Rideshare success in Portland

By Steve Buckstein,
Cascade Policy Institute

Call it the smartphone/mobile app economy. Call it the Free World of Ridesharing. Call it the future. Whatever you call it, Uber, Lyft, and a host of smaller innovative companies are quickly transforming the century-long, highly government-regulated transportation market in Portland and around the world. And this is just a subset of a much broader technology-enabled transformation process that paints a vivid picture of what economist Joseph Schumpeter called the essential fact of capitalism: “creative destruction.”

By far the largest of the new ridesharing companies, Uber entered the Portland market uninvited in December 2014 and then stepped back to allow the city government time to revamp its antiquated taxi regulations. In April, the city enacted a four-month pilot program that basically let Uber and its smaller rival Lyft enter the Portland market and removed many regulations from the existing taxi companies.

Now, half-way through the pilot period, the City Council received an interim report on the program’s initial results and held a public hearing on July 15. Nearly 70 taxi and ridesharing drivers were given two minutes each to either praise their newfound opportunities to make a living, or bemoan the cuts in their incomes due to competition they felt was unfair.

While the interim report was full of statistics, it was the driver testimony that really personalized the issues before the Council. Time after time, rideshare drivers explained how upset their passengers had become with traditional taxi service, because of either long wait times or poor service.

Once seen as ridesharing’s staunchest opponent on the Council, Commissioner Steve Novick noted that he thought the report showed that “the experiment was working pretty well for consumers,” but that he wanted to hear more about the impact on drivers. He specifically asked drivers to say whether they preferred to be treated as employees subject to minimum wage law, workers compensation, and unemployment insurance—or do they prefer to be treated as independent contractors?

Novick’s question to drivers was in the context of a recent decision by the California Bureau of Labor that one specific Uber driver should be considered an employee even though ridesharing companies treat all their drivers as independent contractors who are able to set their own hours, use their own vehicles, etc. Uber has appealed the ruling, and has already prevailed in at least five other states in keeping its definition of drivers as independent contractors.

The way Novick phrased his question, it seemed he was hoping to hear many drivers testify that, sure, they would prefer all the guarantees and benefits afforded to employees over being independent contractors. Not one driver gave him that response. Time after time, rideshare drivers made obviously heartfelt statements about how thankful they were for the flexibility that being an independent contractor afforded them and their families.

Some drivers were caregivers for family members and so needed to be home when required. Others had been laid off elsewhere and appreciated the flexibility of driving while having time to seek other employment. Some had other jobs and used driving for Uber and/or Lyft as a way to generate extra income to pay their mortgages and other bills.

One woman told the Council how driving for Uber let her get off food stamps and become more independent. More than one noted that they had been entrepreneurs who had fallen on hard financial times and saw driving as simply one more entrepreneurial activity affording them much needed income.

One driver urged the Council to continue allowing ridesharing, noting that “this is the land of opportunity.” Another said, “I don’t work for Uber. I work for myself!” Still another noted, “We must all adapt to the world around us….Dinosaurs did not adapt!”

When one traditional taxi driver told Novick that he, too, preferred to be an independent contractor because of the flexible hours, the Commissioner told him that employees could be offered flexible hours also. Even with that information, the driver said he would be neutral as to his employee status. Not one driver at the hearing said they clearly preferred employee status over working for themselves as independent contractors.

There surely are individuals who prefer the benefits and safeguards afforded to formal employees. But obviously, many recognize and value the opportunities and the freedom of being independent contractors, now better enabled by smartphone technology. Let’s hope that Portland City Commissioners and Oregon’s Labor Commissioner all recognize these preferences and are willing to protect them. Otherwise, we risk going backward to the government-protected monopoly taxi industry that stopped working for many passengers long ago.

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