Spotlight Exclusives

Is the Ride-Sharing Economy an Opportunity for Low-Income Americans?

Spotlight Team Spotlight Team, posted on

In recent years, ride-sharing companies such as Uber and Lyft have expanded so rapidly that some have wondered if traditional taxi services may become obsolete. Such large-scale shifts in the economy undoubtedly have implications for economic opportunity and low-income workers, but many people disagree whether these changes are primarily positive or negative.

Proponents of ride-sharing services argue that these companies have created a wealth of new jobs with competitive earnings and limited educational requirements.

Washington Post blogger Matt McFarland argues that this new model in which customers use smartphone apps to request car service on demand has allowed for a “more efficient marketplace” in which drivers are more easily able to connect with customers, meaning “more fares and more money.”

According to Uber estimates, drivers in New York City who work at least 40 hours a week make a median net income of around $75,000 per year. Its competitors report similarly high potential incomes. These companies could expand job opportunities and raise incomes for low-skilled workers.

Because drivers are not given information about customers۪ race, appearance, or destination in advance, ride-sharing services could also help mitigate discrimination against low-income and minority customers. A 2013 undercover investigation in Washington, D.C. “showed black passengers waiting up to three times longer than their white counterparts” for a traditional cab to pick them up.

Still, many wonder if the benefits of these ride-sharing services are so clear cut. Uber and Lyft have been accused of promising high incomes to drivers and then cutting fares and shifting the terms of their agreements. In September, a group of New York City Uber drivers began a series of protests. Among the complaints was that the company was returning a substantially lower share of fares to drivers than initially promised.

Further, some critics contend that these companies have gained economic advantage primarily by circumventing regulations rather than providing superior services. These opponents say ride-sharing companies have used shrewd lobbying and other tactics to sidestep consumer protection laws.

Taxi drivers and their allies have also argued that their incomes have fallen as these companies have grown.  In response, they have organized protests in a number of cities against what they see as unfair competition.

Dean Baker, an economist with the Center on Economic and Policy Research, suggests that some taxi regulations are potentially outdated and should be reconsidered. However, instead of redesigning laws uniformly for the entire industry, Baker believes that Uber and Lyft are simply being permitted to play by a different set of rules.

Despite the ongoing controversies, it seems clear that ride-sharing companies and other “sharing economy” businesses will continue to disrupt and transform traditional service-delivery models in the years ahead. Spotlight will continue to analyze and track what these changes mean for low-income Americans.

Posted by Maya
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