Uber Ignites Automated Ridesharing

A Collision Course with the Gig Economy

Uber Revs Up the Automated Labor Market

Keith Riegert, Co-Editor-in-Chief

Keith Head Shot

This month, ride-sharing mega-app, Uber, is introducing a novel way to hail a ride—a car. . . sans driver. The company will roll out a fleet of approximately 100 fully automated Volvo SUVs on the streets of Pittsburg. For tech aficionados and futurists, the rapid implementation of this cutting-edge machinery is thrilling. But for drivers in Uber’s broad U.S. workforce, the rollout is more of a loud warning shot.

Chances are, by now, the “gig economy” (temporary work, born out of the Internet) has worked its way into your life.  It’s also woven its way into the fabric of the American economy. While the government doesn’t track exactly how many Americans are making a living through alternative employment opportunities, best expert estimates peg the “gig economy” at or above an astounding 15% of the U.S. labor market and growing.   

Following the smart-phone revolution, startups pursuing the potential of the gig economy have risen to become some of the most revered companies in the world. Uber turned chauffeuring into a part-time job; AirBnB built a new hospitality industry; TaskRabbit offered delivery service gigs to anyone; and Fiverr created a forum for turning a personal talent—from voice-overs and drawing to website design—into a potentially full-time freelance career.

There is no doubt that the Internet that evolved post dot-com bust has revolutionized the way anyone can make money. And, based on the rapid growth of this sector, it’s likely that the advent of tech-driven temp work has played a large part in the recovery following the Great Recession. Question is, will it last and, if not, what comes next?

Disrupting a Disrupted Industry

There are clear hints now that the same disruptive forces that gave rise to the gig economy may be boomeranging back against it. A prime example: Uber. The San Francisco-based company helped bludgeon the value of New York City taxi medallions by nearly 50% in a single year while transforming not only how people purchase rides, but who provides them as well.

Nevertheless, labor disputes, lawsuits and massive human capital costs have left Uber, valued at over $60 billion, with a business model that may not be sustainable in the long run. In the first six months of 2015, Uber shelled out a whopping $2.72 Billion to its drivers. Unsurprisingly, in the first six months of 2016, the company then reported a $1.72 billion loss.

The constant push and pull between this traditional, bottom-line-oriented corporation and its “contingent workers,” employed in a novel labor force with limited bargaining power, has led to a turbulent and, at times, highly unpredictable labor market for Uber’s drivers.

Now it looks as though Uber’s drivers are in for even more uncertainty. The ride-sharing company’s solution to its massive human capital bill may be to take the human driver out of the picture entirely. While this early Pittsburg test will be limited, the big picture is not—hundreds of thousands of human Uber drivers on the road today may have to contend with robotic competitors tomorrow.

For corporations like Uber, the transition makes perfect sense—automated workers don’t need a salary, sick days or healthcare. A fleet of autonomous cars would allow Uber to slash prices for consumers while capturing the multi-billion dollar labor costs it pays now. Uber is just the beginning; in the years and decades to come, this tack toward automation is surely going to touch every industry with profound effect.

Of course, the fundamental problem with an automated economy is that capitalism depends on both producers and consumers.  And if a shrinking labor market, thanks to superior automation, means less consumer-spending power, economic pistons could cease firing.

A Thriving Economy. . . with No Workers

In his 1930 paper, “Economic Possibilities for our Grandchildren,” economist John Maynard Keynes foresaw the type of technologically disrupted economy we are rapidly approaching. While life in this new reality may be more leisure-filled, it’s clear now that we will require a social counterweight, like basic income, to offset inequality created by a chronically anemic labor market. There is little doubt that large numbers of human jobs—from drivers all the way to computer programmers and lawyers—will be threatened by automation and artificial intelligence in the not-so-distant future. And while today’s politicians may talk big about “bringing jobs back,” it’s highly plausible that many of the positions they’re campaigning to claw home won’t ever be filled by a worker with a pulse.

The gig economy may be serving as a temporary stopgap in a long evolution of labor-market disruption; but we collectively need to begin considering bigger solutions to the economic realities that lay just ahead of us—like the ones rolling out, just now, onto roads in Pennsylvania.

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