Uber and Lyft only work because the economy is crappy enough that drivers are desperate enough to work below cost

Uber and Lyft only work because the economy is crappy enough that drivers are desperate enough to work below cost. [Ian Welsh]

Drivers can’t find good jobs and need cash now, so they work at rates below minimum wage and below the cost of keeping and maintaining their cars.

When the economy improves, Uber and Lyft will be in trouble.

Here is the thing about Uber and Lyft (and much of the “sharing economy”).

They don’t pay the cost of their capital.

The wages they pay to their drivers are less than the depreciation of the cars and the expense of keeping the driver fed, housed and healthy. They pay less than minimum wage in most markets, and in most markets that is not enough to pay the costs of a car plus a human.

These business models are ways of draining capital from the economy and putting them into the hands of a few investors and executives. They prey on desperate people who need money now, even if the money is insufficient to pay their total costs. Drivers are draining their own reserves to get cash now, but hey, they gotta eat and pay the bills.

This sharing economy shit works in a shitty economy. In a good economy, where people have what they need, it doesn’t work.

And this is not a problem that will be solved by the free market.

Until we stop pretending the market fairy is going to solve social action problems, we won’t actually solve those problems.

Via Cory Doctorow, who notes that other companies that fail to provide a living wage, such as McDonald’s and Walmart, are taxpayer-subsidized in the form of food stamps to employees.

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