“Welcome to Europe,” says Stefan Keuchel of mytaxi, a German ride-sharing app similar to the massively successful Uber. But there are differences between the two firms, and Keuchel is proud of them. “We have laws that protect workers from being ripped off. The Uber model doesn’t work here, and we are very happy about that.”
“The Uber model doesn’t work here, and we are very happy about that.”
The San Francisco-based company has faced costly fines or outright bans in France, Germany, Spain, Denmark, Belgium, and Italy. In Germany, Uber was forced to close operations in three major cities because its model of connecting passengers with unlicensed drivers violates the law. Today it operates only in Berlin and Munich, using only licensed drivers.
However, what began as staunch resistance in Europe to Uber’s model has been slowly eroded over the past two years. Even Keuchel’s mytaxi now uses independent contractors, over-hiring drivers the same way Uber does in major U.S. cities, and drawing similar ire from traditional taxi companies. Meanwhile, the European Union in June warned member states to avoid “over-regulating” Uber and similar firms, and to accept outcomes similar to those we’ve seen in the U.S. But European policymakers would do well to observe the full implications of letting Uber run wild.
Uber has become central to the debate about labor standards in the U.S. by illegally classifying regular workers as independent contractors, allowing drivers to use their own vehicles, and undercutting the industry safety standards followed by traditional taxi companies. Each of these moves takes money out of drivers’ pockets or endangers riders. Moreover, Uber’s size and stature has set a precedent that other sharing-economy companies have been quick to replicate.
Uber promotes itself as an innocuous and virtuous business platform, but it has helped to create an economy where part-time, low-wage, on-demand work is the new norm.
In many cases, Uber has had to pressure U.S. state and local governments to create special rules favorable to its business model so that it can operate free from the regulations other transportation companies must abide by. Alternately, in places where it has failed to do so, such as Philadelphia, Uber says it will simply carry on illegally and accept the consequences.
[Uber] has helped to create an economy where part-time, low-wage, on-demand work is the new norm.
One obvious comparison—or cautionary tale—is Wal-Mart, which nimbly leapfrogged local statutes to become a rapacious behemoth in a competitive and heavily regulated industry. “Wal-Mart changed the American economy,” says Sarah Leiberstein of the National Employment Law Project. “Uber is to the gig economy what Wal-Mart is to retail.”
Wal-Mart is notorious for fighting and winning against government regulation. Likewise, Uber does not seem to be giving up easily in Europe. After it was banned by the Belgian government, Uber immediately advertised for a general manager in that country, claiming the job promised to be “by far the most demanding position Uber has to offer.”
Signs are cropping up that the company’s approach is beginning to pay off. A recent study by PricewaterhouseCoopers says the value of Europe’s sharing economy has exceeded its predicted growth, doubling its revenue within the past year and anticipating profits of 80 billion euros by 2025.
Meanwhile, the labor climate is changing to Uber’s advantage. Steven Hill, an American journalist and author of a new book about the gig economy, suggests a readily available pool of cheap and flexible labor “is the raw resource you need to get the sharing economy going.”
That surplus labor pool is already emerging. Although Germany has reduced unemployment since its slumping economy was called the “sick man of Europe,” the current jobwunder of high employment masks the growing percentage of precarious part-time workers. Since the early 1990s, the number of part-time workers has nearly doubled, rising to 27 percent of Germany’s overall workforce. These workers have fewer job protections, lower wages, and greater unpredictability in their schedules. Just the kind of workers likely to sign up to drive for Uber.
These trends have been recognized by Germany’s trade unions, which have begun adapting to the new conditions—as much as they might fear them. Until fairly recently, unions actively opposed organizing part-time workers, under the assumption that “part time” was a temporary condition between unemployment and a full-time job. That has changed, according to an official at Ver.di, the second-largest union in the country. Ver.di, whose members include 15,000 part-timers, recently released a report on the state of precarious employment in Germany, warning that technology firms are transforming social norms and values about work. “All too easily the freedom to decide when and where one works becomes pressure to work everywhere and at all times,” it says.
European governments should learn from the damage done to the U.S. economy.
What began as a trickle of unregulated labor in Europe is now starting to look like a tide that could force the policy changes necessary to create an economy based on precarious work. This is good news for companies that rely on part-time, contingent workers.
But European governments should learn from the damage done to the U.S. economy by the growth of low-wage, part-time, non-union jobs. Better yet, take a cue from American workers for Uber and Lyft—14,000 of whom recently signed union cards.
Indeed, finding a way for some version of the sharing economy to abide by the rules of European social democracy will not only maintain the comparatively high standard of living enjoyed by many European workers. It will also promote an alternative model that American workers can hope to emulate.