Automation & Labor in the Gig Economy

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With Uber’s much anticipated IPO looming on the horizon, the tech behemoth’s finances are being brought to light. More than 60 percent of Uber’s gross income is transferred to driver earnings. Another sizeable portion funds driver incentives and subsidizes passenger rides. With current and future investors closely watching, it is no surprise that in their recent S-1 filing, Uber admitted to having lowered driver fares to maintain a competitive edge in several markets. Ultimately, however, Uber is betting on the development and the anticipated deployment of its autonomous vehicle fleet to eliminate labor costs and to increase its profits.  

With so much uncertainty surrounding autonomous vehicle technology, will Uber ever part from its current labor arrangements? Will managing an autonomous vehicle fleet actually reduce costs in the long run?



The Big Bet on Automation

Several automakers and tech companies have devoted numerous resources and millions of dollars in their race to reach Level 4 and 5 automation. Some claim fully automated vehicles will arrive by 2020 while others argue they will operate in mixed traffic by 2030. Waymo, a front runner in AV development with over 10 million test miles and almost a decade of testing experience under its belt, has only begun testing on tightly controlled public roads with safety drivers near Google’s Mountain View campus. Although the technology is developing rapidly, external factors, including federal and state safety regulations, will extend the time horizon of the deployment of autonomous vehicles. Fully automated vehicles may be inevitable but knowledge of where and when they will arrive  remains uncertain. We should therefore expect Uber’s longstanding labor dilemma will remain for years to come.  


Automation and Its Associated Costs

Swapping drivers for a fleet of autonomous vehicles comes with its own costs, costs that might not outweigh the labor costs Uber is attempting to evade. In addition to manufacturing a fleet equipped with advanced sensors, cameras, and computers, Uber will also have to maintain and store these vehicles, a cost they have always pushed on to drivers. Overseeing a fleet of autonomous vehicles shares similarities with overseeing a fleet of public transit buses. Uber and Lyft will have to clean, fuel, and perform regular maintenance on their vehicles. Like transit agencies, they will have to hire workers to complete these tasks. In addition, Uber and Lyft will need to find land to store their fleets, which they will have to purchase from cities and private landowners. Currently, drivers involved in accidents may have to use their own insurance to cover damages. In this scenario, however, the cost associated with accidents will likely be attributed to Uber or Lyft. Labor cost reductions will reappear in other parts of Uber’s balance sheet.

Automation will not solve the labor dilemma in the near term or, arguably, in the long-term either. It is therefore in the interest of the company and of the drivers that Uber take on the challenge of negotiating better working conditions for its drivers.



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