Instacart cedes to shoppers, Uber cozies up to Pittsburgh’s mayor, and “real pressure” from the gig economy
|Oct 18, 2016||Public post|
“Real pressure on payroll employment.”
I swear months go by without any new reports on the sharing-slash-gig economy and then boom, everyone puts out something at once. Last week we got a lengthy paper on independent work from McKinsey, a global ridesharing synopsis from 7Park, and city-by-city analysis from Brookings. And they swear they didn’t coordinate!
Brookings’ Ian Hathaway and Mark Muro used Census data on nonemployer firms—technically, businesses with no paid employees, i.e., the archetypal Uber “small business owner”—as a proxy for tracking gig activity in “rides and rooms” across US cities. They found that (1) gig work is growing fast, (2) is concentrated in large metro areas, and (3) most interestingly, shows early signs of displacing traditional payroll employment.
Keeping in mind that this data is two years old—the Census doesn’t exactly “move fast and break things”—we’re already seeing a handful of cities where growth in gig workers from 2012 to 2014 came alongside flat or negative growth in payroll employees. It’s most apparent in the ground transportation industry (a proxy for ride-hailing), but also visible to some extent in traveler accommodations (the cleanest comparison for home-rentals/Airbnb). “The negative payroll instances clearly stage the possibility that the platforms are putting real pressure on payroll employment and potentially beginning to cannibalize full employment in those areas,” says Muro, the bluntest he’ll get.
If we had data through today, I suspect these trends would be even more apparent. See hockey-stick growth curves, the increased frustrations of the hotel industry, the decline in the value of a New York taxi medallion, and the small number of cab companies that have filed for bankruptcy. Should “gigs” turn out not just to be supplementing traditional jobs in the economy but also replacing them, that’s important and makes it all the more urgent that we figure out benefits and a safety net for gig workers.
Instacart did an about-face last week after workers threatened to strike over its decision to replace tipping with an option “service fee.” Instacart said in September that it would increase the commissions shoppers made on each order and phase out tips to “ensure more consistent pay for every delivery completed.” I have to say, it seems like Instacart meant well with this. Some 20% of orders which received zero tips, according to its data, and all of the service fees were still going to be passed on to shoppers. We’ve also all heard the arguments about how tipping is an abomination.
But shoppers freaked out. They worried customers would be confused by the “optional service fee” and stop leaving it entirely. They disliked that those fees would be pooled and redistributed back. And many said that even with the bump in base pay, their wages were so dependent on tips that they would be earning significantly less money. They planned a strike for Sunday and Monday (Oct. 16-17).
Then, late last week, Instacart retreated. It would still increase base pay and add a customer service fee, but would also preserve the ability to tip a shopper directly. “We heard from shoppers that they liked most of the changes but wanted to retain the ability for customers to tip online,” Instacart wrote in a blog post, its preferred forum for this sort of announcement. “We understand their concern and have decided to continue to accept tips.”
Honestly, the whole saga is a little weird. On the one hand, maybe Instacart really did have some solid data to suggest restructuring pay would be better for its shoppers, and that was all there was to it. On the other, Instacart doesn’t have the best track record with workers, so no wonder they were immediately suspicious and assumed they were somehow getting screwed to make the company richer. Trust is expensive in the gig economy and Instacart has done very little to afford it.
Here is a good story from Motherboard, which obtained emails between Pittsburgh mayor Bill Peduto and Uber CEO Travis Kalanick and found that … they are buds! Pittsburgh, you’ll recall, is where Uber has set up its main research facility for driverless technologies and is testing rides with self-driving cars. On Peduto’s “Uberversary” in June he forwarded a note about his trip history to Kalanick with the message, “218 miles. Any other Mayors come close?” Another time when Kalanick wanted to talk at “10am tomorrow” Peduto was “good EST and PST.” He signs all his emails B. Travis signs all of them T. It’s kind of cute. Less cute is how closely Uber worked with Peduto’s office to protest an $11.4 million fine it received from Pennsylvania’s Public Utility Commission for operating in the state without permission. (The fine was upheld.) As a spokesperson for Uber told Motherboard, “We’re always in conversations with mayors, state officials, and others about Uber and the future of transportation—and it should come as no surprise that after the state PUC levied the highest fine of all time, we asked for their support.”
The implosion continues! Here is a pair of updates from Eric Newcomer at Bloomberg: (1) Square Said to Have Discussed Caviar Sale with Uber, Grubhub, and (2) Money-Losing Meal Delivery Startup Munchery Seeks New CEO. Add that to some of the stuff I’ve reported on Postmates (misleading prices, trouble fundraising) and you can see the business of food delivery is not particularly healthy. The one exception seems to be Grubhub, whose stock price is soaring and revenue growth reaccelerating. Uber is also interesting, with its headfirst push on Eats, and Amazon, which is slowly but methodically building free restaurant delivery into Prime. We shall see! In the meantime, if you know things about this space and its many, many problems, please be in touch.
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