The companies Uber Technologies Inc. and Lyft Inc. offer smart phone apps that allow you to find drivers available for hire. The companies have expanded rapidly in the last year and are just now hitting the City of Pittsburgh.
Investigators from the Pennsylvania Public Utility Commission responsible for regulating taxi cabs caught the companies operating in Pittsburgh and two judges have issued orders for the companies to stop offering their services in the city.
As Josh Eidelson in Business Week notes, the conflict in Pittsburgh is not a new experience for the companies. They have also met with resistance in some other states and localities in which the firms began offering services without first obtaining regulatory approval.
Serious financial heavyweights back both companies, with Google among those investing in Uber and the hedge fund Third Point Capital among Lyft’s backers. Third Point Capital came to public attention recently, as Matt Taibbi explains, because it collected fees from public pension funds while its chief executive made philanthropic donations to organizations actively campaigning to eliminate public pensions.
Lyft has secured a Harrisburg lobbying and public relations firm to make the case that its services are different from those on offer by cabs and therefore not subject to the rules that govern cabs. That argument falls flat as it is clear these companies compete head-to-head with traditional taxi services. Taxi services are regulated to ensure clean and safe taxi services which also has the effect of elevating driver incomes.
Today in Pennsylvania the typical cab driver makes about $22,000 a year which is just above what workers would make working full time at $10.10 an hour. While we actively campaign to raise the minimum wage to at least $10.10, the expansion of Lyft and Uber raises the risk that the incomes of drivers may stagnate or fall. That’s because if these companies get their way in Harrisburg and are allowed to enter the state without being required to follow a reasonable set of safety and insurance rules that govern existing taxi services that will allow lower fares and lower safety standards to displace traditional cabs. That’s not competition that’s a race to the bottom that puts passengers at risk.
There is no reason that Lyft, Uber and traditional taxi cabs can’t compete with one another to the benefit of riders. All we need is a common set of rules for traditional cabs and Lyft and Uber with the aim of guaranteeing passenger safety.
Lyft and Uber are following the same “business model” as oil and gas companies that came to Pennsylvania early in the shale boom and have been engaged in a full-court lobbying campaign (including full-page ad buys in The Patriot News) in recent weeks to head off a common sense severance that benefit everyone not just gas company stockholders. If the sharing economy is just an expansion of economic activity in which business lobbyists buy the policies they want that also translate into stagnant or falling incomes for most people there’s nothing very new about it. Perhaps we should call it the “not sharing” economy.