Jan 18, 2020
Evolution of Ride Sharing
Transportation has always been one of the most interesting problems of human civilization. The domestication of horses, Roman road building, Incan bridges, and the first steam ships have all sought to improve how humans moved from one place to another. Recent improvements in smart phone technology have allowed for the rise of ride-sharing companies, like Uber and Lyft. These companies provide a modern solution to transportation and they continue to develop into the future.
Ride-sharing companies utilize the latest in Global Positioning System (GPS) in conjunction with wireless payment and mobile application development to provide streamlined services to consumers. Their use has replaced the traditional yellow taxi cab and have become synonymous with nights out on the town. Ride-sharing companies have proliferated due to several factors. These factors are directly related to the demand and supply of such companies and their growth.
Ride-sharing demand is highest in urban areas. The higher density of locations to visit as well as the lack of parking for personally owned vehicles, lead to higher demand in metropolitan areas. Demand also spikes during nights and weekends because that is when many consumers look to ride-sharing companies for transportation.
Demand has also increased due to the convenience of ride-sharing. It is as simple as pressing a button on the application. Payment is processed automatically at the end of the service with a predefined credit card. It is no longer necessary to “hail,” or call, a cab by waving at one.
Ride-sharing supply continues to rise as well. The success of ride-sharing companies can be attributed to the emergence of the “gig” economy. This is a modern economic phenomenon where people work small jobs or “gigs” in addition to their main job, or possibly, many small gigs if they are unable to find a traditional employer. The gig economy strength is primarily flexibility of hours and days. Ride-sharing is no exception and many providers will work on nights and weekends to satisfy the demand spikes during those times.
Gig economy jobs also have a very low barrier of entry. In this case, it is simply owning a car, which many people already do. This low barrier of entry enables many more service providers to work, thereby increasing the supply of available providers. The quality of the service provided by so many gig workers is backed by consumer feedback reports. While there is some room for abuse in the reports, they seem to serve as a decent guarantor of quality.
There is some competition in the ride-sharing market, and it primarily comes from traditional taxi companies and competing ride-share companies. Taxi companies gained a lot of power through militant power advocacy which allowed them to shape a lot of municipal policy during the mid and latter parts of the 20th century. This negotiating power has decreased somewhat, allowing the rise of ride-sharing companies. (Dubal, 2017) However, in some locations, like New York City, taxi companies hold a lot of political sway as well as protesting by blocking roads. New York City in particular, uses a “medallion” system, effectively a license that must be purchased. In 2013, such a medallion was sold for $1.3 million dollars. (Gevero, 2015) The rise of ride-sharing companies has disrupted traditional regulation and shifted the balance of power from the strongholds of taxi companies and shifted it to companies such as Uber and Lyft.
The competition of ride-share companies has caused an interesting phenomenon. These companies are barely profitable because they must pass much of their profit directly to their workers, who are somewhere between employees and contractors. To keep their fares low and compete with traditional taxi unions, the ride-share company takes a smaller cut as a result. The cut to drivers is also decreasing to stay competitive, however, there currently appear to be more than enough people willing to work for less that this does not become an issue. Earnings for the average ride-share driver are usually below minimum wage. There has been pressure to force ride-sharing companies to pay a minimum wage. In New York City, this wage is $26.51 an hour, before taxes. This political pressure has come from New York’s Taxi and Limousine commission. (Brustein, 2018) This minimum wage produces great stress on the ride-share companies’ operations. This problem illustrates the power that traditional taxi companies still have with regards to controlling municipal transportation politics.
The future of ride-sharing companies will be rife with political battle and technological upheavals. Traditional taxi unions will continue to face eroded earnings as they fight to secure their power. Members of the gig economy will continue to drive where they can to increase the amount of money they take home every month. However, all of this may change when self-driving cars become the norm.
Self-driving cars will disrupt the market for transportation and indeed, all markets, more than any other change previously. When applied to ride-sharing services, it is not difficult to imagine a world where urbanites do not own cars ever. They will request an autonomous vehicle to pick them up and drop them off at all hours of the day. And the price for such a service will be driven lower than they are now, because there is no longer a need to pay a human driver for his services. The cost of the service is also driven lower by the economy of scale that will be allowed as vehicles can operate at all hours of the day, dependent only on maintenance, refueling, and cleaning. Companies could easily offer subscription services that are lower than the price of owning a car and the associated registration fees, taxes, and maintenance that are associated with it.
The future of pedestrian transportation will be very interesting. The laws of supply and demand, as well as the political games that surround the taxi industry, will pave their own road leading into the future. As autonomous vehicles become more commonplace, human drivers will be required less and less. The future unemployed driver’s best course of action will be employment as cleaners, refuelers, and maintainers of these autonomous vehicles. Taxi unions will be forced to adapt, or they will be overcome by automation. In the end, consumers vote with their wallets, and there may be little that traditional political powerhouses can do in the face of such changes.
References:
Brustein, J. (2018, December 4). New York Sets Nation’s First Minimum Wage for Uber, Lyft Drivers. Bloomberg Wire Service. Retrieved from http://search.proquest.com/docview/2149185692/
Dubal, V. (2017). The Drive to Precarity: A Political History of Work, Regulation & Labor Advocacy in San Francisco’s Taxi & Uber Economies. Berkeley Journal of Employment and Labor Law, 38(1). https://doi.org/10.15779/Z387P8TD1D
Gevero, A., Alves, E., & Durante, B. (2015). HOW UBER AND OTHER RIDE-SHARING COMPANIES ARE ROILING THE TAXI MEDALLION INDUSTRY. The RMA Journal, 98(4), 36–41,11. Retrieved from http://search.proquest.com/docview/1756060597/
