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What You Need to Know About Uber

June 18, 2014 By Nathan Dahlen, Undergraduate Research Fellow

The story of Uber’s rapid rise to prominence is a compelling one. In just four years it has expanded from San Fransisco to 128 cities and 37 countries worldwide. In fact, it just became the most valuable startup ever. Uber has not avoided controversy, however. Many of the company's expansion efforts have triggered fierce backlash. In the fall of 2012, Uber brought the fight to our state when it established operations in the Twin Cities. As its popularity grows, the public, policymakers, and stakeholders must come together to discuss what sort of role we want Uber to play in our community.

So, what is Uber?

Uber is a booking service that connects you to a private driver via its mobile app. To call a car, you 1) open up the app on your phone 2) drop a pin at your location 3) choose which car service you want. Once the ride is confirmed, you are able to watch the car navigate towards you and track its ETA in real-time. After the ride, you just thank your driver and get out – the driver is automatically paid through the app and tip is included.

Why are people excited about Uber?

Uber is great for several reasons. Riders experience a sense of familiarity with their driver. Upon ordering a car, riders are shown the driver’s name, photo, and rating out of five stars. After a ride, the driver and the rider rate each other, which incentivizes civility. Drivers may not pick up riders with low ratings. Riders may pass on drivers with low ratings or Uber may deactivate (fire) them. This system of incentivized civility makes for, in my experience, a pleasant ride every single time.

The list does not end there. Uber is more efficient for both parties. Its technology allows drivers to go from fare-to-fare more quickly, and consumers can have a car ready for them in minutes. Drivers and riders don’t have to fuss with the fare and tip after the trip since the payment is automatic and electronic. Increased efficiency means Uber drivers make more money than traditional taxi drivers. If these reasons were not enough, Uber’s UberX service is usually cheaper than taxis.

These advantages and more have fueled Uber’s rapid expansion. But all has not gone smoothly for the transportation network company.

Why are people concerned about Uber?

Uber is in the midst of several regulatory and legal battles across the country and world. When Uber launches in a new city it invariably triggers outrage and legal challenges. The Twin Cities is no exception, and many are concerned about Uber’s proliferation.

Taxi companies claim that it is difficult to compete with companies like Uber because they are burdened by heavy regulations and Uber is not. Taxi drivers in Minneapolis have to pay license and inspection fees, replace their car every 5 years, and pay for commercial insurance – Uber does not.

Some are worried about what would happen if companies like Uber were to completely replace taxi companies. Taxi companies provide services for the disabled – Uber does not. People without smartphones or access to banking services can use taxis – they cannot use Uber. Others are worried about potential gaps in Uber’s insurance coverage and inadequate background checks.

As Minneapolis discusses the legalization (Uber currently operates illegally) and regulation of Uber, taxi companies are demanding that Uber should be subject to the same stringent regulations that they are.

There is a better solution.

Taxis are heavily regulated to protect the public interest, and this principle certainly must guide the debate over how to regulate companies like Uber. But stringent regulation is not necessary. Policymakers can impose smart regulations on companies like Uber that uphold the public interest goals of safety, accountability, and equality without stifling economic development. To create conditions for fair competition, Minneapolis policymakers should review taxi policy as well and strongly consider removing or reforming outdated regulations. One set of regulations should not be significantly more burdensome than the other. For example, it would be unfair to allow Uber to conduct internal vehicle inspections and still require taxi drivers to pay the city for the same task, or allow Uber drivers to have a cheaper and less comprehensive insurance plan.

As cities across the world draft public policy to incorporate Uber into their regulatory frameworks, it is important to remember two things: good public policy considers the thoughts and concerns of all stakeholders to properly assess what is best for the community, and smart regulations can strike an appropriate balance between defending the public interest and fostering economic growth.

Fair competition can flourish once appropriate regulations are put in place for taxi companies and transportation network companies like Uber. Competition between them may not be a zero-sum game either; Uber may become just another option for consumers in Minnesota’s evolving transportation landscape. Regardless, in an era characterized by disruptive technological innovation, it is imperative to craft smart, community-driven public policy that preserves the public interest in a way that fosters economic development and innovation.
 

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1 Comments:

  • Paul Conklin says:

    June 23, 2014 at 9:40 am

    I agree that “meet in the middle” regulation changes make sense.  Stiffer commercial insurance requirements for Uber drivers are an absolute must.  Otherwise all of us will be subsidizing Uber drivers, and riders who are injured by an Uber driver may not receive fair compensation.  But if electronic, consumer ratings can replace a city inspection system, that would be a win-win for taxis and consumers.