Gig work predates the internet. Besides traditional forms of self-employment, like plumbing, offers for ad-hoc services have long been found in the Yellow Pages and newspaper classified ads, and later Craigslist and Backpage which supplanted them. Low-cost broadband internet allowed for the proliferation of computer-based gig platforms like Mechanical Turk, Fiverr and Elance, which offered just about anyone some extra pocket change. But once smartphones took off, everywhere could be an office, and everything could be a gig — and thus the gig economy was born.
Maybe it was a confluence of technological advancement and broad financial anxiety from the 2008 recession, but prospects were bad, people needed money and many had no freedom to be picky about how. This was the same era in which the phrase “the sharing economy” proliferated — at once sold as an antidote to overconsumption, but that freedom from ownership belied the more worrying commoditization of any skill or asset. Of all the companies to take advantage of this climate, none went further or have held on harder than Uber.
Uber became infamous for railroading its way into new markets without getting approval from regulators. It cemented its reputation as a corporate ne’er-do-well through a byzantine scandal to avoid regulatory scrutiny, several smaller ones over user privacy and minimally-beneficial surcharges as well as, in its infancy, an internal reputation for sexual harassment and discrimination. Early on, the company used its deep reserves of venture capital to subsidize its own rides, eating away at the traditional cab industry in a given market, only to eventually increase prices and try to minimize driver pay once it reached a dominant position. Those same reserves were spent aggressively recruiting drivers with signup bonuses and convincing them they could be their own boss.
Self-employment has a whiff of something liberatory, but Uber effectively turned a traditionally employee-based industry into one that was contractor-based. This meant that one of the first casualties of the ride-sharing boom were taxi medallions. For decades, cab drivers in many locales effectively saw these licenses as retirement plans, as they’d be able to sell them on to newcomers when it was time to hang up their flat cap. But in large part due to the influx of ride-sharing services, the value of medallions has plummeted over the last decade or so — in New York, for instance, the value of a medallion dropped from around $1 million in 2014 to $100,000 in 2021. That’s in tandem with a drop in earnings, leaving many struggling to pay off enormous loans they took out to buy a medallion.
Some jurisdictions have sought to offset that collapse in medallion value. Quebec pledged $250 million CAD in 2018 to compensate cab drivers. Other regulators, particularly in Australia, applied a per-ride fee to ride-sharing services as part of efforts to replace taxi licenses and compensate medallion holders. In each of those cases, taxpayers and riders, not rideshare companies, bore the brunt of the impact on medallion holders.
At first it was just cab drivers that were hurting, but over the years, compensation for this new class of non-employee app drivers dried up too. In 2017, Uber paid $20 million to settle allegations from the Federal Trade Commission that it used false promises about potential earnings to entice drivers to join its platform. Late last year, Uber and Lyft agreed to pay $328 million to New York drivers after the state conducted a wage theft investigation. The settlement also guaranteed a minimum hourly rate for drivers outside of New York City, where drivers were already subject to minimum rates under Taxi & Limousine Commission rules.
Many rideshare drivers have also sought recognition as employees rather than contractors, so they can have a consistent hourly wage, overtime pay and benefits — efforts that the likes of Uber and rival Lyft have been fighting against. In January, the Department of Labor issued a final rule that aims to make it more difficult for gig economy companies to classify workers as independent contractors rather than employees. The EU is also weighing a provisional deal to reclassify millions of app workers as employees.
Of course, the partial erosion of an entire industry’s labor market wasn’t always the end goal. At one point, Uber wanted to zero out labor costs by getting rid of drivers entirely. It planned to do so by rolling out a fleet of self-driving vehicles and flying taxis.
“The reason Uber could be expensive is because you’re not just paying for the car — you’re paying for the other dude in the car,” former CEO Travis Kalanick said in 2014, a day after Uber suggested drivers could make $90,000 per year on the platform. “When there’s no other dude in the car, the cost of taking an Uber anywhere becomes cheaper than owning a vehicle. So the magic there is, you basically bring the cost below the cost of ownership for everybody, and then car ownership goes away.”
Uber’s grand automation plans didn’t work out as intended, however. The company, under current CEO Dara Khosrowshahi, sold its self-driving car and flying taxi units in late 2020.
Uber’s success had second-order effects too: despite a business model best described as “set money on fire until (fingers crossed!) a monopoly is established” a whole slew of startups were born, taking their cues from Uber or explicitly pitching themselves as “Uber for X.” Sure, you might find a place to stay on Airbnb or Vrbo that’s nicer and less expensive than a hotel room. But studies have shown that such companies have harmed the affordability and availability of housing in some markets, as many landlords and real-estate developers opt for more profitable short-term rentals instead of offering units for long-term rentals or sale. Airbnb has faced plenty of other issues over the years, from a string of lawsuits to a mass shooting at a rental home.
Increasingly, this is becoming the blueprint. Goods and services are exchanged by third parties, facilitated by a semi-automated platform rather than a human being. The platform’s algorithm creates the thinnest veneer between choice and control for the workers who perform identical labor to the industry that platform came to replace, but that veneer allows the platform to avoid traditionally pesky things like legal liability and labor laws. Meanwhile, customers with fewer alternative options find themselves held captive by these once-cheap platforms that are now coming to collect their dues. Dazzled by the promise of innovation, regulators rolled over or signed a deal with the devil. It’s everyone else who’s paying the cost.
To celebrate Engadget’s 20th anniversary, we’re taking a look back at the products and services that have changed the industry since March 2, 2004.
