I'm about to kick it old school. In the process I'll probably freak out a few hipsters. And, I'm sure to attract the wrath of an economist or two. But, here goes...
Consumer welfare shouldn't trump the welfare of those who produce what consumers buy. The goal should be to find some balance between the two.
Unfortunately, consumers are today's gods while producers are pesky obstacles to progress. Let's take a case in point. The Uber debates.
For those of you who live outside the DMV or in places without Uber, it is basically an informal taxi service. Because you have to be an Uber 'member' to catch a ride with an Uber driver, Uber isn't registered as a taxi company. I put 'member' in scare quotes, however, because all it takes to gain membership is a simple download of the Uber app. The app let's you request a ride and see the closest drivers near you.
I've never taken Uber. It started to get big about the time I had a baby, and since my little one can't ride in a car without a car seat, all taxis (formal or otherwise) are a no-go for me at the moment. I'm not completely out of the loop though. A friend used Uber to catch a ride from my house to hers the other night. I watched her request a ride and peered at the map showing where all the Uber cars in the area were. We were able to guestimate (with accuracy) how long it would take for one to arrive.
All of which is to say that I get the attraction of Uber. Uber gives you more options (especially in the suburbs where getting a taxi is harder than in the city), and it is often faster at pick-ups than traditional taxis are.
It is annoying, however, to see Uber described as "rais[ing] consumer welfare." That's what the IGM Economic Experts Panel recently did. It is also annoying to hear Uber's legions of fans describe it with the kind of hyperbole usually reserved for tent revivals in the South. One Uber fan on Business Insider wrote: "Uber has changed my life and as God is my witness I will never take a taxi again."
Really? So that's what Scarlett O'Hara was talking about--a ride to Atlanta.
On the face of it IGM is right. Uber does improve consumer welfare. However, it does so at the expense of a lot of other things.
What are those other things? Thanks go to the Washington Post's Catherine Rampell for pointing out some of these in her recent op-ed about Uber. She notes, for example, that despite claims to the contrary, Uber isn't all that green. Indeed, their goal is to be immediately available to anyone who requests a ride, and that means flooding the streets of big cities with Uber drivers. The inevitable result is a lot of idling cars. According to Rampell there's also evidence that people take Uber instead of greener options, like buses and metrorail.
There are other problems with Uber, though, that can't fit into the space of an Op-ed in the Washington Post. Here's where MOCOMusings comes in. Let's look at the drivers. Driving a taxi can be a middle class job, although a difficult one. You know that feeling you get after a road trip where you've done all the driving? The cramped legs, twitchy fingers, and achy back. Taxi drivers often do road trip amounts of driving everyday. So, they get those feelings everyday. The regulations can also be a pain--you can't refuse customers (even though many do by simply 'not seeing them), and your car has to pass frequent inspection.
The job can be worth it, though, because the pay is decent, the regulations and fares are predictable (and only change on an annual basis, if at all), and you've got flexibility (need to pop into the store to get something for your kid, you can do it). Uber's model will destroy or undermine all of that. In fact, its business model vis-à-vis its employees is to off-load most of the risks onto its drivers. Drivers have to buy their car (although it must fit Uber's specifications), pay for the insurance, deal with aggressive/drunk customers, compete with the heaps of new drivers Uber keeps hiring, and accept fare reductions that often happen on a whim. Oh, and let's not forget the commission the drivers have to pay Uber, a fee also subject to unannounced change. Don't believe me? Check out this post on a near strike by Uber drivers based on some of these practices.
The taxi-riding public can demand omnipresent services. It is their right, I suppose. But, the Uber-riding public among them might want to stop equating their demands with all that is good and holy. Uber provides its service in much the same way Nike and other large corporations do--at the expense of their labor. And, all those economists who tell you Uber is great for the flexibility-demanding American workforce are just deluding themselves. Uber is an attractive option for many drivers because they can't find a job elsewhere.
Somewhere in Michigan (I presume), Henry Ford, who believed workers should be paid enough to be consumers, is turning over in his grave.
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