I think the error you're making is the assumption that everyone in the market is a rational actor with good information and understanding, so that evidence of particular market behavior is evidence that it's rational and beneficial to the person doing it.

It's very believable to imagine gig economy jobs where the workers typically lose money doing them, but it takes them a a long time to figure that out, because the pay is obvious but much of the expense is obscured. Fresh, naive marks take over for those workers who get wise and drop out, maintaining the population of workers. The combination of corporate marketing and desperate hope then help maintain a supply of fresh, naive marks.

Million of people are not rational and naive? I doubt that.

Look, the costs with Uber are pretty straightforward: you have car payments, insurance, periodic maintenance and finally gas. People really aren’t too stupid to realize that their Uber income doesn’t cover their car payment.

IRS has a nice estimate of average cost of driving, it’s 58 cents per mile. If you are doing more than that, you are making money, and at Uber you make significantly more than that.

The cost to run and maintain a car is not uniform however. The per mile cost of a 2019 Escalade is not the same as a 2016 Prius.

There is room for profit I am sure, but also lots of ways to wear out your car many years earlier than you had expected to.

The thing is, we had already been there. We know what happened then.

These economists say what they need to say to get paid.

> Many economists do not like the minimum wage at all for many reasons.

Usually it boils down to simply believing that "standard of living" is a silly concept.

It's true, the demand for labor is essentially infinite, but having a minimum wage effectively puts a cap on the number of actual jobs. If people could hire maid services for $1 per hour, there'd be a lot of maid service jobs and nearly everyone would have clean homes.

But the standard of living would hit the floor.

Eliminating minimum wage would eliminate unemployment, for sure. But it would also mean rising homelessness or people cramming 5+ people into 400 sq foot studio apartments as the people at the bottom could no longer afford to pay rents on their own. And let's not pretend that only minimum wage workers would be affected, people near minimum would likely wage cuts as well.

Eliminating minimum wage creates a race to the bottom for low-skill jobs as people become more and more desperate for money.

> If people could hire maid services for $1 per hour, there'd be a lot of maid service jobs and nearly everyone would have clean homes.

Why do you assume there are enough maids to clean everyone's house at such a low rate?

> any rise in revenue Uber experienced in the last 3 years was exclusively due to cuts in pay for drivers

Outrageous claim. Source?

Uber's own P&L.

An article regarding the P&L:

https://www.nakedcapitalism.com/2017/12/can-uber-ever-delive...

It’s outrageous to say that is an outrageous claim at this point. To suggest Uber had other means of obtaining profitability would be the incredible claim needing tons of new evidence, not the other way around.

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