You're Probably Getting Screwed by the Gig Economy
How monopolies bully their way to power under the guise of innovation.
Welcome to You’re Probably Getting Screwed, a weekly newsletter and video series from J.D. Scholten and Justin Stofferahn about the Second Gilded Age and the ways economic concentration is putting politics and profits over working people.
Last week ride-sharing giants Uber and Lyft threatened to leave the Twin Cities after the Minneapolis City Council voted to approve a minimum wage for drivers. The issue dovetails with legislative efforts in Minnesota to improve working conditions for drivers. If you are interested in the particulars of those policy discussions or the intra party politics surrounding it, you can find more here. I instead want to highlight how these two companies provide a textbook example of the way monopoly power threatens democracy and screws us all, but also why state and local policy have an important role to play in fighting back.
Like other tech giants birthed by Silicon Valley types, the lore around Uber and Lyft framed them as scrappy innovators upending a stale industry. There is some truth to this, ordering a ride easily on your phone, instead of trying to hail a vehicle on the street in the snow, is an improvement. Setting aside that taxi companies were beginning to roll out app-based ways to catch a cab, the real innovation from Uber and Lyft and the rest of the gig economy was convincing policymakers they were something inherently different and the rules of the road did not apply to them.
In her brilliant book Bream Em Up, law professor and antimonopoly advocate Zephyr Teachout writes, “The modern gig economy is neither glamorous nor inevitable, and it hides monopolies behind the rhetoric of technology.” In the book Teachout describes how the rideshare duopoly used anti-competitive tactics straight out of the usual monopoly playbook to undermine the regulatory system New York City had in place for the the taxi industry. While not perfect, the system benefited riders, drivers, and city residents and was structured specifically to prevent monopolization.
In this way, the gig economy is just one part of what Teachout calls the “chickenization” of the economy, a reference to the poultry industry where companies like Tyson control the decisions farmers used to make, but offload all the risk onto farmers. For example, Uber and Lyft drivers are considered independent contractors with all the risk and expenses that entails, but with decision making tightly controlled by the rideshare firms, similar to the experience of a worker.
New York City was not the only place Uber and Lyft deployed their regulatory arbitrage. In 2018 the National Employment Law Project found that rideshare companies had convinced lawmakers in more than 40 states to overrule and preempt local efforts to regulate them.
I was in Illinois when the General Assembly passed the Transportation Network Providers Act in 2014, which exempted Uber and Lyft from common carrier regulations that taxi companies are subject to. The only thing innovative about this are the arguments tech lobbyists must have made to policymakers. The rest of the gig economy has followed a similar playbook; exploiting their workers, lax antitrust enforcement, and policymakers unwillingness to stand up.
Now these companies are engaged in the next stage of flexing their power by using threats to maintain their chokehold. Uber and Lyft have set up a very consequential game of chicken in Minnesota, because their monopoly has destroyed the taxi industry. In 2015 there were 1,385 taxis in Minneapolis and today there are just 14! The rideshare companies have become Too Big To Leave, creating a classic example of how economic power equals political power and why monopoly threatens democracy.
This is not just a gig economy problem though. Take for example dollar stores and chain pharmacies. These companies have driven independent grocers and pharmacies out of business, leaving communities reliant on their new corporate overlords. But now Dollar Tree is planning to close a thousand stores and Walgreens and CVS have been closing pharmacies. These closures were not the result of threats like Uber and Lyft, but they demonstrate how communities are used and abused by monopolists.
This dynamic not only robs communities of opportunity, it makes them less resilient and reduces their control. But remember what Teachout said, none of this is inevitable. We do not have to be servants to monopolists, it is within our collective power to create an economy that serves us.
YOU’RE PROBABLY (ALSO) GETTING SCREWED BY:
Apple
In a much anticipated move, the Department of Justice announced they’re suing Apple for antitrust violations regarding their smartphones.
This will be a case worth watching!
Billionaires
This meme gets it…
Major League Baseball Owners
Do you think it’s weird when a Major League Baseball player doesn’t get offered by teams and then all of sudden gets offered basically the same contract by multiple teams?
When Spring Training began, seven of the top 50 free agents remained unsigned with Opening Day less than four weeks away, including three of the top 10.
Collusion is a very serious allegation and it is also extremely difficult to prove. Front offices are increasingly reliant on their analytical models to put a dollar figure on players, and there are more than a few owners in the sport who place a higher priority on making a buck than winning ball games. That's not collusion, but it has fostered an environment in which the free agent market has become unfavorable for baseball's middle class of players.
State Legislators
Ten states have no working-class state lawmakers. State Legislatures often are hard for working class people to participate in and be elected to, causing the make-up to be disproportionately retired people and/or independently wealthy people. The U.S. would be better off if we had more working-class representation.
Netflix
If you have a Netflix subscription, you may want to double-check how much you will soon be paying. 26 states have or will have a sales tax or equivalent on streaming services. Meanwhile…
Taxes
With taxes due less than a month from now, the Consumer Financial Protection Bureau has released its 2024 Guide to Filing Your Taxes.
Things to follow
Barons by Austin Frerick will be released on March 26 and it’s getting good reviews. Here’s Alan Guebert’s review. Both JD and I will be hosting discussions with Austin on his book in April. You can find the full schedule here.
BEFORE YOU GO
Before you go, I need two things from you: 1) if you like something, please share it on social media or the next time you have coffee with a friend. 2) Ideas, if you have any ideas for future newsletter content please comment below. Thank you.
Break Em Up (As Zephyr would say),
Justin Stofferahn
Just found your site, and really enjoying how informative and readable it is! Makes it easier to share to family members/friends who aren't as up to date with these issues.