The Los Angeles Times paints a picture of what it is like to be a cab driver in LA…and it isn’t pretty.
Columnist Steve Lopez caught up with a couple of taxi drivers near Los Angeles International Airport and shares a sad story.
Take Varuzhan Shahazizyan. For 20 years he was a driver for Yellow Cab. But with intense pressure from Uber and Lyft, business plateaued and then plummeted. Yet Yellow Cab still charged him $1500/month in dues. His take-home dropped to about $500/week…working 40 hours per week.
Finally he had enough. He pulled the Yellow Cab stickers off his yellow Toyota Prius and now drives for Uber and Lyft. But that has only gone worse. In his first few months as an independent contractor, he continued to clear only about $500 week and now drives twice as many miles and puts in 12-hour days. Later this year, he is planning on moving to Las Vegas, where rent is much cheaper, and becoming a truck driver.
Or take Caesar Bravo. He also drives for Yellow Cab and has not given up yet. But a decade ago he was offered $100,000 for his taxi medallion, which essentially gives him an ownership stake in Yellow Cab. Now Bravo claims he could not give it away.
Cab companies in Los Angeles are losing business fast. Drivers are quitting and the new LAXit system at LAX, which requires taxis (and Uber and Lyft) to pick-up in an adjacent parking lot rather than at the terminals, has hurt business further.
Even worse for cabbies, Uber Black and other equivalents are still available curbside and cost about the same as taxis (though much more than Uber X).
Will AB5 Change Things?
You may have heard about AB5, a new California law that significantly restricts who can be an independent contractor. The move has tremendous ramifications for Lyft and Uber, since re-classifying drivers as employees would destroy the business model (of a company that already loses billions).
Responding to the new law, Uber and Lyft are rolling out a number of changes, including showing destinations upfront (before a driver accepts the ride) and letting drivers set their own rates. Those changes could move ridesharing and taxis closer to parity, leading to higher prices for consumers.
CONCLUSION
Lopez is a liberal icon in the LA Times. His tone is unnecessarily anti-consumer in that he overlooks how Uber and Lyft have changed transport for the better for so many passengers and no one is forcing these freelancers to drive. But you have to figure this model is unsustainable and we are due for a day of reckoning in Los Angeles and in metropolises across the country.
The question of who is a contractor and who is an employee is much wider than just about Uber and Lyft. It goes to the heart of the tax system and the employment system. Because employers have to look after their employees, whereas companies don’t have to look after their contractors, it costs much more to employ someone than use a contractor. The charge at a corporate level against the likes of Uber is that it can undercut other corporations because it doesn’t employ drivers: it’s not a liberal vs right wing matter, it’s a level playing field matter. Yes there are all sorts of connotations, including those related to workers’ conditions, but it’s fundamentally not about those, it’s about competitors getting around the established rules of operating.
All I know is that I stopped doing business with three independent contractors at my company when California told me they had to be reclassified as employees…but I suppose that is another discussion.
Maybe you not properly categorizing those employees, then?
I’m not saying CA is doing the best thing. But we have created labor protections for a reason. Go back to pre new deal America and look at the Steinbeckian life so many people lived. You push that crap too far and bad things happen.
I’m ver lunch happy about ab5. Tech believes labor laws don’t apply to them and the burden of running a company doesn’t apply to them. Uber isn’t a business if it can’t make money or properly employ people. I hope it dies a horrible death. In fact I hope this law smashes the tech bubble to pieces and all of the companies the “create” things that we don’t need or are unsustainable. The simple fact is they are tax cheats.
Taxes and CPUC regulations aside – since that’s a much longer and more legal-oriented discussion – AB5 and the new conundrum for “contractors” is just the pendulum swinging back in the other direction, or at least normalizing the market. Let’s face it, Lyft and Uber flourished because enough people were dissatisfied with taxis. Hailing a ride on the street could be incredibly difficult depending on your city and time of day (or your skin color, for that matter), taxis I’d been in were often filthy and more reminiscent of police cruisers, driving skill/style was often erratic as the drivers attempted to get you to your destination as quickly as possible to pick up another fare, and (somewhat conversely) I can’t count the number of times a cabbie tried to “take me for a ride” in a city I knew very well – like SF or NYC – in an attempt to run up the meter despite my objections. Then Uber comes along and removes all the guess work from fares and the hoping to snag a cab during a busy time, and it generally ensured you’d have a moderately pleasant ride and allowed you to provide feedback if it wasn’t. Uber was (sometimes) cheaper and hit all the wickets cabs took for granted insomuch as how they treat customers. So while I empathize with the plight of cabbies insomuch as takehome income, they created through complacency the niche market Uber and then Lyft came to fill. I have a hard time mustering any actual sympathy.
That’s not to say I agree with how Uber treats its drivers; I think it’s high time Uber and Lyft stopped being able to skirt treating people like employees and am in support of these measures that allow folks to earn a living wage. But let’s not pretend that the taxis are being martyred in this scenario the way Lopez suggests.
Taxis companies treated people with shit because there was no competition. The lack of competition was created by politicians in cahoots with taxi unions. All that uber and lyft did was create competition.
Taxi drivers deserve what they are getting but the bankers and politicians have escaped consequences. Let me guess most taxi drivers are brown. Most bankers are white. I guess you have to be smart to even choose your crimes well.
Regarding the race observations: I’m amused in that if most taxi drivers are non-white, then who discriminates against non-white passengers?
Per the context of your comment, you make the assumption that racism is confined to a single race – whites – which is a pretty silly notion to hold. People from all ethnic backgrounds can be racist. So yes, non-white taxi drivers can and do discriminate against other non-white would be passengers. Don’t be daft.
Don’t forget. It’s payroll tax and the 1.45% Medicare tax that companies avoid by categorizing workers as contractors.
A contractor pays both sides of the employment tax and the full 2.9% of the Medicare tax.
Unskilled labor jobs should be miserable, otherwise there is no incentive to obtain skills, and skilled labor would go off and do menial tasks like driving a car. It’s still a much better life than that of a coal miner, or say a 19th century factory worker. Besides, before ride-sharing, taxi drivers were basically the worst people on Earth, so good luck getting people to feel sorry for them
Fully agree. Adversity builds character. Which is why rich white Republicans should always be in adversity so they can keep building their character.
Take away all their wealth so they can pull themselves up by their bootstraps and know the joy of achieving something. And do it again and again. I want white Republicans to have all the joy in the world.
debit: Keep in mind that if the left didn’t constantly trash working class whites, then they wouldn’t have voted for Trump out of protest.
So do keep up the good work!
While I sympathize with the plight of some taxi drivers, let’s not forget how we ended up in this situation in the first place. Simply put, the taxi cartels ran a system where customers often encountered poorly-maintained vehicles, rude service, and many, many fraudulent/abusive practices where there was basically zero accountability on the part of drivers or the companies. I still largely refuse to use taxis, both here in the US and especially abroad, because I’ve been taken advantage of one too many times. The two drivers featured in this story might be good guys, but the reality is, there are far too many in the business who aren’t.
Regarding AB5, there are far-reaching consequences to industries beyond Uber and Lyft, but putting that aside, I believe there needs to be a balance when it comes to employee/contractor classification for ridesharing companies. If I decide to join Uber/Lyft and drive people around for a few hours on Saturday and Sunday because I’m bored, then I’m a contractor, and frankly it’s absurd to argue otherwise. Or for that matter, equally absurd to effectively block the ability of people to do that by their own choosing for a few extra bucks. But if someone’s driving 12 hours a day every day, then yeah, they’re an employee. I’m not sure what exactly the right answer is for full-time drivers, but the current system needs fixing.
I am against AB5. It implicates my business too–in a bad way.
Unskilled laborers should be miserable? Um no. All people who do real work, like driving, stocking groceries, laying concrete, etc. have a role in advancing society and should have a modicum of dignity.
Half of Princeton’s graduating class goes to Wall Street and these kids have a much higher IQ and math/verbal skills than the average person. But they go on to fleecing pennies here and there on millions of transactions and create millions of dollars of financial wealth without “greasing capitalism” or producing any necessary goods or services.
Who should be the one the laws should protect?
I have absolutely no sympathy for the taxi drivers… they reap what they have sowed. Years and years of ripping people off finally came back to bite them in the hiney.
They, taxi drivers collectively, had their chance to get their act together over the last 50 years. If they had offered clean cars, decent service, and transparency in dispatching without any cherry picking of fares, things might’ve turned out differently over the years.
Of course. we should be careful what we wish for, once Uber runs them all out of business, then raises the prices right back up to taxi fares or higher 🙁
Your last sentence is a very reasonable concern.
But indeed, to your point and others – taxis are reaping the fruits of their harvest. Crooked, overpriced, dirty for so many years…now it is too little, too late.
Matt, it’s my understanding that Uber has been running at a loss for years to build up market share. This is the same model that other tech companies used, particularly Salesforce, and it did work for them. Nonetheless, at some point, either Uber will go under or they’ll raise prices eventually, but it will most likely happen.
Zero sympathy for this first guy. People in his country would kill for that kind of wages ($100 per day), for which he probably doesn’t pay taxes!
I have a solution for the Uber/Lyft dilemma that I think everyone can get behind. Drivers should make a living wage ($15/hour) when DRIVING and the IRS reimbursement rate (~58 cents per mile) when DRIVING. They should be able to make this AFTER the ride share app takes their cut, and the ride share app should cover 50% of FICA taxes similar to a W-2 employee. While this would increase fares, I don’t think it would do so meaningfully. Would that make everyone happy????
@Andy K
I think we should pass a law that *everybody* gets at least a “living wage” — let’s say $30/hour — fast-food worker, uber drivers, etc. I think everybody can get behind that.
I also think it’s ridiculous to pay so much for doctor visits. Doctor visits should only cost $1. Food too. I mean everybody needs food. So the law should say that bread can only cost 10 cents a loaf from now on.
After you read an econ 101 textbook, come back and tell us how these ideas will work out.
I have a degree in economics – I understand what you are saying. Minimum wage, rent control, etc. do not work and actually constrain demand/supply by creating price floors and price ceilings. From a theoretical perspective, I agree 100%. However given our political landscape and the fact that most people don’t see it the way you do, I was making an attempt at pragmatism. Positive versus normative. Look it up.
In fact, if you look at current prices for Uber in SF, I am seeing 40 cents per minute and 1.60 cents per mile, factoring in Uber’s 25% cut, driver receives $18 per hour and $1.20 per mile.