In the Drivers' Seat

Can a cooperative in New York City point the way for imagining alternatives to Big Tech?

By Luis Feliz Leon | May/June 2021

This article is from Dollars & Sense: Real World Economics, available at http://www.dollarsandsense.org

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A scrappy band of Uber drivers, a union organizer, and an Uber operations manager have joined forces to launch an experiment in cooperative economics in New York City, with the aim of siphoning business away from the dominant ride-hailing companies—Uber, Lyft, Via, and Juno. Seeding their experiment in one of the largest ride-hailing markets, they are underdogs in a sector flush with oodles of cash from venture capitalists. Despite the odds of taking on Silicon Valley titans, they’ve done their arithmetic and contend that the worker-owned ridesharing app they’ve created can provide drivers a deal that the dominant ride-hailing companies can’t beat—worker control. By putting the needs of workers’ first, The Drivers Cooperative (TDC) aims to give drivers the flexibility and higher wages that Uber and its ilk pay lip service to in marketing gambits.

Launched in December of last year, TDC’s co-founders and member-leaders have disparate, but complementary, backgrounds: Erik Forman is a labor organizer who formerly worked as the education director of the Independent Drivers Guild (IDG), which represents thousands of for-hire vehicle drivers, including Uber drivers; Alissa Orlando was an Uber operations manager; Ken Lewis is a former Uber driver; and David Alexis is a former Uber driver and organizer. Forman, Lewis, and Alexis met through IDG, and Orlando joined them later when she learned about their experiment. As of February 2021, more than 2,500 cooperative worker-owners have joined TDC as active drivers, according to the cooperative’s founders. As of last spring, Uber had 80,000 drivers in New York City.

In the wake of Proposition 22’s passage in California last year, TDC serves up a model that offers a high-road alternative for drivers who depend on the ride-hailing industry to survive. Last November, the app-based companies Uber, DoorDash, and Instacart launched a $250 million ballot initiative campaign known as Prop 22 to roll back the state’s Assembly Bill 5 (AB5). That bill was intended to resolve the problem of misclassifying drivers through a three-pronged ABC test to determine a worker’s status as either an employee or an independent contractor. AB5 granted app-based drivers protections such as a minimum wage, overtime pay, and reimbursements for expenses. After the app-based companies notched a decisive victory, labor unions have begun to entertain capitulation, seeing the loss as a fait accompli. By contrast, TDC’s model holds out a promise of eschewing capitulation in favor of imagining the alternative of workers’ control in an environment rife with grueling work schedules, crippling debts, and dictatorial management by algorithms.

The Value (and Values) Proposition

While one of TDC’s co-founders (Forman) and one of their member-leaders (Alexis) describe themselves as socialists, the group’s aims are more modest and reform-minded, seeking to rein in an unfettered capitalism that has cast workers’ dignity and protections to the wayside.

“It’s a free-market economy. Drivers in their own organization have as much right as Uber to exist,” Lewis told me while explaining the cooperative’s vision. In the case of TDC, Lewis said, “No one is really talking about any radical change” to the system as a whole. “We are talking about a radical change in how workers are treated.”

Like Lewis, Orlando echoes a similar sentiment about creating a fairer economy. “I think that we’re having this runaway capitalism, whereby you’re having capital distort the market,” Orlando said. The answer to that distortion is “reviving the normal rules that should apply to a capitalist economy.”

TDC’s main objective, says Orlando, is to “increase incomes for drivers, full stop. That is our mission,” explaining that the cooperative is entering the marketplace to compete against Uber and Lyft in terms of who is providing a better deal to drivers. “What makes Uber unprofitable is [the] subsidization of prices to achieve a monopoly, pouring resources into fantasies like self-driving cars, and constantly battling drivers in court,” Forman said.

In its bid to secure market share, Uber has offered driver incentives and customer discounts, pushing it into the red. “This is a monopoly practice,” he added, noting it “won’t be able to do this forever since shareholders are demanding profits.”

Uber’s profits tanked by 80% during the height of the pandemic. Despite the hit to its bottom line, the company has launched a $250 million incentive program to lure drivers back. Riders are becoming less hesitant about using the ride-hailing service due to increased vaccine availability and more state reopenings. Despite the company’s awareness that its incentives are unsustainable if it wants to become profitable, its spending on them increased from $259 million in the third quarter of 2019 to $316 million in the third quarter of 2020. In the first nine months of 2020, reports Edward Ongweso Jr. in the online magazine Vice, the company spent over $900 million on incentives.“Uber has needed to spend hundreds of millions on recruiting drivers because it burns through over 90% of its workforce each year,” Ongweso wrote.

The cooperative understands these vulnerabilities. “If one outcome of our intervention is that Uber has to pay drivers more and charge customers less in order to maintain market share, this is still a win for us,” said Forman. TDC is charging drivers a commission of 15% for using the app, compared to the average 25–40% other app-based companies collect. The drivers earn between $35 to $50 an hour, significantly above the city’s Taxi and Limousine Commission’s (TLC) minimum wage of $27, according to Orlando. Part of the savings come from eliminating the incentives and marketing overhead that Uber and Lyft must spend to attract new drivers and customers. Instead, TDC is building partnerships with cooperatives such as Cooperative Home Care Associates in the Bronx, which employs nearly 2,000 African-American and Latina workers. They are also launching partnerships with progressive candidates in New York City to get voters to the polls during elections.

The cooperative’s business model is solid: They have a class traitor like Orlando on their side. She left her job in Uber operations in East Africa to join the cooperative’s team after the passage of California’s Prop 22 granted app-based platforms exemptions to important labor laws and platform companies failed to provide paid leave and unemployment benefits to workers during a lethal pandemic. Another factor in her departure was Uber “trapping people in a cycle of debt,” she told me, referring to the company’s Vehicle Solutions program, through which drivers can take out three- or five-year loans ranging from $15,000 to $20,000 even though there are cars eligible for the platform in a much cheaper price range. Workers take on these punishing loan terms for a variety of reasons, ranging from poor credit histories to a lack of financial literacy. But the “final straw,” as Orlando put it, was Uber reducing prices by 20% in East Africa—putting downward pressure on wages while also further squeezing more labor out of drivers.

The experience of debt peonage is a common one. Alexis, another co-op member and a former Uber driver, describes logging into the Uber app in 2016 and seeing that his first earnings on trips mostly went to paying a weekly $450 rental fee on his 2015 Hyundai Sonata with one of the preferred leasing companies that contracts with Uber. Even though the fee was high, Alexis managed to service the debt. “When I was renting, no matter what was going on, you had to hit the road and work because if you didn’t, you will see that charge hit your account. … I would have to work to effectively pay off the balance before I could actually start making money,” he explained.

“And the way that it was set up was ‘lovely’ because they are one of the preferred leasing companies with Uber, the money actually came directly out of my Uber account,” he continued. These experiences are what make the cooperative’s experiment so attractive to drivers. Despite some cooperative members’ stated reform aims, they are planting the seeds of something potentially different—public ownership, say, of the technologies running the apps—which could help create possibilities for change that actually feel within reach.

Seeding Alternative Models

The rideshare industry is rigged against drivers, so even valiant efforts at reforms like the Prop 22 fight in California or the minimum wage fight in New York City were easily overturned or deferred through legal maneuvering funded by the bottomless war chests of Uber and Lyft.

The solution is a new strategy. “Our approach is direct action—we are simply taking direct control of the means of production. Drivers already own the rest of the capital of this industry in the form of their vehicles; the app is the keystone. Once drivers own that, this will be the largest industrial sector under 100% worker ownership,” said Forman.

Listening to Forman, it’s easy to hear a prefigurative logic of what is possible if workers had control not only over one sector of the ride-hailing industry, but of the whole economy and society. “[The goal of] our project is not only creating a better job within the industry as it exists today, it is also to aggregate workers together as a political force to transform the industry and society,” he told me.

But as soon as the wings of that vision take flight, they are clipped by capitalist market realities—TDC will have to become a financially successful company in order to attract a broad group of workers.

Another related constraint has been getting access to capital. TDC has received funding from Shared Capital Cooperative and the Local Enterprise Assistance Fund, two cooperative loan funds. TDC has also raised money through grants and crowdfunding. But they are up against formidable foes with deep pockets.

To offset these challenges, TDC is also looking to build partnerships with natural allies like labor unions.“Labor organizing is a necessary complement to cooperative organizing because it raises the floor,” he told me. If wages rise for app-based drivers, the wage enhancement increases the bargaining power of other low-wage workers.

The Dangers of the “Third Way”

If a cooperative can create a worker-owned app to compete with Uber’s, can the U.S. government do something similar for public transit? Can the government nationalize the cloud computing of Amazon Web Services? Or at the very least break up the big tech companies using the existing antitrust laws on the books? These are the questions TDC’s experiment provokes.

But other people have little inclination to imagine. They want to strike a deal fast. The desperation is understandable. Labor unions have been battling Silicon Valley titans and losing for years. Rather than continue on that losing streak, unions have seized on the possibility of reaching a rapprochement with tech companies in exchange for sectoral bargaining.

Such deal making with ride-hailing app companies is rotten to the core, and leads to compromises like the decision of the Machinists Union of New York City and Uber to create the IDG, which receives funding from Uber and Lyft and is, in effect, going national as a model.

Through multiemployer contracts, or sectoral bargaining, unions get to set standards for whole industries, instead of bargaining individually with each employer. Traditionally, labor unions have used the monopolies that sectoral bargaining can create as leverage to bring employers to the negotiating table.

Take, for instance, Amazon. It’s too early to know if the countervailing power of unions and the regulatory state may come together to restrain the corporate behemoth. Senator Elizabeth Warren has proposed breaking up the company. President Joe Biden has selected Lina Khan, a prominent antitrust scholar and professor at Columbia Law School, for a vacancy at the Federal Trade Commission. (Khan wrote an influential paper on how Amazon violates existing antitrust law.)

But if unions are seeking a bargain, no better option exists than the threat of breaking up Amazon. The historian Nelson Lichtenstein argues that even the threat of breaking it up will force Amazon’s hand and may bring it to the negotiating table with labor unions. That was the deal that was struck with a group of retail clerks in the 1930s, which later became the United Food and Commercial Workers International Union (UFCW).

Lichtenstein provides the example of the Great Atlantic & Pacific Tea Company, or better known as the supermarket chain A&P, which rivaled Walmart’s and Amazon’s market capture in its heyday in the 1930s. Explaining the union’s position, Lichtenstein told me, “they said, ‘Look, we will not support these anti-chain store laws, proliferating all over the place,” in exchange for union recognition. “One reason we have more than a million grocery workers who are unionized today is partly a result of that kind of deal that was struck,” he told me.

But the current compromise on offer isn’t a sign of power but of acquiescence. Unlike the 1930s, workers today are not actors in a rank-and-file upsurge of militant strike actions. Instead, by entering into a compromise with the ride-hailing app companies, labor unions are admitting that they have no power and will make do with the scraps in order to collaborate with the bosses, figuratively squatting beside the legs of the table in case leftovers from the capitalists’ plates spill to the floor.

“Whether you are a worker in Germany or in Alabama, the only way you win a decent life is by building enough power to create a crisis for the capitalist class,” Jane McAlevey wrote in The Nation about the prospect of creating a third category of worker in exchange for sectoral bargaining with gig companies.

“That means the power to forge supermajority unity, striking, and causing profits to nosedive until the bosses remember that workers—whatever we call them—make the profits the 1 percent thrive on today, while everyone else suffers,” McAlevey added.

As Forman puts it, “sectoral bargaining is a good idea—but can also cement a monopoly in place, which is part of why Uber and Lyft are open to it. They see it as a way to stabilize the regulatory environment for their exploitative business model.”

A Race to the Bottom

The very existence of Uber and Lyft depends on a business model that is extractive and predatory. Uber’s market-capture debut in 2011 was premised on a swift takeover of the taxi business by inundating New York City streets with cars, “with average monthly active vehicles increasing from 19,000 to more than 90,000” between 2015, when data first became available, and 2018, according to New York City’s TLC. The traditional taxi services, which included both yellow taxis and livery cabs, operated within a highly regulated marketplace with licensing requirements that capped the number of cars on the street and guaranteed drivers a living wage. The yellow cab business, however, was predatory and riddled with problems long before Uber came along. For instance, drivers are required to purchase a permit, also known as a medallion, in order to drive a cab. Between 2004 and 2014, the cost for a single medallion rose to $1.3 million, and the cost is now back to under $200,000. Half a dozen drivers have committed suicide after they were unable to shoulder the burden of servicing debt loads of more than half a million dollars. The New York Taxi Workers Alliance has organized drivers to demand a restructuring of these onerous debts, but the plan New York City Mayor Bill de Blasio has put forward is inadequate, asking instead for a $125,000 ceiling on outstanding medallion debts.

“Stop with the suicide thing,” Taxi and Limousine Commission Chairwoman Aloysee Heredia Jarmoszuk told the brother of a taxi driver who died by suicide when he mentioned the need for the city to put forward a more generous plan. “There’s no better deal. This is it,” Jarmoszuk said.

Undoubtedly, the market for medallions was already exploitative. But Uber took it over and the whole vibrant ecosystem of livery taxis, including a bustling array of cab companies serving New York City’s diverse immigrant communities, came under threat. All of these companies were highly regulated.

Uber bucked the trend of regulation by initially setting up shop in cities illegally and using piles of cash in its war chest to smear and intimidate anyone, including journalists, mayors, and former employees who stood in its way to unrestricted growth. In 2018, at the height of Uber’s dizzying growth in New York City, there were 107,435 licensed for-hire vehicles, in TLC terminology, which included app-based black cars, liveries, and luxury limousines, with a total of 185,000 licensed drivers across all taxi types. The majority of drivers are immigrants, hailing from countries as diverse as Guinea, the Dominican Republic, Haiti, India, and China. To make up for depressed wages, these drivers logged brutal working hours into the app in hopes of approximating a living wage to feed their families and keep a roof over their heads in a city with staggering inequality.

But in the early days, Uber’s appeal rested in the flexibility it provided to drivers. Lewis, one of the cooperative’s co-founders, started driving for Uber in 2012 because as a graduate student he wanted a flexible schedule, and describes days even then when he had to sleep in his car to make sure he put in enough hours to make ends meet.

Alexis also began driving for Uber because the flexibility of the job allowed him to care for his wife who has sickle cell anemia. Alexis also saw in Uber the opportunity to be present as a father and husband. He evokes pride in his identity as a “provider,” as well as his commitment to not repeating the same pattern of long work hours and no family time that his father, as a Haitian immigrant and an economic and political refugee seeking a better life in a foreign land, had to endure when he came to the United States.

Six years into Uber’s arrival in New York City, however, the appeal had begun to wear off. Early press reports that lent the company an aura of youthful inventiveness in a staid industry gave way to horror stories—a smattering of which ran the gamut from sexual assault, gender discrimination, and wage theft, which transformed then-CEO Travis Kalanick from boyish media darling to “entrant into the burgeoning pantheon of tech sociopaths,” in the words of journalist Nikil Saval.

Crossing Lines

On January 28, 2017, as protesters gathered at airports to oppose former President Donald Trump’s travel ban and taxi drivers organized through the New York Taxi Workers Alliance called a strike, stranding passengers at John F. Kennedy International airport, Uber decided to scab and #DeleteUber began to trend on social media. In the words of Uber investor and tech entrepreneur Hadi Partovi, “This is a company where there has been no line you wouldn’t cross if it got in the way of success.”

That same year, on Super Bowl Sunday, one of the many revelers out that night was Kalanick, who after some partying requested the company’s high-end black car service, Uber-X, for himself and a couple of friends. In between Kalanick’s corny repartee with his acquaintances about Uber’s “hard year,” the conversation turned serious when the driver complained to the CEO that drivers like him couldn’t make a living with the company’s new pricing structure.

To the plight of drivers, Kalanick then retorted: “Some people don’t like to take responsibility for their own shit.”

The Drivers’ Cooperative is taking him up on that and defining their own working conditions and wages. And what’s more, they may one day supersede their corporate overlords and a thousand new cooperatives will roar down the roads of America’s cities, with drivers in control.

LUIS FELIZ LEON is an organizer, journalist, and independent scholar in social movement history making good trouble in New York City. Follow him on Twitter: @Lfelizleon.

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