Working in an office is so passé. Wouldn’t it be great if you could quit your job and work for yourself on your own time?
Thanks to the “sharing economy,” you can…kinda. Instead of waking up to the same ol’ routine every day, you can simply hop in your car, turn on your phone, and ferry people around as an Uber driver. If you have a spare bedroom, you could rent it out on Airbnb and make some extra scratch. If you have a bike, you could deliver food and groceries to people in your area for Instacart or Postmates.
In the last several years, a million of these apps popped up that use you, your resources, and your smartphone to perform services and deliver goods. While that might sound fun and super convenient, there’s actually a darker side to these companies than what’s on the surface. Worst of all, their business could put their workers, potential investors, and you (yes, you) in harm’s way.
The “sharing” or “gig” economy uses independently contracted workers and their resources to power services.
Save for rulings in California and a few cities that state otherwise, people working for services like Instacart, Left, Uber, Airbnb and other like companies are independent contractors. They work on their own time with no boss other than the people they communicate with over the phone. They don’t go to an office. They don’t receive company cars. They use or “share” their own resources (cars, apartments, etc.) to deliver goods, ferry people around, or perform certain services. (There are a few exceptions to this, like Uber-owned self-driving cars in Pittsburgh.)
How does the company make money on this? They act as the facilitator between the customer and the provider. Since Airbnb helps people rent out apartments or homes, the service receives a percentage of all money charged to every customer. Uber connects drivers to passengers and collects payment. The company sets rules and restrictions for both host and customer in hopes of assuring a smooth, safe transaction and experience.
Unfortunately, they don’t pay a heck of a lot.
In the last few months, we spoke to over 10 different Uber drivers about how much the company takes from each fare. We were told that Uber takes a total 30% from every trip the driver makes on Uber. We were also told that New York is “lucky” compared to commissions taken from other drivers in other cities and states. In order to make a decent living while still paying 30% of your earnings to someone else, Uber drivers have to work well over 40 hours a week just to break even on paying off their car and paying the bills.
Other companies like Instacart often change their pay structure to benefit the company and not the worker. You could simply get by and maybe pay your bills if you work for them full-time, but you’d still be an independent contractor without benefits like health insurance. If you’re in college, this might sound better than nothing. But if you’re trying to make a living, you wouldn’t want to do it with one of these services. In fact, people working in the sharing economy often work for more than one sharing economy app at a time to make ends meet.
They’re not a permanent job solution.
According to a report by JPMorgan Chase, 52% of workers at companies like Uber and TaskRabbit quit within a year. This is likely due to the amount of time one must put into working for these companies and the mediocre-at-best compensation they receive in return.
Then there’s the fact that Uber and Lyft are heavily investing in self-driving cars to automate (replace) a large chunk of their workforce in the future. While they offer jobs for drivers now, they won’t rely as heavily on human drivers in the future. This will benefit high-skilled workers like engineers, as well as the company’s bottom line. It will not, however, benefit anyone potentially replaceable by artificial intelligence-powered machines.
They’re terrible about dealing with racism and sexual assault.
Companies like Airbnb and Uber repeatedly face accusations of racist hosts and drivers, respectively. While the companies put out PR statements and make incremental changes to policies that aim to curb this problem, it’s still a problem. Yes, it’s only perpetrated by the independent contractors or “hosts,” but the company needs to impose tighter restrictions, bans, and help safeguard customers through better screening processes and customer service.
This also goes for incidents of sexual assault, particularly with Uber. The ride sharing company currently has no way to directly get in touch with a customer service rep by phone, so if a passenger is subjected to sexual assault by their driver — which happens all too frequently — they must send an email after calling the authorities. The company’s customer service team supposedly has hundreds of these emails in a queue, all waiting to be answered and addressed one at a time.
They’re overvalued AF.
As of June this year, Uber has an implied valuation of $66 billion. This means that they raised billions of dollars under the idea that the company is worth that much. Yet this is a valuation calculated by Uber’s investors and any outside banks or firms dealing with venture capitalist investments in the private company.
This valuation is not a reflection of how much money the company currently makes, but how much they could be worth in the future. When considering the fact that Uber lost $1.2 billion in the first half of the year, it’s hard to see how the company is valued this high. If the company were to go public, their valuation would likely be even higher.
Uber has undoubtedly proven themselves to be valuable, but perhaps not as valuable as some people think. If they go public and are deemed to not be worth as much, initial investors in the company can lose a lot of money. Sadly, Uber is not alone in supposedly overvaluing their business. Other sharing economy companies are valued in the low-to-mid eleven digits — but are they really worth that much? No one actually knows.
Uber, Airbnb, and other like services inevitably want to go public and sell shares of their company on the stock market. This will help them raise money to further expand their business and grow exponentially in different markets around the world. Yet when their valuations keep skyrocketing and their finances are opaque at best, they might not be as good of a future investment as you might think. Plus, their services don’t actually benefit their workers and don’t handle consumer complaints with extreme urgency, which begs the question: why would you use them in the first place?
Share this with your friends below, and consider taking the train instead of an Uber next time.