Hello.

What About Uber?

Uber’s been bringing a whole lot of controversy over the year.  I assume you’ve been reading what I’ve been reading, so I won’t rehash the issues.  To me, they center on two things:

Uber is unregulated, unlike the taxi cab system

Uber is causing traditional cab drivers and their businesses to suffer

Guess what?  I have no problem with those things, nor Uber.  Why?  Because people love Uber.  And in a day where bad news spreads like wildfire, we’d certainly know by now whether they were a disservice to the public.

But…there’s always a but…

I think what needs to be regulated is their pricing and treatment of workers.  Uber has fallen for the trend that is contagion on much of corporate America: cutting compensation to near-break-even levels, requiring excessive hours, and giving its employees no voice.  Anyone who knows me knows that I am against all three of these.  Why?

Because cutting compensation reduces costs and accrues to the stakeholders of Uber, while harming, possibly literally, the lives of its employees.  All of this was discovered back in the days of the robber barons when minimal wages and excessive hours were the norm and their danger made known.  Second, it is a monopolistic practice, because if a competitor, say cabs, is not willing to starve its employees of wages then it suffers a competitive disadvantage and goes out of business.  At which point the monopolist can raise prices to its customers, but often not compensation to its employees.

How would I regulate Uber?

I don’t want to risk my reputation and pretend to be expert in regulation.  I’m not.  But I do point out that Uber resists unionization for a reason.  Because it knows unions give power to its employees.  Worker salaries suffered dramatically historically once unions were disbanded.  And while we all know the downside of unionization, the pendulum has swung too far in the favor of Uber, so unionizing, negotiating wages, and moderating driver hours is a good thing.

Michael Emerald, CFA

Wall Street Analyst and owner, Performance Business Design

Categories: Current Issues

About the Author