Discussions of automation and artificial intelligence often imagine a world of rampant robots leading to massive technological unemployment, and a need for major new social approaches like a universal basic income. Even conservative estimates indicate that artificial intelligence, automation, and related technologies could lead to job losses by nearly one in ten Americans in the decades to come. But before we initiate something as ambitious as a universal basic income in order to head off the worst of what could happen, there are very real, immediate challenges already at hand in occupations being upended by technology, as well as measures we can take to ameliorate the harm done.
A crucial example of effective response to such a problem can be found in New York City, where, after years of building pressure for action, the city is taking critical steps to mitigate the economic damages caused by the explosion of Uber and other gig-economy consumer transportation platforms—the subject of an October 16 forum at The Century Foundation. In particular, the NYC Taxi and Limousine Commission is rolling out a number of measures to ensure that driving for companies like Uber and Lyft is as livable a profession as driving a certified NYC taxi—including the instatement of a de facto minimum wage.
There is much to learn from New York City’s experience as policymakers across the nation and globe discuss how to address technological change. Unfortunately, the possibility that computing power will one day generate mass unemployment has taken attention away from the less calamitous, but still very significant ways technology is already changing the nature of work in the United States. Existing and active technology is already radically altering employment, dramatically changing working conditions, regulation, and the allocation of capital, even without causing mass unemployment. Policymakers also need to be concerned with protecting the retirement security and wealth of experienced workers who cannot train their way out of a late-career technology disruption.
New York City’s Economy for Drivers
The streets of New York City were described as eerily empty on a late-May day in 1998. In response to new regulations on taxi drivers that would quadruple insurance costs and triple certain fines, among other things, over 12,000 of the city’s yellow cab drivers went on strike. Motivations for the action, beyond economic ones, were the sentiment that Mayor Giuliani’s policies were racist—that the regulations were intentionally undercutting and harming the livelihood of the majority foreign-born drivers.
The 1998 strike propelled the fledgling New York Taxi Worker’s Alliance (NYTWA) into position as a leading worker’s center, bargaining for better working conditions on behalf of its members, who are forbidden by law from joining a traditional union. But just as NYTWA was winning significant gains for its members, the introduction of Uber into the market in 2014 ushered in an unimaginable shift in the market for vehicle service in NYC, as it has across the world. Since then, NYTWA has waged a spirited campaign to stop a race to the bottom in conditions for drivers, and has recently had major breakthroughs, thanks to the leadership of Mayor De Blasio’s Taxi and Limousine Commissioner (TLC) Meera Joshi and the City Council. But despite many victories for taxi drivers over the past decade, “These companies [Uber, etc.] come in without any of those regulations,” said Bhairavi Desai, co-founder and executive director of the NYTWA, at our forum on the subject. “Disruption is the absolute right word for it, but more than disruption, it’s been destructive.”
Existing and active technology is already radically altering employment, dramatically changing working conditions, regulation, and the allocation of capital, even without causing mass unemployment.
Desai’s sentiments stem from the the onslaught of for-hire vehicles that have arrived in NYC in the past few years. For over half a century, New York taxi drivers could work for a few years leasing vehicles while they saved up to buy a medallion, the rationed official city license to drive a certified NYC taxi cab, and which was previously seen as a safe investment that could secure a decent living and retirement. Before Uber, those holding an approved taxi medallion were the only ones who could pick up passengers from the street in the lucrative Manhattan market (rather than calling a car service), an advantage neutralized by Uber’s technology and saturation of the city with its vehicles. Once Uber and other app-based platforms like Lyft, Juno, and Via came to town (collectively known as transportation network companies, or TNCs), the value of the medallion fell like the housing market during the Recession. While it peaked at $1.3 million in 2014, it is now going for just $150,000 to $450,000, with many being sold through foreclosure. From early 2015 to 2018, the number of monthly trips for medallion drivers fell from over 13 million to under 9 million, during which the number of trips stemming from app requests skyrocketed from 2 million to 17 million (See figure below). During the first quarter of 2018, the four major TNCs, listed above, dispatched nearly 600,000 rides per day.
Because of the TNCs’ remarkable rise, the idea of a medallion as a safe investment has “changed overnight,” according to just one of many affected by the change. And the impact on the larger population of drivers is not trivial: as a recent NYTWA letter to the TLC states, “bankruptcies, evictions, and foreclosures have been at record numbers.” Medallioned taxi drivers, however, are not the only ones who are suffering. As much, if not more, than the statistics, the suicides of seven New York City drivers within the past year—most recently Uber driver Fausto Luna in Washington Heights—has convinced policymakers that the current path of driving work, for taxi drivers and TNC drivers alike, has become unsustainable.
A New Minimum Wage for Uber and other App Drivers
Until earlier this year, there was no regulation that aimed to steer the growth of for-hire vehicles (FHV, referring to, but not limited to, vehicles driven by the employees of Uber and other TNCs). The TLC, under new leadership, has taken on the task of reinstating driving in NYC as a livable profession, and countering the calamitous outcomes of recent years. One package of legislation passed earlier this year set a cap on FHVs, and a new set of legislation is addressing proposals for health care benefits, racial inclusion, driver leasing, and medallion debt (see below). TLC’s minimum wage for FHV drivers has already been proposed through rule making, which is currently in open comment period, and is likely to be voted upon before the end of the year.
The minimum wage proposal is outlined in a report commissioned by the TLC by economists James Parrott and Michael Reich. The weight of the report, in addition to its length of 80+ pages, lies in its details about the other side of the NYC driving economy: financial calamity not only for taxi drivers, but also for the gig economy drivers. Apps like Uber depend on having an excessively large fleet of vehicles, which means that drivers spend more time waiting for jobs than doing the job, which dilutes hourly pay, encourages drivers to work longer hours to make enough per day, and adds to congestion in already congested areas. Further, FHV drivers are responsible for purchasing the capital that runs the FHV business—vehicles as well as maintenance, gas, and insurance. After costs were subtracted, median net hourly pay among the TNC drivers studied came to $14.25 in late 2017. So, while Uber has dangled big salaries on its billboards to attract new recruits, most New York City drivers were not earning nearly enough to meet the basic costs of living in one of the most expensive cities in the country, and will soon be earning less than most New Yorkers, who will be covered by at $15 hour minimum wage by the end of the year. By setting minimum fares per ride and minimum driver pay per ride, in addition to the cap on the number of TNC drivers, this proposal would increase the rate to a minimum of $17.22—giving a pay raise for 85 percent of drivers and leveling the conditions between all TNC drivers (who pay higher taxes as independent contractors) and other working New Yorkers.
The suicides of seven New York City drivers within the past year—most recently Uber driver Fausto Luna in Washington Heights—has convinced policymakers that the current path of driving work, for taxi drivers and TNC drivers alike, has become unsustainable.
The TLC’s minimum wage proposal breaks new ground. The rise of the gig economy has been largely predicated on treating workers as independent contractors, exempting them from the minimum wage and stripping them of the right to join a union. The TLC does not have power to require that Uber pay its drivers as it would non-contracted employees, with the rights that such employment entails; but it does have the authority to set a minimum fare and used that power creatively to establish a de facto minimum wage. With Uber and allies successfully petitioning thirty-two states to guarantee that those working for Uber and other TNCs are classified as independent contractors, regulations of minimum fares is a critical lever for governments to raise conditions for drivers.
A Just Transition for Medallion Owners
But what about the taxi drivers whose working lives were fundamentally changed by the onslaught of Uber? While they’ll be helped by the minimum wage proposal, the cap, and potentially by others of the legislative measures currently under discussion, permanent damage has already been done, especially to those who were counting on the value of their medallion as their retirement savings. This is a similar situation to coal miners displaced by the rise in natural gas and the demand for clean energy, and whose pension plans are on the verge of financial collapse. The unions representing these workers have called for a just transition to a clean energy economy that would address their financial concerns and invest in a more environmentally and socially sustainable economy. A key component of such proposals is to protect the retirement security of workers impacted by an energy transition.
Rather than debating over the near-science fictional worst case scenarios that have yet to come even close to passing, policymakers should take action now to stop the convenience of today’s technologies from worsening our living standards.
Parallel actions are going to be a key part of any effort to address the full economic damage done by Uber, Lyft, and their competitors to taxi medallion owners’ wealth. New York City Council member Mark Levine has introduced a bill that would be a first step: a city funded study of the scope of medallion debt, including recommendations for action, such as setting limits on medallion financing and providing financial counseling to medallion owners. Medallion owners are right to look to government for compensation for these losses that came through no fault of their own, and were facilitated by regulatory choices that allowed for-hire driving to mushroom. Such compensation could come in the form of programs to help medallion owners write down their debt without foreclosure, working with lenders as was done during the housing crisis. Perhaps a tax on Uber and Lyft could pay for the writing down of these debts. The Center on Global Policy Solutions proposes that one way to help truck drivers replaced by autonomous vehicles would be to provide early social security and Medicare to workers who are too old to retire; NYC, and other cities, could employ a similar measure. Especially since cities like New York can face limitations in their abilities to address personal debts or levy new taxes on specific companies, national and statewide solutions will also be needed.
Making Sure That Work Keeps Pace with Technology
There’s little doubt that technology is upending work. But rather than debating over the near-science fictional worst case scenarios that have yet to come even close to passing, policymakers should take action now to stop the convenience of today’s technologies from worsening our living standards. The New York City Taxi and Limousine Commission and the New York City Taxi Worker’s Alliance should be commended for taking creative actions and searching for answers to hard questions posed by major technological changes; and government elsewhere in the country, whether local, state, or federal, should take careful notes.