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They believe they can bear the expense of this policy better than their competition, and in particular they don't want to compete with lower-cost-lower-quality

They believe they can bear the expense of this policy better than their competition, and in particular they don't want to compete with lower-cost-lower-quality firms. So it's both a (presumably sincere) ethical position and a form of anti-competitive regulatory capture. I think most minimum wage laws have some of this Baptists-and-bootleggers effect.

Legogris 7y ago
If it were sincere, they would do these things without being required by law to do so.
- oconnor663 7y ago
  Competitive forces prevent them from raising wages unilaterally, because their customers are extremely price sensitive. They're not going to commit corporate suicide over their ethical preferences, any more than most people would.
  - ghaff 7y ago
    >because their customers are extremely price sensitive The proposal suggests to me that they think their customers are not extremely price sensitive but they're also not loyal to a specific supplier. In other words, they'll take almost as many rides even if the price goes up but they'll still go with whoever is cheapest.
    - oconnor663 7y ago
      Right, I was struggling with the phrasing for that. The overall demand may be somewhat inelastic, but the cost of switching firms is zero.
    - adventured 7y ago
      They may in fact think their customers are price sensitive (the majority of customers are for any mass service; we already know that most of Uber's customers are price sensitive), while their aim is to capture their customers in a regulatory manner so that they have no or few alternatives. If they can establish a regulatory framework that favors them (Uber), they can raise prices as competition is further restricted, to more than offset the $21 / hour. Their ideal has to be to establish that favorable competition environment, enabling considerable price increases that get them closer to profitability (ie exceeds the wage cost increase by a large margin). In the current situation, Uber is facing a bankruptcy scenario with their low sales growth, extreme burn rate and with a competitive market where they can't freely increase prices. That tells you what their goal has to be. If they were certain their customers were not price sensitive, Uber would have already spiked their pricing far higher to push toward profitability.
      - ghaff 7y ago
        >If they were certain their customers were not price sensitive, Uber would have already spiked their pricing far higher to push toward profitability. Many/most Uber customers would use a materially cheaper equivalent service if available because the switching costs are low. However, that's not the same as price elasticity (of demand) which is what the term usually refers to. Price elasticity is about how much less they'd use any price-competitive service as the price increases. I'm honestly not sure what that curve looks like. Within reason, pricing wouldn't affect my usage much at all. But I'm a light user of these services and use them almost entirely for business. Certainly I'm a very different profile from a young urban professional who doesn't own a car. ADDED: Between surge pricing and other pricing experiments I'm sure they conduct, I would imagine that Uber has a pretty good idea of what demand and driver supply curves look like.
    - novok 7y ago
      I’ve read somewhere ride share companies make more total revenue when prices are cheaper, and people use it less when its more expensive. Since these companies make more money with more total revenue, i’m guessing its in their interest to make it cheap. It makes sense, if something is cheaper, you use more of it. If its more expensive, you start using substitutes, as the benefits of rideshare gets dwarfed by its extra cost. It’s literal econ 101
      - ghaff 7y ago
        It depends on what the price elasticity of demand is. At least in the simple case, there is some price point at which revenue is maximized. Higher prices drive demand down faster than they drive revenue up. Lower prices drive revenue down faster than greater demand drives them up.
  - behringer 7y ago
    uber and ethical preferences? hahahhaha
- Matticus_Rex 7y ago
  They think they can survive doing it, but their competitors can't (or can't survive it as well). They probably can't survive doing it if their competitors don't have to. Whether they're sincere about thinking it's a good thing or not is irrelevant to the practicality of the suggestion, and the suggestion only makes sense for them to make as a law.
  - dylan-m 7y ago
    More cynically, they can survive it as long as their competitors die first :b
ineedasername 7y ago
This seems to be a reaction from Uber because they specifically do not want regulations to come into force on the issue. To me that takes it out of the baptists & bootlegger territory. Absent regulations getting involved, this is simply Uber offering better compensation.
- oconnor663 7y ago
  I think you're right (and the article is right) about the particular timing, but I also think Baptists-and-bootleggers is a good way to understand why Uber would prefer this policy over the other regulatory proposals it's reacting to.
amelius 7y ago
So first they evade regulations, then they propose regulations?
- penagwin 7y ago
  First they evade regulations, then they propose a new policy that is enticing to potential employees (or whatever they call them) - but the policy is so generous that most competitors would have issues keeping up. How many companies can afford to pay 21$/hr minimum for example? So somehow it's both a great step forward and terribly anti-competitive at the same time.
  - peteradio 7y ago
    Seems very competitive, not anti-competitive.
    - shawnz 7y ago
      Uber paying their employees $21 is very competitive. Uber lobbying for their competitors to have to pay their employees $21 is anticompetitive. The latter is what is happening here.
      - peteradio 7y ago
        Uber paying their employees $21 doesn't make sense, they will get undercut on pricing by race for the bottom competitors. There really isn't anyway to grant a viable minimum wage except via legislation. Paying more to the driver isn't the same thing as paying more for top-tier engineer. It isn't like getting a nascar driver in the seat is going to justify higher wages. So what do you recommend?
        mamon 7y ago
        >> they will get undercut on pricing by race for the bottom competitors If Uber unilaterally increased minimum salary, then those competitors would have to do the same, otherwise they would lose all their drivers to Uber. So, if Uber really cared about drivers they would just do it. Instead they are making PR stunt by "demanding" government regulation.
ryanmarsh 7y ago
they don't want to compete with lower-cost-lower-quality firms Such as?
- seandhi 7y ago
  Lyft and traditional taxi service are a couple that come to mind... not that Lyft is necessarily lower quality.
  - ryanmarsh 7y ago
    That's what I mean. Taxi services are lower quality but much higher cost (including to the drivers). Lyft (in the markets I travel) is more expensive and higher quality. So I'm struggling to ascertain who is this mythical Wal-Mart to Uber's supposed Target?
tfha 7y ago
I wouldn't assume it comes from an ethical origin. It's more about killing competition. As soon as the competition is dead they'll be talking about how non-viable $21/hr is. Also, a high minimum wage for drivers really bumps the value of their self driving car arm.
- SpicyLemonZest 7y ago
  But Uber's opponents seem to be arguing that $21/hr is too low, and it'd give drivers a worse deal than passing the law. If that's true, passing the law will kill Uber's competition even more effectively.
  - munk-a 7y ago
    I don't follow, is this a "perfect is the enemy of the good" situation where they think the minimum wage should be higher and are opposing a half-step toward that? For political reasons that can make sense, it's hard to push for a minimum wage bump right after a different one, but I am unaware of other cab companies advocating for a higher minimum wage prior to this.
  - enlyth 7y ago
    Considering a 40 hour work week, $21 hour comes out to about $3350 before tax monthly, is that really too low for driving around a car?
    - boring_twenties 7y ago
      It's $42k annually and that's before the insurance, maintenance, depreciation and fuel, so down to the mid-to-high 30's. That seems like it would be poverty level in many California cities.
      - enlyth 7y ago
        That's a fair point I didn't think about the car maintenance too much.
ofibrvev 7y ago
presumably sincere.. If it were a sincere ethical position, once again, they would just implement it... no need to make a big deal about it
dcolkitt 7y ago
Similarly, Wal-Mart has been lobbying for increasing the minimum wage for years. Most minimum wage earners in retail work for small businesses. Whereas Wal-Mart averages nearly double the federal minimum wage. Wal-Mart knows that hiking minimum wage would help it kill mom-and-pop stores that it competes with. [1] https://www.cnn.com/2019/06/05/business/walmart-shareholders-meeting-minimum-wage/index.html https://www.cnn.com/2019/06/05/business/walmart-shareholders...
- Consultant32452 7y ago
  The more money Walmart customers make, the more they can spend at Walmart. As long as they don't make enough to forego Walmart altogether. So it's a double win for Walmart.
- Wowfunhappy 7y ago
  > Most minimum wage earners in retail work for small businesses. Do you have a source for that? I find it a bit hard to believe, given the decline of mom-and-pop stores in general.
  - satya71 7y ago
    I talked to many independent coffee shop workers, and they used to get minimum wage. While Starbucks offered better wages, access to health insurance at a certain level, and now even tuition assistance. Starbucks probably had more unpredictable scheduling, not sure if they have changed that bit.
    - dankohn1 7y ago
      Amazing story of how a NY Times article caused Starbucks to reverse their immoral scheduling policies. https://www.nytimes.com/2014/08/15/us/starbucks-to-revise-work-scheduling-policies.html https://www.nytimes.com/2014/08/15/us/starbucks-to-revise-wo...
  - dcolkitt 7y ago
    > Roughly half the minimum-wage workforce is employed at businesses with fewer than 100 employees, and 40% are at very small businesses with fewer than 50 employees. [1] https://www.epionline.org/oped/who-really-employs-minimum-wage-workers/ https://www.epionline.org/oped/who-really-employs-minimum-wa...
scarface74 7y ago
Uber lost over $5 billion in one quarter. They can’t afford too much of anything. https://www.theverge.com/2019/8/8/20793793/uber-5-billion-quarter-loss-profit-lyft-traffic-2019 https://www.theverge.com/2019/8/8/20793793/uber-5-billion-qu...
- skinnymuch 7y ago
  Uber didn’t lose $5B in cash. They lost $1.3B in cash at most. Stock based compensation is a cost, but different than straight up losing money.
  - scarface74 7y ago
    At the end of the day, if it's part of compensation that they have to pay, doesn't matter? And losing $1.3B is not inconsequential no matter how you look at it.

Legogris 7y ago

If it were sincere, they would do these things without being required by law to do so.

oconnor663 7y ago
Competitive forces prevent them from raising wages unilaterally, because their customers are extremely price sensitive. They're not going to commit corporate suicide over their ethical preferences, any more than most people would.
- ghaff 7y ago
  >because their customers are extremely price sensitive The proposal suggests to me that they think their customers are not extremely price sensitive but they're also not loyal to a specific supplier. In other words, they'll take almost as many rides even if the price goes up but they'll still go with whoever is cheapest.
  - oconnor663 7y ago
    Right, I was struggling with the phrasing for that. The overall demand may be somewhat inelastic, but the cost of switching firms is zero.
  - adventured 7y ago
    They may in fact think their customers are price sensitive (the majority of customers are for any mass service; we already know that most of Uber's customers are price sensitive), while their aim is to capture their customers in a regulatory manner so that they have no or few alternatives. If they can establish a regulatory framework that favors them (Uber), they can raise prices as competition is further restricted, to more than offset the $21 / hour. Their ideal has to be to establish that favorable competition environment, enabling considerable price increases that get them closer to profitability (ie exceeds the wage cost increase by a large margin). In the current situation, Uber is facing a bankruptcy scenario with their low sales growth, extreme burn rate and with a competitive market where they can't freely increase prices. That tells you what their goal has to be. If they were certain their customers were not price sensitive, Uber would have already spiked their pricing far higher to push toward profitability.
    - ghaff 7y ago
      >If they were certain their customers were not price sensitive, Uber would have already spiked their pricing far higher to push toward profitability. Many/most Uber customers would use a materially cheaper equivalent service if available because the switching costs are low. However, that's not the same as price elasticity (of demand) which is what the term usually refers to. Price elasticity is about how much less they'd use any price-competitive service as the price increases. I'm honestly not sure what that curve looks like. Within reason, pricing wouldn't affect my usage much at all. But I'm a light user of these services and use them almost entirely for business. Certainly I'm a very different profile from a young urban professional who doesn't own a car. ADDED: Between surge pricing and other pricing experiments I'm sure they conduct, I would imagine that Uber has a pretty good idea of what demand and driver supply curves look like.
  - novok 7y ago
    I’ve read somewhere ride share companies make more total revenue when prices are cheaper, and people use it less when its more expensive. Since these companies make more money with more total revenue, i’m guessing its in their interest to make it cheap. It makes sense, if something is cheaper, you use more of it. If its more expensive, you start using substitutes, as the benefits of rideshare gets dwarfed by its extra cost. It’s literal econ 101
    - ghaff 7y ago
      It depends on what the price elasticity of demand is. At least in the simple case, there is some price point at which revenue is maximized. Higher prices drive demand down faster than they drive revenue up. Lower prices drive revenue down faster than greater demand drives them up.
- behringer 7y ago
  uber and ethical preferences? hahahhaha
Matticus_Rex 7y ago
They think they can survive doing it, but their competitors can't (or can't survive it as well). They probably can't survive doing it if their competitors don't have to. Whether they're sincere about thinking it's a good thing or not is irrelevant to the practicality of the suggestion, and the suggestion only makes sense for them to make as a law.
- dylan-m 7y ago
  More cynically, they can survive it as long as their competitors die first :b

ineedasername 7y ago

This seems to be a reaction from Uber because they specifically do not want regulations to come into force on the issue. To me that takes it out of the baptists & bootlegger territory. Absent regulations getting involved, this is simply Uber offering better compensation.

oconnor663 7y ago
I think you're right (and the article is right) about the particular timing, but I also think Baptists-and-bootleggers is a good way to understand why Uber would prefer this policy over the other regulatory proposals it's reacting to.

amelius 7y ago

So first they evade regulations, then they propose regulations?

penagwin 7y ago
First they evade regulations, then they propose a new policy that is enticing to potential employees (or whatever they call them) - but the policy is so generous that most competitors would have issues keeping up. How many companies can afford to pay 21$/hr minimum for example? So somehow it's both a great step forward and terribly anti-competitive at the same time.
- peteradio 7y ago
  Seems very competitive, not anti-competitive.
  - shawnz 7y ago
    Uber paying their employees $21 is very competitive. Uber lobbying for their competitors to have to pay their employees $21 is anticompetitive. The latter is what is happening here.
    - peteradio 7y ago
      Uber paying their employees $21 doesn't make sense, they will get undercut on pricing by race for the bottom competitors. There really isn't anyway to grant a viable minimum wage except via legislation. Paying more to the driver isn't the same thing as paying more for top-tier engineer. It isn't like getting a nascar driver in the seat is going to justify higher wages. So what do you recommend?
      - mamon 7y ago
        >> they will get undercut on pricing by race for the bottom competitors If Uber unilaterally increased minimum salary, then those competitors would have to do the same, otherwise they would lose all their drivers to Uber. So, if Uber really cared about drivers they would just do it. Instead they are making PR stunt by "demanding" government regulation.

ryanmarsh 7y ago

they don't want to compete with lower-cost-lower-quality firms Such as?

seandhi 7y ago
Lyft and traditional taxi service are a couple that come to mind... not that Lyft is necessarily lower quality.
- ryanmarsh 7y ago
  That's what I mean. Taxi services are lower quality but much higher cost (including to the drivers). Lyft (in the markets I travel) is more expensive and higher quality. So I'm struggling to ascertain who is this mythical Wal-Mart to Uber's supposed Target?

tfha 7y ago

I wouldn't assume it comes from an ethical origin. It's more about killing competition. As soon as the competition is dead they'll be talking about how non-viable $21/hr is. Also, a high minimum wage for drivers really bumps the value of their self driving car arm.

SpicyLemonZest 7y ago
But Uber's opponents seem to be arguing that $21/hr is too low, and it'd give drivers a worse deal than passing the law. If that's true, passing the law will kill Uber's competition even more effectively.
- munk-a 7y ago
  I don't follow, is this a "perfect is the enemy of the good" situation where they think the minimum wage should be higher and are opposing a half-step toward that? For political reasons that can make sense, it's hard to push for a minimum wage bump right after a different one, but I am unaware of other cab companies advocating for a higher minimum wage prior to this.
- enlyth 7y ago
  Considering a 40 hour work week, $21 hour comes out to about $3350 before tax monthly, is that really too low for driving around a car?
  - boring_twenties 7y ago
    It's $42k annually and that's before the insurance, maintenance, depreciation and fuel, so down to the mid-to-high 30's. That seems like it would be poverty level in many California cities.
    - enlyth 7y ago
      That's a fair point I didn't think about the car maintenance too much.

ofibrvev 7y ago

presumably sincere.. If it were a sincere ethical position, once again, they would just implement it... no need to make a big deal about it

dcolkitt 7y ago

Similarly, Wal-Mart has been lobbying for increasing the minimum wage for years. Most minimum wage earners in retail work for small businesses. Whereas Wal-Mart averages nearly double the federal minimum wage. Wal-Mart knows that hiking minimum wage would help it kill mom-and-pop stores that it competes with. [1] https://www.cnn.com/2019/06/05/business/walmart-shareholders-meeting-minimum-wage/index.html https://www.cnn.com/2019/06/05/business/walmart-shareholders...

Consultant32452 7y ago
The more money Walmart customers make, the more they can spend at Walmart. As long as they don't make enough to forego Walmart altogether. So it's a double win for Walmart.
Wowfunhappy 7y ago
> Most minimum wage earners in retail work for small businesses. Do you have a source for that? I find it a bit hard to believe, given the decline of mom-and-pop stores in general.
- satya71 7y ago
  I talked to many independent coffee shop workers, and they used to get minimum wage. While Starbucks offered better wages, access to health insurance at a certain level, and now even tuition assistance. Starbucks probably had more unpredictable scheduling, not sure if they have changed that bit.
  - dankohn1 7y ago
    Amazing story of how a NY Times article caused Starbucks to reverse their immoral scheduling policies. https://www.nytimes.com/2014/08/15/us/starbucks-to-revise-work-scheduling-policies.html https://www.nytimes.com/2014/08/15/us/starbucks-to-revise-wo...
- dcolkitt 7y ago
  > Roughly half the minimum-wage workforce is employed at businesses with fewer than 100 employees, and 40% are at very small businesses with fewer than 50 employees. [1] https://www.epionline.org/oped/who-really-employs-minimum-wage-workers/ https://www.epionline.org/oped/who-really-employs-minimum-wa...

scarface74 7y ago

Uber lost over $5 billion in one quarter. They can’t afford too much of anything. https://www.theverge.com/2019/8/8/20793793/uber-5-billion-quarter-loss-profit-lyft-traffic-2019 https://www.theverge.com/2019/8/8/20793793/uber-5-billion-qu...

skinnymuch 7y ago
Uber didn’t lose $5B in cash. They lost $1.3B in cash at most. Stock based compensation is a cost, but different than straight up losing money.
- scarface74 7y ago
  At the end of the day, if it's part of compensation that they have to pay, doesn't matter? And losing $1.3B is not inconsequential no matter how you look at it.