Thursday 24 November 2016

Uber flexible

Roger Partridge lays out some of the problems with the government's proposed changes to the taxi regs. While the government talks a good game about flexibility, the rules do the opposite. For example, paper logs for drivers makes little sense when drivers' records are all already in the Uber app, and where someone with 2 hours on-shift might be far more fatigued than the driver who's been on 6 hours, if the former just came off the day job.

The upshot of the rules is to increase the fixed cost for prospective drivers. And that wrecks what seems one of the main benefits of Uber for drivers: flexibility. When fixed costs are high, that pushes things towards a smaller group of drivers putting in lots of hours rather than a greater number of drivers putting in a bit of time here and there when it suits their schedule.

Uber, the ride-sharing company launched in 2010, has grown at an exponential rate. This paper provides the first comprehensive analysis of the labor market for Uber’s driver-partners, based on both survey and administrative data. Drivers who partner with Uber appear to be attracted to the platform largely because of the flexibility it offers, the level of compensation, and the fact that earnings per hour do not vary much with the number of hours worked. Uber’s driver-partners are more similar in terms of their age and education to the general workforce than to taxi drivers and chauffeurs. Most of Uber’s driver-partners had full- or part-time employment prior to joining Uber, and many continued in those positions after starting to drive with the Uber platform, which makes the flexibility to set their own hours all the more valuable. Uber’s driver-partners also often cited the desire to smooth fluctuations in their income as a reason for partnering with Uber.
The paper uses, among other things, administrative data from Uber on drivers' driving patterns: when they're active picking up fares, and when they're not on the clock.

Another interesting tidbit: the survey of drivers shows only a fifth of drivers see it as a full-time job, and only a fifth had worked in transport in their previous job. The New Zealand government still wants drivers to have a P-endorsement. If you weren't working as a cab or commercial driver in your previous job, that's a pretty big barrier. Given the proportion of drivers in the US who came to Uber from outside of the commercial transport sector, it's a barrier that matters.

The paper makes really rather clear that the flexibility Uber offers matters for drivers.
First, the Uber platform provides a great deal of flexibility for driver-partners, and this characteristic of work in the on-demand economy may attract workers who supply labor to the sector more generally. Responses to the BSG survey indicated that many driver-partners valued the flexibility to choose their hours and days of work. Furthermore, the administrative data indicate that a large share of driver-partners avail themselves of this flexibility and vary their hours from week to week. Compared with traditional taxi drivers, Uber driver-partners tend to work substantially fewer hours per week. For example, taxi drivers and chauffeurs were five times more likely to work 50 or more hours per week. The high fixed costs of obtaining a medallion to drive a taxi in many areas could explain the longer hours of taxi drivers. The finding that hourly earnings for Uber’s driver-partners are essentially invariant to hours worked during the week also makes Uber an attractive option to those who want to work part-time or intermittently, as other part-time or intermittent jobs in the labor market may entail a wage penalty.

Second, Uber’s driver-partners are more similar in terms of age and education to the general workforce than to taxi drivers and chauffeurs. There are many possible explanations that could have contributed to this result. First, the U.S. economy was operating at less than full employment during the period studied, and more highly educated and younger workers may have had fewer alternatives available than is normally the case in this time period. Uber may have represented a particularly attractive bridge option for these workers. Second, entry barriers in traditional taxi and limo services may prevent a broader segment of the workforce from gaining such jobs. And third, a segment of the general public may be drawn to Uber over traditional taxi and chauffeur jobs because Uber permits greater flexibility in terms of scheduling. The fact that new drivers continued to partner with Uber at an accelerating rate in late 2014 and 2015, when the economy strengthened and the unemployment rate fell below six percent, suggests that weakness in the economy was not the major reason why driver-partners partnered with Uber. In addition, most driver-partners were employed prior to joining Uber. These considerations suggest that Uber has attracted driver-partners with a wide range of backgrounds because they value the type of opportunity for flexible work that Uber provides. 
Let's hope the NZ government doesn't wreck that flexibility. More on that momentarily.

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