The companies Uber Technologies and Lyft offer smartphone apps that allow you to find drivers available for hire. The companies have expanded rapidly in the last year and just recently began offering their services in Pittsburgh without regulatory approval to do so.
Investigators from the Pennsylvania Public Utility Commission responsible for regulating taxi cabs documented the companies operating in Pittsburgh and orders were issued for the companies to stop operating in the city.
The conflict in Pittsburgh is not a new experience for the companies. They have met with resistance in some other states and localities where they began offering services without first obtaining regulatory approval.
Serious financial heavyweights back both companies, with Goldman Sachs among those investing in Uber and the hedge fund Third Point Capital among Lyft’s backers. Third Point Capital came to public attention recently 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 the Harrisburg lobbying and public relations firm Triad Strategies 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 promote clean and safe transport, 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 Pittsburgh activists 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 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, they can charge lower fares and adopt lower safety standards to displace traditional cabs.
This is not competition. This is 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 in recent weeks to head off a commonsense severance tax that would benefit everyone, not just gas company stockholders.
If the sharing economy as represented by Lyft and Uber is just an expansion of economic activity in which business lobbyists buy the policies they want, policies that 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.
Mark Price is a labor economist at the Keystone Research Center in Harrisburg (keystoneresearch.org).