It's becoming abundantly clear the real innovation from on-demand services (including ride-sharing companies), is their ability to transfer more money from labor to capital with complex pay structures. For many if not most of these companies, its their only means towards profitability. For instance, any rise in revenue Uber experienced in the last 3 years was exclusively due to cuts in pay for drivers. Tech has long lost the glow that prevented the public from scrutinizing whether a VC subsidized, underdeveloped business model is good for society. So far the answer seems to be no.
I had a period where I wasn't doing any class work but didn't have my degree and couldn't get a job because of that. The ability to trade time and tires for some of the extra VC money was kind of awesome honestly and I'd imagine it gives people who are in worse situations options they really need (essentially borrowing against car components.)
I know in a few years it will change when they try to become profitable but there will be another thing by then.
The article points out that for many DoorDash workers, they aren't getting paid a positive sum, even if they count their time as worth zero.
Look, we have the technical ability to handle millions of people as hourly workers on timescale granularities of seconds. Require these companies to treat their "contractors" as part-time employees being paid minimum wage: start paying them when they accept their first job on day, pay them for periods of up to ten minutes between jobs, and stop being reviled by everyone who hates slave labor.
>The article points out that for many DoorDash workers, they aren't getting paid a positive sum, even if they count their time as worth zero.
This just doesn't pass the smell test. It's much, much more likely that their method is flawed than it being the case that a bunch of workers pay DoorDash to work for them.
Instead of posting your personal idea that this must be wrong because it seems extreme, you could read the very lucid and clear article giving exact numbers on how they calculated this and why they are confident in this calculation.
The article says they gathered their data from a non-random sample of 200 drivers. I think the “smell test” is more accurate. Or DoorDash’s own claims, that drivers make $18 an hour.
Their sampling is biased, but DoorDash muddies their own claims by saying that pay is per "active hour". It's possible they're not counting time that drivers still need to allocate towards their work, making it inaccurate. I imagine you at least have to spend time pulled over to look at and accept an order (or break the law) so even that time getting in and out of traffic is probably not counted in "active hours". Imagine working retail and your employer only counting your time actually spent at the till when they say you're paid $20 an hour. You could be doing a whole lot more work than that but they don't consider it in that calculation.
I'll agree you absolutely have to watch what you're doing and count miles and whatnot, but having the option is a powerful thing (even when you're making negative money) and I wonder if regulating it too aggressively might take that away.
Imagine all the alternative ways this valuable human time could be used. Do you really think the majority of people feel empowered and freely do this, or is it rather that they are stuck in a negative loop and can't get out.
Also to highlight that currently the government is subsidising these companies by paying food stamps and Medicaid (in the case of the US), and the workers are subsidising them by taking any and all economic and personal risk (injury, accident, car breakdown, long term health issues, etc.)
"Empowered" is a spectrum. Do I think the majority of gig economy drivers find their job empowering in some cosmic sense - no, probably not. But I'd certainly be much happier as a driver for Doordash than a sales clerk at Walmart, and the reasons are empowering things like "I don't have to spend 100% of my time around annoying customers" and "there's no manager who will come yell at me if I play around with my phone for a few minutes".
I agree human time is undervalued in the modern economy and it’s often waisted, but I think door dash because of its flexibility might actually be part of a change that results in it being more valued rather than less.
Both things can be true. The gig economy can provide people with the kind of flexible work that wasn't possible. It can also utterly fleece workers that would like to having full time jobs but cannot.
Taking a few delivery jobs while being relatively well off isn't the same as people picking this up as a 2nd or 3rd job and depending on it.
I can't believe I have to point out that most of the people being affected negatively by this aren't by-and-large "wealthy" or "secure" people to begin with.
You'd be surprised how prevalent that attitude is, the people with good paying jobs doing it for "extra cash on the side" say they don't care about the pay rate or unionizing or anything and so the going rate for these little delivery contracts is super low.
They advertise that you'll make well over minimum wage when in reality you'll hardly ever even meet min wage. They could easily guarantee a min wage, which should be no problem if the drivers are all really making so much money, but they obviously don't.
People say "well the drivers shouldn't do it then, they should get different jobs. if it doesn't pay and they keep doing it they're stupid", and then go on to order food from the app and tip $0.50 bc "hey, I only spent $5, that's 10%!"
Drivers are essentially depending on tips to live just like a waiter. They might take home $4/hr from the app. So every time you order you have the chance to make it right for the driver and pay them for doing their job by giving a decent cash tip. IMO $3 is the absolute minimum, $5 is normal. If your reaction to that is "whoa that's way too much what did they do to deserve that?" you're a cheap bastard.
Sorry for the rant, I just did this job for a while and got treated like dog shit by the customers and the companies for efficiently and politely indulging their every whim on demand at any hour, and it makes me sick to hear people who aren't starving living in their cars depending on work like this to survive talking about it in abstract terms like they have any idea. We really should have a period of compulsory food service work for every teenager in this country, seriously.
the real innovation from on-demand services is their ability to transfer more money from labor to capital
DoorDash hasn't transferred any money to capital! They are still private. In fact, it is the opposite. Transfers have been from the capital of their investors to labor and to consumers.
There is plenty of innovation here - Uber is a lot nicer than phoning up the taxi company, and DoorDash is a lot nicer than phoning up some small restaurants to get food delivered. The lack of innovation is not the problem.
The problem is that there is no moat. DoorDash, Uber Eats, Postmates, and GrubHub are all providing the same service. There are millions of people capable of being a driver for these services. So competition is currently squeezing profits to zero or negative, and squeezing worker pay. Competition isn't helping the VCs, it's helping the consumers.
Eventually, if some of these companies go out of business, the remaining ones will be able to raise prices, which will be worse for consumers but better for the investors and perhaps better for drivers.
This is not how the actual GAAP accounting works for a company like Uber. The total the customers pay is referred to as bookings. There was a similar issue with Groupon when that was the hot stock of the day:
Uber paying drivers does not make the drivers employees. When I have worked as a software developer as a 1099 contractor and someone bought the resulting software, does that mean that the customer who bought the software was paying me? Would the payment for the software be counted as revenue for the company?
When I was a part time fitness instructor, I taught at corporate gyms where the employees had free memberships. I got a 1099 every year from the gym. Did the employees pay me? Would that be an expense of the corporation?
That may be how Uber wants to phrase it, but I'm pretty sure the thing that shows up on my CC statement is Uber, not the driver's name... IE, if they're claiming that, it's a legal fiction. Whether that legal fiction would stand in court is up to the court.
> I'm pretty sure the thing that shows up on my CC statement is Uber, not the driver's name
That just means that Uber is acting as a payment processor for the driver. If you buy an app or make an in-app purchase in the Google Play Store then Google's name appears on your statement; that doesn't make the app publisher Google's employee. The same goes for non-app vendors using Google Pay or similar services such as PayPal. The point of Uber is to connect riders with drivers and provide standard systems for payment and review—the actual transportation is up to the users.
There're like three sub-threads to your comment now of people getting it wrong. What you are describing is Gross Bookings. If you don't believe me, Uber's quarterly financial results are here and you can see for yourself.
I recently got into EconTalk and burned through a few of their podcasts [0]. Roberts mentions his 'distain' for the minimum wage a fair bit during the shows. Many economists do not like the minimum wage at all for many reasons.
However, with these gig economy jobs, there effectively is no minimum wage. Yes, things are murky here about the definitions of wage, employee, boss, etc. But the effective hourly rates are all well under the minimum wage. So, these companies can uncover the 'real' minimum wage that the market will deal with (again, suuuuuper murky definitions).
It turns out, that number is very low, so low that most people aren't rationally taking those jobs. Factoring in depreciation, I often hear that they loose money to work (not always, but damn close).
I wonder what Roberts has to say on how the minimum wage and the 'wage' that these gig-econ companies pay relate.
It seems to me that having run the experiments now, the theories that the economists that Roberts is like, well, maybe they should update those ideas.
It turns out, that number is very low, so low that most people aren't rationally taking those jobs. Factoring in depreciation, I often hear that they loose money to work (not always, but damn close).
This is simply hard to believe. There are over a million driving for Uber. An overwhelming majority of them must be making money, because the idea that any significant fraction of a million of people is in the red at the end of a year simply is ludictious. Sure, they might be making less than they think after accounting for operating costs, insurance and depreciation, and they might be making less than they would had they got a regular job, but they cannot possibly be actually losing money.
>> It turns out, that number is very low, so low that most people aren't rationally taking those jobs. Factoring in depreciation, I often hear that they loose money to work (not always, but damn close).
> This is simply hard to believe. There are over a million driving for Uber. An overwhelming majority of them must be making money, because the idea that any significant fraction of a million of people is in the red at the end of a year simply is ludictious.
I think the error you're making is the assumption that everyone in the market is a rational actor with good information and understanding, so that evidence of particular market behavior is evidence that it's rational and beneficial to the person doing it.
It's very believable to imagine gig economy jobs where the workers typically lose money doing them, but it takes them a a long time to figure that out, because the pay is obvious but much of the expense is obscured. Fresh, naive marks take over for those workers who get wise and drop out, maintaining the population of workers. The combination of corporate marketing and desperate hope then help maintain a supply of fresh, naive marks.
Million of people are not rational and naive? I doubt that.
Look, the costs with Uber are pretty straightforward: you have car payments, insurance, periodic maintenance and finally gas. People really aren’t too stupid to realize that their Uber income doesn’t cover their car payment.
IRS has a nice estimate of average cost of driving, it’s 58 cents per mile. If you are doing more than that, you are making money, and at Uber you make significantly more than that.
> Many economists do not like the minimum wage at all for many reasons.
Usually it boils down to simply believing that "standard of living" is a silly concept.
It's true, the demand for labor is essentially infinite, but having a minimum wage effectively puts a cap on the number of actual jobs. If people could hire maid services for $1 per hour, there'd be a lot of maid service jobs and nearly everyone would have clean homes.
But the standard of living would hit the floor.
Eliminating minimum wage would eliminate unemployment, for sure. But it would also mean rising homelessness or people cramming 5+ people into 400 sq foot studio apartments as the people at the bottom could no longer afford to pay rents on their own. And let's not pretend that only minimum wage workers would be affected, people near minimum would likely wage cuts as well.
Eliminating minimum wage creates a race to the bottom for low-skill jobs as people become more and more desperate for money.
There's no such thing as "real" minimum wage since the factors that result in having minimum wage must be included (taxes/regulations/cost of living etc). Just as looking at the wages of illegal immigrants doesn't represent the "real" economy, the gig economy, whose companies largely operate under artificial, VC inflated markets, and depend on heterogenous labor markets,can't gage "real" wages.
If you're wondering how low a wage can be and still retain employees, the answer is pretty close to zero. Even baring the no/very low wages that predominated human history, in the 20th century mining companies were able to avoid paying their employees money at all and instead provided tokens serviceable in stores the mining companies owned. The goods in those stores were sold with inflated prices, essential making the cost of labor close to zero.
The case against minimum wage is largely based off of highly isolated factors typically favoring shareholder economics.
Average wage for a day laborer in mid 19th century US was roughly equivalent in purchasing power to what you today get in food stamps. The UBI is already here, you just have to go back to mid 19th century lifestyle.
If you change slightly the economic assumption and go from a completely competitive labor market (where workers get paid the marginal revenue productivity) to a monopsony labor market (there is only one employer), then the minimum wage can increase employment and wages. https://open.lib.umn.edu/principleseconomics/chapter/14-2-mo...
A monopsony labor market is highly unlikely to happen, but something similar can be said of a highly competitive labor market.
It’s outrageous to say that is an outrageous claim at this point. To suggest Uber had other means of obtaining profitability would be the incredible claim needing tons of new evidence, not the other way around.
> “These orders don’t pay for our expenses or our time. We actually lose money when we take those orders. If I pick up an order that is 10 miles away and deliver it 6 miles I’m traveling 16 miles for a $3 order — so I have lost money. I’m in the negative when I account for gas, wear and tear, and other expenses. Not to mention my time.”
This begs an obvious question: why are people choosing to do this if it pays $0/hr? It’s voluntary. Can they find something better to do with their time?
"However, if a worker rejects too many jobs too frequently, they may receive fewer job offers as a result."
They take those jobs because they lose all access to the chance of profitable jobs otherwise. The people working for door dash aren't exactly the sort of person with the ability to fully understand probabilities and statistics either. I'd say it's fair to assume their business model works by bullying the same psychological behaviors as videogame loot crates, lottery tickets, and casinos. That one huge order that pays $30 after tips quiets the anxiety of losing money on the previous ten orders even if the actual math places the driver in the red. Most people have a very poor sense for overhead costs like vehicle maintenance. The link between miles driven and the rate of repairs required just isn't there.
I've worked these gigs before, and so have friends of mine with advanced STEM degrees. Sometimes you are stuck between a rock and a hard place (usually you are, if you're low income) and your current dilemma is between not being able to afford your rent tomorrow or food tonight, and working some exploitative app gig like this. So cool the condescension. Poor folks -- even those with really low numeracy -- are generally extremely aware that these gigs are exploitative and not sustainable income sources in the long run and see the scam a mile away. In my experience it's folks who haven't been poor who don't have a good sense for how expensive it is to be poor, for how difficult it is to make long term decisions, and the intractability of problems you have to solve just to get by sometimes
None of all of what you wrote addresses how those folks between a rock and a hard place will be better off not having the option to work for a given service at all.
These businesses are already unprofitable. So you probably couldn't have another DoorDash that pays its workers more. I suppose you could argue that some restaurants might have their own delivery services, or something. But that'd be tiny in scale compared to what these services are doing.
A tiny delivery service based around a local group of restaurants could easily have a fairer distribution of income and time consumed. Since the delivery service operates from about five or ten shops there's no "drive 10 miles to the pickup". Since the service is basically local there's no "take money from the poor and give it to the richer" - even the profits that go to the capitalists is still going to local members of the community who are making some money, but not too much to know what to do with. "Unprofitable" is relative.
Consider: restaurants often consider delivery to be a 'loss leader'. It's not a terribly profitable industry, maybe not at all profitable. A more limited service (unable to average costs over a large number of restaurants and customers) is going to be even less so?
Right, but as I said, the scale of these local delivery services is much smaller. Even if we accept your premise that each local job would be better (which i'm not sure is true, but i'll grant you it), there would be far fewer of them. It's not obvious to me which is better: A lot of bad jobs, or a few good ones?
Not completely. I remember life before Uber and seamless. I'd just stay home and eat ramen (this is in Dallas and I didn't have a car). These businesses did genuinely create businesses and also changed lives for many by the service. That's not an excuse for such exploitative behavior of course.
I remember life before Uber and I'd never heard of Seamless, until your comment. These businesses genuinely just used VC funding and exploitative contracts to undercut perfectly viable existing services.
Before Uber, I'd take public transport, phone for a minicab or walk to their office to get one. (and I still do)
Before Deliveroo, I'd call the local takeaway and get them to deliver, or walk there and collect it myself. (and I still do).
You can argue that they have improved the lives of people who find it hard to use the phone, However, that was already solved for food delivery before these new delivery services came along and I would be surprised if there weren't minicab firms that accepted SMS or web bookings.
Looks like you haven't lived in a city like Dallas. Public transport is a joke (which I did resort to when I finally run out of food; will take me half a day to do groceries and I need to come back home and shower). Cabs will take thirty minutes to come to your home and will charge outrageous amounts (4x what Uber used to charge initially).
When I say I'd just sit at home I wasn't joking. I and many friends (mostly women) would just not do shit most of the time and just watch TV instead. Hell I'd go years without visiting my cousin in Plano (a suburb) because commuting there is a multi day ordeal (I need to start from their home at 5 pm if I needed to use public transport).
Did I and others just exploit Ubers unreasonably cheap prices? Yes. Did it improbe our lives measurably? Also yes. If you were lucky enough to live in New York or some city like that power to you but not every place was blessed.
That's true. I have only lived in walkable areas. This is because I have not owned a car until recently.
I understand that public transport and minicabs are poor in tiny villages where the only amenities are a pub and a church, but I assume that when something is a city, it is a large built-up area with all the normal amenities that I expect of a city (shops, offices, entertainment, bus routes, possibly a light railway etc.). Is Dallas really not like that? What is it? Just miles and miles of big houses?
Out of curiosity, what caused you to live in a car-dependent area without a car?
In Vietnam Grab drivers actually make a decent amount of money because a lot of their customers are middle class (relative to Vietnam). I don't think they're missing out on that much business by not having lower prices because you still see them everywhere (17 at a red light is the most I've ever seen) and people who can't afford Grab will use public transportation or their own motorbikes (student jobs may pay 20k-50k/hr, a bus ticket is 6k and a 10km GrabBike ride can be 70k, 4-5km is like 35k). A college graduate after some time may make 100k-200k/hr, and yet you'll still find a large class of people buying the latest iPhones (which would cost around 25 million).
I guess the US is a different environment where there's not enough customers who could afford realistic prices for Uber, and there's not enough alternatives for those who can't afford a personal vehicle.
That has a lot more to do with the tech and distribution model they unlocked than financial viability. In Europe Uber drivers are private (company) drivers, not contractors, and it still works. There is a ton of money in transport, Uber is not even cheap if you’re not in tech / top earners.
Just because a service exists doesn't mean the same service can exist and be financially viable for every employee. There are many businesses that are inherently unprofitable. It can be argued that such businesses should be subsidized because their existence is beneficial to society (e.g. Ubers in the neighborhoods that taxis wouldn't serve).
These people often have reasons why they are not already working a more classic job and are unlikely be hired or in some cases want to work under whatever new standards and time commitments required for full time employees of these apps.
I'm not saying that they would be -- correct me if I'm wrong but I don't think that has been a point of discussion.
A job/app gig can both exploit someone and also give them the ability to survive where they might have few options otherwise. See sweatshops and the agricultural industry for example
I could probably have fuel in my car for two weeks, but be hungry and without food today, Maybe I am looking forward to getting another jon in 2 days so this might help me now.
I would also add that people take the jobs because of initial sign-up bonuses (although those have greatly diminished over the years) and because the sales pitch is often compelling. It isn’t until the person signs up that they realize it’s harder to get jobs and that the average pay isn’t worth the hassle. At that point, people quit. It’s why turnover is so high for the food delivery apps (I’m excluding Seamless/Grubhub, who I believe offer a different model. Or at least it did — Seamless used to rely on a restaurants own delivery staff). Turnover is still high for car services, but there are stricter requirements to get approved there and in a busy area, the average pay is going to be better than for DoorDash or Postmates or whatever.
"Eschew flamebait. Don't introduce flamewar topics unless you have something genuinely new to say. Avoid unrelated controversies and generic tangents."
Not all orders are like that, but a lot can be, and it depends on the region.
I worked GrubHub back in 2018 when I was between jobs(took some time off to do side projects and did deliveries to make ends meet). These apps play this psychological game on you where you have to accept something like 95% of orders in order to get more quantity and quality(supposedly), so some people are desperate to take all the shitty no-tip orders just so they have a shot at getting better ones.
The funny thing was the lowest acceptance rate I had was 3%, and that's because I hung around a rich area of town and waited for those sweet $20-$50 orders that were only a few miles distance. Always felt like I got the golden ticket. I never got fired for having that low of an acceptance rate.
There were some fellow drivers I talked to on Reddit that got kind of a bad deal. They would drive for GrubHub or DoorDash at a town in Podunk, Nowhere with low demand and would often get sent those kind of orders that were 10+ miles away for $3. If that happens to be the demand, then you're either screwed taking bad orders or you're screwed if you reject too many of them and you get fired.
I think the reason I never got fired is because the LA area, at least while I was doing it, was hot(figuratively) and GrubHub just wanted to fill up the market with as many drivers as possible. In areas where they've fully met the demand, then your arse can be on the line if you reject too many orders.
Overall, it was a fun job to have for a while. But it would suck big-time if I had to actually do it for a living. Thank god I'm good enough at software engineering.
EDIT: Saw lots of hilarious things happen while I was on the job. It's amazing how many women order food while they're taking a bath and then either forget to answer their phone or they come to the door wrapped in towels. WTF! I once delivered a 2 dozen donuts to this one guy at ~10:30pm who was super high accidentally walked into the door before opening it. Also had some sad moments, like those times I delivered to an elder hospice. This one sick old lady wanted to give me a handsome tip, but I didn't want to accept it because I just felt like she deserved that ice cream in her condition and was just happy I brought it to her. But she insisted because she said it might be her last ice cream. :(
> the shitty no-tip orders just so they have a shot at getting better ones.
Wait a second... Are people not giving a cash tip in these cases? I do no-tip and give cash instead (which I thought was preferred). Is that a bad strategy?
Most no-tip orders don't result in a cash tip, but some do. I'd say 1 in 5 no-tippers end up tipping in cash. People who use these apps aren't exactly the greatest customers in the world.
It's only a bad strategy if most or all drivers pass on your orders. Some drivers take these offers in hope for cash. I chose to stop taking those offers because I found most people don't end up tipping me in cash. It was more profitable to drive 20 - 30 minutes to a hot spot or a rich neighborhood where I knew I would get worthwhile offers. (and also not end up in the hood!)
As a user there is a strong pull not to tip after paying the premium for the initial service. For example an order for a $10 burger costs $20 and is delivered cold, I don't really want to tip for that. But then the driver shows up and its some down on his luck father lugging his son around because he can't afford child care, of course I'm going to tip every driver I see from then on (and feel ashamed for using the service in the first place).
Either consumer tolerance for convenience spending is going to break, or the prices will just keep going up astronomically as a perverse form of inflation (indirectly suppressing all jobs who's compensation isn't similarly skyrocketing).
If i read the article correctly, that may be the optimal strategy. Trouble is, if these drivers see what they are making up front, they may be more inclined to turn you down.
There is (or was) a movement on Instacart where you'd tip $0.22 to show that you intended to either tip cash or increase the tip amount after delivery (which somehow benefits the shopper).
As a pizza delivery driver, your pizza shop is your base and you only go out when there's an order that needs to be delivered. My friend used to work at Pizza Hut and he was getting reimbursed for gas (per mile but it was slightly more than his gas mileage so i suppose it covers for wear and tear?).
As far as i know, you're not getting reimbursed for delivering DoorDash and the pickup location could be on the other side of the town.
I don't think DoorDash has to be less efficient for traveling than pizza delivery.
With pizza delivery, you have to drive to the person's house then back. So you cover the same road twice for a single delivery.
But with DoorDash, theoretically, then could see there's an order from A to B, find a driver near A, have the driver deliver to B, then match that driver up with an order from near B to near A. So the driver could do 2 deliveries in a single out and back trip.
In an ideal world, maybe - but most delivery drivers employed by the restaurant (like pizza delivery drivers) take multiple orders at a time to deliver. You're going to have to get very lucky to beat this on average with DoorDash or similar services.
Ha, same here. I thought my catering side job was pretty sweet (7€ an hour!) until I once scratched someones car on the way to work and it cost me 350€, which was more than I had earned in that job.
I've since realised that cars are very expensive and you should probably not take a job that requires a lot of driving around in your own car if you don't get reimbursed for it.
No doubt. I had an IT job that required me to drive around to schools in the city. Well, I didn't have some special parking pass or anything. If I got a ticket, or hit a red light camera, I'd make negative money for the day potentially. I ended up biking everywhere. The traffic in the city was so bad such that there was no time difference anyhow.
Those repairs are the deeply-embedded, systemic problems that creep up and ambush you one day before work, forcing you to decide between a $1k car repair -- often the barest minimum-cost repair you can find and negotiate -- or forking over a few times that much for an entirely different car to drive.
I can usually get a rental for ~$20/day, which buys time to find a better vehicle. A teenager can't get a rental, but they can probably borrow a car from their parents for a few days/weeks until a decent opportunity comes up.
$2000 will get you a pretty decent vehicle and is probably a better investment than a $1000 repair.
Really simplistic view: Before the hour of work I had $10003 of vehicle, $0 in my pocket, and an hour of time. After the hour of work I had $10000 of vehicle, and $3 in my pocket.
With the assumption that you are going to eventually pay that $3 back into your vehicle, by paying for repairs or buying a new one, you basically just "borrowed" money from your vehicle.
> you basically just "borrowed" money from your vehicle.
so wouldn't it then make more sense to just sell the vehicle for $10003, then place that money in an interest earning asset like a bond, rather than "borrow" from the value of the vehicle?
Most Americans can't manage daily necessities (groceries, childcare, doctor's visits, etc.) without a car.
Then maybe you ask why they don't have a cheaper car.
Generally, a cheaper car costs far more to maintain. The total annual cost of ownership of a 2-year-old Camry is far lower than a 10-year-old Camry. But to get that lower cost, you have to temporarily convert more of your money into that car asset.
End result: your cash is stuck in your car, and DoorDash/Uber/whatever lets you liquidate it without selling your car.
> Generally, a cheaper car costs far more to maintain. The total annual cost of ownership of a 2-year-old Camry is far lower than a 10-year-old Camry. But to get that lower cost, you have to temporarily convert more of your money into that car asset.
That’s a poor example, since a Camry is notoriously reliable and needs minimal maintenance. And ten years really isn’t that old. The depreciation on the two year old car would outweigh the maintenance on the ten year old car. I believe that 5-10 years old is the sweet spot for TCO.
I think it's more that dealerships usually carry newer cars, and it's a lot easier to get qualified for a loan at a dealership than for a private car sale (or at least it's perceived that way). The types of people doing Uber or Doordash aren't the type that can pay cash for a car (Uber even restricts you to newer cars last I checked).
A lot of people see car payments as being "normal" and a necessary expense. I have never had a car payment, so adding $200+/month is not something I'm going to consider. However, many people don't have any real cash in savings[1] 40% would struggle with an unexpected $400 expense, 20% don't have $400 in the bank. Personally, I keep at least $500 in cash at home, and I keep enough to cover my single largest "expected" sudden expense (e.g. replace my car), or last at least 3 months without pay (6 months right now since I'm a contractor), whichever is bigger.
The culture around debt is truly alarming. People pay $20k+ at 4+% to drive a car that may be more "reliable", when they could pay ~$10k at 0% (or enter your opportunity cost here for keeping cash) for a car that's approximately as reliable over ~5 years. If both follow the same depreciation curve, buying an older car with cash is way better than buying a newer car on credit. My advice is: buy a cheaper car, pay yourself whatever the car payment would've been on the more expensive car, and use that fund to replace/repair your cheaper car (never pay more than 50% of the value of your car for a repair). I would be very surprised if the majority weren't better off buying older cars with cash than newer cars with credit.
Definitely agreed. A cheaper car can be a better deal, however anyone who's poor isn't necessarily going to have the resources (time, secondary transportation, and $650 for a water pump repair) to manage it safely.
A financially well-off family may have multiple cars, a garage, and some spare time. They can incur the risk of an old cheap car much more easily.
> The total annual cost of ownership of a 2-year-old Camry is far lower than a 10-year-old Camry.
Really? Maybe 10 years ago but cars have become remarkably good recently. I wouldn’t expect a 10 year old car to give you many problems beyond maybe the difficulty of sourcing parts.
A lot of the push towards fuel efficiency led to tech that was in some ways or another half baked.
Examples:
- Direct Injection : Good for Emissions and Fuel economy, but many first generation systems have carbon build-up issues (Toyota D4S and -newer- Ford Ecoboosts don't have this problem because they have 2 sets of injectors)
- All the transmissions: Ford's DCT is notorious at this point for reliability issues, Hyundai's DCT is not looking so hot so far, Nissan's CVT is a joke, Subaru's CVT is a bit of a diceroll as to whether it blows up at 100k or not, the ZF 9 speed that many manufacturers uses has issues...
I'll note that SOME of these are newer problems, but most of them started happening around 10 years ago and are only finally getting smoothed out.
As a counterpoint, however, the costs of all of these newer safety systems is driving up repair costs in accidents, as well as the insurance premiums for newer cars.
Re the direct injection comment.. one small trick can save you $300 on engine flushes from carbon buildup: you can get an oil catch can installed for under $100 that solves this problem.
But you can’t argue direct injection is worse than older fuel injection. You save more gas, get better performance (even though you don’t get as many valves), and have a cooler running engine with direct injection. That’s a net positive for the environment and your wallet over the life of your car
And this is why working under this scenario, the vehicle is a money losing asset (where every dollar you earned driving costs a dollar in vehicle depreciation, even with a tax deduction, it's still a money losing asset).
The deliverer has to be able to earn $1.15 (at least) per dollar depreciated from the vehicle for the work to be "worth it".
The other issue is uncertainty - you have no idea how much you will earn on a given day or if this will be the day your car finally hits one pothole too many and dies.
But you can estimate it. Record your earnings every day, any compare it by the hour, day, week, and month, as well as miles driven each day. Estimate the total cost of driving (IRS estimate of ~$0.50/mile is a good place to start). Use this simple formula:
(Income - expenses) / hours worked = hourly wage
Is your hourly wage reasonable? If so, it may make sense to optimize away your expenses and generally stay the course. If it's not, would changing your work hours or location make it reasonable?
Unfortunately, I get your feeling that people only look at the income and ignore the rest of the equation (hey, I got $50 tonight! I had to drive 100 miles though...). If you're making $3/trip, you had better drive less than 6 miles or you just lose.
The problem is how to turn car-value into cash. You have a car worth $10003 and your current needs can be filled by converting $3 per hour.
chii is suggesting you sell the car. That converts the entire car at once. Then you don't have to spend any hours! As an optimization on top of that, they suggest you store the value in a bond, and pull $3 per hour out of the bond instead.
The real problem with this idea is that selling the car leaves you with no car.
Your objection that "you need the cash now" is based on a misunderstanding of chii's idea. chii's idea does get you all the cash now. It gets you the cash far far faster than $3 per hour. It gets you the cash so fast that you could actually invest almost all of it and pull out $3 per hour and do things you actually want to do during those hours.
It's not "buy a bond, have no money today, have more money tomorrow".
It's "buy a bond, drain the bond for $3 an hour today, have more money tomorrow".
Compared to having 10k under your mattress, the bond has no downside.
What do you need a car for? If it's just to go shopping, consider paying for delivery services instead of being the delivery service. If it's to get to a day job, compare car ownership to mass transit or bike committing. All of these cases can be estimated fairly easily (IRS allows deducting ~$0.50/mile, which is a good first estimate for total cost of ownership per mile).
Unless a car is a certain model, it's a liability instead of an asset, so it should be treated like any other expense. If you only use the car for local trips and commuting and taking the bus/biking is doable (perhaps less convenient), then buying a cheap car, keeping a few weeks of food on hand, and taking the bus to work whenever the car breaks down is likely way cheaper than buying a newer, more reliable car.
I used to have two cars (married with kids, so one car for each parent), and then decided to start biking to work to improve my health. I noticed that I can bike most days, and the insurance alone was enough to convince me to deal with the occasional inconveniences (e.g. when it snows, I bike to the bus stop).
The problem is that most people don't actually do the math and just assume that owning a car is better, when it's not most of the time.
He's saying: Sure it costs me money to maintain the vehicle, but that's tomorrow's me problem. Today I get cash. It's like you took a loan from yourself with your vehicle's health as the collateral.
"The only reason I do it at all is because the few orders where customers tip high enough to make it worth it keep me going on some of them." - Lee, DoorDash worker in Hendersonville, TN
Also of course they may have not done the math yet, or they may be doing this to try and fill in the gaps between their other two shitty minimum-wage jobs that never give them enough hours to be an actual full-time employee with benefits.
It feels more like gambling than "filling in the gaps". Casinos, video game loot boxes, mobile games, etc are all based on the idea that an occasional dopamine hit will keep people interested. A good tip now and then seems like the same thing.
It's quite likely that someone working multiple jobs will be worse off doing something like Uber and Doordash part time, but they feel like they're better off because they occasionally get that dopamine hit.
I think everyone should record everything about these types of side hustles. It's quite likely that the extra miles on your car completely erodes the money you make. The IRS allows deducting $0.50/mile, which is a pretty reasonable estimate for vehicle costs. I drive an older hybrid, which I paid cash for, and my cost is still ~$0.25/mile for repairs, insurance, depreciation, and gas (gas is <$0.10/mile if you get better than 26mpg, so it's very misleading).
I don't know about that. I've never seen the same driver twice...not from Doordash and not from any other delivery service except the two that have the drivers as actual employees.
I'm sure the churn is huge because the pay isn't there.
I am curious about how they selected workers to sample. If the advertisement was, "Pissed about your DoorDash wages? Share them with us!" or anything similar, I'm not sure what conclusions can be drawn from the analysis.
Though it's not likely too distorted, because the average hourly gross pay was similar to what DoorDash cites [we can't tell how close because DD doesn't explain their exact methodology]; just the net pay is very low.
I reread the article. What's super distorted is how they're calculating expenses. Sure the IRS will let you deduct 58c per mile, but that doesn't mean that's what it actually costs. Unless you're stupid, you use an intelligent car like a used Corolla or Fit for a job like this. Maybe a nicely used Prius. A sensible driver would incur expenses of about 20c per mile.
So that means their estimate of expenses is about 200% higher than what it should be. Since they don't really provide sufficient data to recalculate their estimates, it's hard to say exactly what effect this might have on their conclusions, but it probably changes them significantly.
I estimated about $0.25/mile, which includes insurance, repairs, and depreciation. Gas is<$0.10/mile if you get better than 26mpg (assuming $2.60/gallon, which is approximately the average). My estimates:
- insurance - $100/6 months for a second car (from when I was debating selling my second car)
- repairs - $400/year (I do most of the routine work myself)
- depreciation - $1000/year
- misc fees - $150 (registration, parking, occasional tickets, etc)
My second car costs >$1500/year. I bought it used (~7 years old) for $10k, and I've had it for 5 years and it's currently worth ~$5k, so my depreciation estimate seems reasonable, perhaps conservative.
If I drive 10k miles/year (I drive less), that's >$0.15/mile + $0.07/mile (~40mpg Prius), so $0.25/mile seems like a decent low end estimate. If you drive more, depreciation will be higher.
When you have no money net income is pretty damn obvious. I'd argue instead that they're actually pretty rational.
The job requires no training and is untaxing both physically and mentally. Despite driver complaints, it's much more flexible than the vast majority of unskilled jobs. I'm sure for most long term drivers, the job basically sucks -- but it's still better than their next best alternative.
It's certainly better than getting a payday loan or something, but there's a good chance many workers are operating at a net loss, especially if they don't do their taxes right (e.g. claim a deduction for car expenses).
Couple this with the general lack of financial education among the populace (40% would have trouble with an unexpected $400 expense, 20% don't have $400 in their bank account) and we have a real problem.
As a society, we need to do a better job of teaching people how to evaluate opportunities. Driving 10 miles for a $3 delivery is probably a net loss, unless you can work out a clever tax arbitrage system (e.g. it costs you $0.25/mile to drive, but you deduct $0.50/mile on taxes).
Even the most clueless and innumerate person is going to notice when they've been working and getting paid for a month, haven't paid any bills yet or bought anything but food and gas, and still have $0.
The problem is that gas is a small part of the equation. You also need to account for depreciation, increased repairs, and opportunity costs (e.g. Uber may require a newer car than you'd otherwise get). It may look like you're making money because you make more than you pay in gas, but I'm guessing people aren't noticing that their day job is subsidizing their side hustle for infrequent expenses.
I use the IRS figure of ~$0.50/mile to ball park an opportunity. When I calculated it for my car, I got closer to $0.25/mile, but that's because I got a good deal on a reliable, used, efficient car (~$10k for a 60k mile Prius) and I do most of my own maintenance. The average driver (having a shop do repairs, worse mileage, buy from dealer with loan) will likely be closer to the IRS figure.
It does not pay $0/hr. Even the TFA states this. Only if you first disregard 88% of the total pay (the tips) and then subtract an overstated expense line-item do you end up with a number close to $0.
The actual number is that Average Gross Earnings are $18.54 per hour. Obviously there are also some expenses, but average expense is not actually $0.54/mile. $0.54/mile is what you get to deduct from your income on your tax return. (So there's actually a tax advantage here too.)
In other words, the guaranteed amount covers more than your expenses, your earnings come from tips, sometimes in the form of cash, and you get a preferential tax deduction on top. It's actually a great deal.
The simple answer to your question is that DoorDash has so many drivers because the job is easy to do and pays well. But for ideological reasons, some people think this kind of employment arrangement should be illegal.
After bike commuting for 10 years and now working from home, I ask that question all the time.
My only guess after asking around is people think they "have to". People put their head down and forget to think about the bigger picture. Maybe working for DoorDash is the same type of thing?
A bike commute for me would be a minimum of 2 hours (twice a day) and I'm almost at the years of experience the vast majority of remote jobs start at (which isn't a small number like 2), so you could say I "have to".
Yep, it's totally someone's choice to live in a neighborhood with affordable housing as opposed to a mansion across the street from their place of employment. Gee, looks like we both know how to make irrational overgeneralizations.
This is classic Stockholm syndrome with commutes that I see all too often.
What's wrong with the commute? The fact that, if you didn't have the commute, you could do all those same things and also anything else you can think of. The opportunity cost is enormous.
You can't have your PhD advisor at home, but consider how many people commute to jobs that could be done just as effectively from home/remotely. How many man-hours are lost to that.
Also, it seems like you're using public transport. You're lucky that that is a) a viable option and b) pleasant enough that you don't want to murder people after a few weeks of doing it. The majority of commuters around the world are using personal transport, which has a huge carbon cost and does not allow for doing other things while commuting.
Personally, I wouldn't mind a 40 minute train trip and a 5 minute walk either side, but a 40 minute drive is awful. I've gone from a 40 minute drive to a 10 minute drive, and I feel "free-er" because of it.
Must be a place with good public transit? I know someone that drives an hour and a half one way just to work in a call center and drive back. So around 3 hours wasted. I guess only music, or maybe a audio book or podcast then in that case but I've seen people text and drive, read books and do makeup before though too even if you aren't supposed to. So many parts of the US lacks public transport, so if you don't have a car you are limited so much. However in the bigger cities there's more options.
My brother works for Uber Eats while between gigs in LA TV; he's actively working towards a full-time job.
In certain cities, I'd be willing to bet much of the demographic who takes this kind of job are in similar positions. That is, they're looking for full-time work while wanting to make a little income on the side. In my brother's case, he makes minimum wage or better.
This is a fairly simple problem to manage though. The computer shouldn't say "no", it should say "This trip isn't fair on our drivers because the standard fee doesn't cover the costs. Would you like to pay the extended distance fee or cancel this job?" It'd still put some people off, but fewer than you'd think. A lot of people want to be ethical when they're buying things.
An extended distance fee being proposed when I live the same distance from the restaurant as the last time I ordered and didn't get charged the fee feels like you're not doing your job in "handling things" for me.
People outsource tasks in part because they don't want to think about the details. Where do UPS trucks get their fuel? Do they use diesel or gas? How long between oil changes? Do the drivers get cold in the truck? Where do Door Dash drivers use the bathroom while they're working? Is the grocery store losing money on those end cap bargains? How does the electrician figure out how to not get shocked? How does the plumber solder pipes without burning my house down? How do roofers stay safe while installing their safety anchors? How long do painters' paint brushes last?
I don't want to think about any of that; I just want to have a reliable service provided with the details handled for me. Every bit of friction you put into the system with fuel surcharges, baggage fees, resort fees, blackout dates, surge pricing, weekend surcharges, and the like represents both financial and attention loss to me in terms of the value you are providing. (At least surge pricing, weekend call-out surcharges, and blackout dates I can understand as maybe essential to giving an attractive overall proposition.)
I was surprised to learn recently - and it may just be one of the rideshare companies in one country, or it may be more widespread - that the driver may not be told the final destination until they have accepted and started the ride.
So you might keep doing loops back to the airport (or a good restaurant precinct) because most of the jobs are OK; but it’s only when I hop in the car for a $10 ride to the next suburb that you discover you’ll lose money on this ride.
Actually, the rideshare folks usually (depending of course on location and personal preference) are after the airport drives. It's the onesie-twosie "bar-hopping" short trips that they don't like.
That’s what I’m getting at. Airport drives are usually the best, but if you aren’t told the passenger’s destination you could be forced to go all the way out to the airport to accept a tiny fare.
Great for me as a consumer; lousy for the driver’s income; and a reason why (to answer the question asked) some drivers / riders accept loss-making fares: they don’t get told in advance how much the trip is worth.
> This begs an obvious question: why are people choosing to do this if it pays $0/hr? It’s voluntary. Can they find something better to do with their time?
Maybe because they want to do something purposeful with their life, even if it doesn't earn them any net cash? Maybe a "Thank you" and a smile from a delivery customer makes for a better day then just being "lazy" and watching TV/consuming social media?
I find it hard to believe someone who wanted to work for free on something meaningful would choose to volunteer for DoorDash in preference to a normal charity?
I don't think most of them were in a situation to say "I want to work for free" and then chose DoorDash (per definition a for-profit job) over volunteering for charity (per definition a non-profit job). I could imagine they found the job, it generated some cash flow and only they later realized that the math doesn't work out.
"However, if a worker rejects too many jobs too frequently, they may receive fewer job offers as a result."
They take those jobs because they lose all access to the chance of profitable jobs otherwise. The people working for door dash aren't exactly the sort of person with the ability to fully understand probabilities and statistics either. I'd say it's fair to assume their business model works by bullying the same psychological behaviors as videogame loot crates, lottery tickets, and casinos. That one huge order that pays $30 after tips quiets the anxiety of losing money on the previous ten orders even if the actual math places the driver in the red.
Why can’t we have normal businesses where you employ your workers and charge your customers the real cost of the transaction ? If that is not viable, don’t start the business to begin with. Let’s just go back to first principles, can we ?
But what about "move fast and break things"? What about early employee's equity? What about the billion dollar valuations? What about justifying 500k/year engineers' salaries to over-engineer things you can do with a boring web framework and a handful of servers?
Why would you ever consider running a legitimate, profitable, down-to-earth business when you can do the above instead?
This is also why I quit the startup scene and despise most of them (including some that I used to work at). I try my best to focus on local, real businesses. They might be legacy, you might find "uncool" technologies but most of them at least have a real product they sell at a profit without screwing anybody and the work-life balance is often better.
Is there any other country other than the US where paying service workers below minimum wage is legal or acceptable? I've been around a fair bit of Europe and surroundings and I've never encountered the US system.
There's also no other developed country that has drug problems like the US. If you stop treating people with respect, they need some way to cope. First painkillers, then the opioid crisis, now alcohol-related deaths are on the rise. And I recently read that the new hip thing are LSD nose spray trips timed to your lunch break.
LSD can't be "timed to your lunch break" as far as I know. Whether micro, threshold, or full-on trip, LSD usually has a duration of around 8-12 hours before you're back to baseline (and tolerance is long, usually two weeks before another similarly-dosed experience would have the same potency)
It does if you’re part of the moral panic that deems substances “evil” and thinks they should all be banned. You know, the same people who would rather kids die than have access to testing services because it might encourage some of them.
This is pedantic, but service workers in the US are generally payed the legal minimum wage.
The distinction is that a different law exists for that category of workers, not that they aren't paid legal wages.
Other countries do make exceptions to their pay rules. For instance, younger people that are likely to be working temporarily may be excluded from benefits rules.
This is even more pedantic but no, service workers are not generally payed the legal minimum wage.
Wage theft by employers is over $20 billion a year (more than all other kinds of theft combined) and wage theft happens predominantly to those being paid minimum wage.
17% of low wage earners are subject to wage theft -- 2.4 million people just in the 10 most populous states -- and the average amount of theft is $64 a week. Which doesn't sound like a lot but is 25% of their weekly wages.
While not legally the same, the UK comes close with its minimum wage/living wage gap: society acknowledges that minimum wage is not enough to make a living (in some areas) so it expects workers to be paid the living wage instead. I don't think this is mandated by law though, so you could have situations where workers are paid below the socially expected "minimum" wage.
However, those countries generally have decent benefits and social housing, so people's net wages provide an adequate standard of living. And the wages are collectively negotiated by unions in a way that is now very rare in the anglosphere: https://www.theguardian.com/world/2020/jan/12/nordic-countri...
You're right that those countries don't have a government mandated minimum wage. That doesn't mean there is no minimum wage in practice though.
Scandinavian countries have massive powerful trade unions that work to negotiate standards and wages for everyone. Even if you're not actively part of a union, your employer will almost certainly use Collective Labor Agreement negotiated by the trade union. This CLA guarantees certain things like vacation time, minimum wages, break times, etc.
Now you could not use a CLA drafted by a union and instead try to fuck people over with your own contracts. That's not very likely to work though since these countries tend to have strong social welfare systems coupled with free healthcare. So if people quite due to shitty pay and/or hours, they can still make do with social benefits. Also people here in Finland at least, know that for most jobs you absolutely want a CLA drafted by one of the unions because that CLA protects you.
Most companies use the CLA's as a base and allow employees to negotiate better contracts if they want to. E.g you can ask for less hours and more pay, the CLA generally only guarantees minimums. Now an employer can always try to renegotiate the agreement with the union for their workers, but you better be damn sure you treat your workers right since if the unions decide that you're not, they will fuck you up.
These unions are massive and hold a ton of power. In Finland over 70% belong to a union and it is not uncommon for them to strike if the employers are trying to fuck them up. The best example of this is the recent chaos with the Finnish Postal Service.
To give you an idea on what happened, the postal service tried to renegotiate the CLA they used, which would have resulted in worse pay and hours for the workers. Union was taking none of it and went to strike. The postal service tried to get around this using questionable means which broke International Labour Organizations rules. This led to a ton of sympathy strikes which eventually ground the nation to a standstill.
Public transportation froze, flights were cancelled, trains didn't run, all goods transported by postal cars were boycotted by unions this led to stores not being stocked up as they should have for example, ferries and cruise ships under Finnish flag froze. Among numerous other things. The unions eventually won after inconveniencing thousands of people and costing corporations tens of millions of euros.
The workers didn't get shafted and their rights were protected even without a government mandated minimum wage.
Even with unions this probably wouldn’t happen in America. People just don’t organize, strike, or care about their civic duties or expressing their opinion. I don’t know what happened to us. Maybe we’re all just lazy now?
I suspect that US laws have made unions mostly toothless. I know this has happened to teachers unions. It's illegal for teachers unions in TN to strike(I don't know about other states). What power does a union have if they can't strike? Also Unions have been demonized in the US media and now public perception of unions is extremely low. Which is sad because they're one of the few tools workers have to bargain for their own rights.
Well, it's only public service unions that can't strike (it depends on state/federal/etc. so there are a lot of things here that I can't accurately comment on) and even so I'm not sure that I find myself agreeing with collective bargaining for public employees either. It's a topic for discussion, for sure.
But the point I wanted to make was that I think even if we had stronger unions, Americans like myself have become lazy and afraid of being inconvenienced. We had Occupy Wall-Street, but I'm just not sure. I just don't envision my fellow Americans striking, together, for things. We're barely united on anything as it is right now.
Just some general thoughts/comments. I'd love to hear other perspectives on this.
Now you could not use a CLA drafted by a union and instead try to fuck people over with your own contracts.
That would be illegal in Switzerland (not really a business hating commie hell hole). When a collective agreement exists for specific areas it applies to all companies in that area.
That's not to say that dodgy firms don't try to get around it, but if they're caught it it gets expensive and troublesome. And checks (alas, I don't know if sufficiently) are conducted.
It's not so clear as it's not entirely objective to determine what companies exist in a certain area.
The national mail in Finland is tasked to do letter service, which no other postal company is doing. Letter service is also the most human intensive job there is.
> The Scandinavian countries don't have a minimum wage either
Their unions regulate wages, and in practice this means the same thing as a government-mandated minimum wage. It just so happens that their structure is a little different.
> Germany didn't even have a minimum wage until fairly recently
We don't really have a minimum wage in Austria either, but wages are regulated per industry. So employers are still required to pay certain wages, even though we don't have a general minimum wage.
And there's no such thing as including tips in the wage, tips are always extra.
(There is one major loophole, of course, which is hiring people as contractors, but that requires convincing the authorities that your employees are not really employees)
The minimum wage ensures that those 'poor people' can afford to eat.
The countries you mention don't need minimum wages set because they have other mechanisms or even just social norms that ensure nobody is having to work 8 jobs to try to feed their kids.
Right, which is exactly what I was saying, those societies mentioned as not having a minimum wage tend to have other mechanisms to either set an effective minimum or structures to help out. It's not like those other countries without minimum wages also give poorer people the finger in every other way, like the US does, and as I imagine would be the case in your (obviously) libertarian fantasy-land.
Might want to update your profile then, it still says London.
What do we know about Singapore? It has masses and masses of public housing, so people are looked after in a way that doesn't happen in the US. The US is very keen to push this sort of thing on employers - see also health insurance.
It's a different model and I would agree probably a worse one, but either way it's the state ensuring people have their basic needs met.
Minimum wages don't outlaw poor people's jobs. They just cause poor people to be paid more since the more money that moves from rich to poor, the richer the whole society gets. You need to keep the money moving.
> The Scandinavian countries don't have a minimum wage either
That didn't mean that people were working several jobs to get by, not that they were paying to work. Maybe it was the easily accessible public welfare that forced employers to pay a living wage, or the large proportion of union membership.
This is a misunderstanding on your part as the system was/largely still is simply different There was no government mandated minimum wage but the pay in sectors is negotiated and fixed by negotiation between employer and employee representative organisations per sector. The rise of new kinds of pay models to undercut these systems fueled a push to in addition introduce a minimum wage. For most places the minimum wage does not replace the negotiated rates but just covers sectors for which there's no negotiation system.
Why do I keep expecting Canada to be better than it actually is?
Although, a quick web search shows that at least in Quebec, minimum wage for tipped workers is 1.9$ lower vs. not applying at all in many US states - better, but still sad.
Yes, tipping culture is alive and well in Canada. A common misconception among foreigners is that the existence of universal healthcare means Canada also shares the economic structures of Scandinavian countries. It doesn't. Canada's economy is structured similarly to the US, but much more dependent on natural resources.
The service sector is actually considered to be a low-cost offshoring center for American businesses, due to lower median salaries, and a weak Canadian dollar.
I moved from US to Australia and then Canada. Canada is almost the same as US with consumer rights, customer service, citizen rights etc which is that's it's almost non existent.
Australia is one of the best countries imo. Minimum wage with penalty can be up to as high as $100 per hour ( yes $100) and starts around $25+
The minimum wage is $19.49 AUD which is significantly lower in USD. Many industries will have higher minimum wages, but it certainly doesn't start at $25.
Misconception. Service workers must be paid the higher of state, city, or federal minimum wage. If wages plus tips are not equal to or greater than the minimum wage then the minimum wage must be paid.
If everyone suddenly stopped tipping then service workers would default to minimum wage. For anyone with a different experience your employer was breaking the law.
But what I think you’ll find is that it is the service workers themselves who prefer working for tips.
I’m sure most people would prefer more money. But if service workers were paid “normal” wages people wouldn’t feel guilted into tipping.
Minimum wage in NYC is $15/hour and $10/hour for food service workers. Some restaurants have started paying their servers more and not allowing tips. But are the employees actually earning more? I doubt it.
> Some restaurants have started paying their servers more and not allowing tips.
Service bad? -> complain to employer, employer punishes employee
Service OK? -> employer pays employee for work done
Service good? -> employer pays employee for work done and customer pays employee for good work (and employee shares it with all the other employees who are in the chain of service).
In the UK wait staff are tipped based on service and are still paid at least minimum wage.
Tipping is generally based on the quality of the establishment, you tip at a higher class restaurant but you don't at restaurants that are franchised or common brands.
That's barely the case any more. The amount of gig-economy wage slavery in all countries is sky rocketing. No country is really spared. You can find people everywhere who are juggling e-scooter, ride share, food delivery etc jobs at an excruciating schedule for barely any money.
In Sweden in particular, it seems that the waves of refugees in recent years have only fueled this.
If those refugees are grateful for the opportunity to work and earn, and are in much better conditions now than in the countries they fled, and also wouldn't necessarily qualify for higher wage jobs because of language/cultural/educational barriers, why is that so bad? And if it allows more prosperous Swedes to enjoy the convenience of food delivery for a cost that they think is worth it, is that so terrible? To me, the market is working here. People are getting what they want. If these companies didn't exist, both customers and workers would be doing the next most attractive thing to them, which would be by definition worse from their viewpoints. Customers would be wasting their valuable time driving to get food or eating less appealing food at home, and workers would get some other menial, low paying job. If the only available jobs had a high minimum wage and benefits, then they would simply go unemployed and become wards of the state.
The problem is the market isn't efficient, and the middlemen (Uber, DoorDash, ...) are getting an outsized share of the revenue relative to their only essential contribution which is (automated) organization. They are only able to command that percentage because regulations filter out potential smaller undercutting competitors. That's also why they fail in "developing" countries with more relaxed policing. Not because there isn't the necessary wealth gap between workers and customers, but because they are undercut by "regular" black market workers.
If they really aren't adding enough value relative to what they extract, then they are opening up a competitive weakness that eventually should be exploited by a new entrant in the marketplace. Right now, the whole area is being opened up by these intermediaries, which are spending enormous amounts on marketing/advertising/promotion to increase customer awareness of the offering and to establish relationships with restaurants. Once this market is developed, a new entrant with a comparable offering but much lower take rate could make sense-- so long as they are very efficient and low cost in providing this service. The fact that DoorDash is making zero/negative profit now suggests that they aren't taking too much of the pie. If they were, they simply wouldn't be able to recruit couriers once the word was out that it was a bad deal.
Have you been to Europe? The standard of living is below what is expected in the states.
It's nice to say removing tips and adding vacation is what workers want, but how will United States workers afford premium phones and buy larger houses?
I get why this is being downvoted, because treating an entire group of people as having one mindset and expectations isn't great, but it's a valid call out.
Expectations are different. It's an entirely different set of cultures. More space, more premium goods, more modern conveniences seem to be common goals more Americans share than not. We like new cars and big televisions. So it's not surprising that employment compensation is oriented toward that, and less toward things Europeans tend to value like healthcare, social services, etc.
This all breaks down, of course, when wages are low _and_ you don't have a social safety net.
Have you been to the US? "Workers" here do not "buy larger houses", we rent tiny apartments when we can and live in our cars/streets/friends couches/wherever we can otherwise. "Premium phones" are irrelevant, the difference between a new iPhone and an Android is maybe 1 week of rent.
If you're in the US and your problems are vacation time, "buy[ing] larger houses", etc., you're not in a position to even get tips. You would be in a privileged class of educated workers with a perfectly fine quality of living.
We're talking about the average US worker. This person has never taken a vacation in their life because they've never been in a position to. They take what they can get, which in the case of the gig economy is often well below minimum wage. If they have a roof over their head it's likely only by the grace of a wealthier family member. This person works their ass off performing the unskilled labor that makes our world go round and they get treated like a criminal for it.
This is essentially all people like Bernie are proposing, it's really insane how much backlash there is against the idea from people who would only benefit from such a redistribution of wealth. It's Stockholm Syndrome 100% honestly
This is absolute nonsense, as evidenced by countries where this is not the case (e.g. all of Europe AFAIK). Furthermore, if you have a point to make this comment does not do it. It's just some vague handwaving with fancy words.
There's a middle ground here. A restaurant owner can decide to put out a sign that says "our employees are paid a good wage, tipping is not expected".
In my area, restaurants are allowed to pay waiters less because tipping is expected, and a restaurant is required to pay workers more if they don't make minimum wage after tips. It's really odd, and we should just remove the exclusion for restaurants. I think simply removing the exception will end up fixing the culture around tipping.
When customers tip, and total wages in the tipped jobs are thus higher than in the non-tipped alternatives, workers will change jobs until expected total wages are about equal.
What works in other countries, eg Japan or Australia, is that different social norms lead to much less total tipping. But you can't transform eg American into Japan or Australia at a whim.
It's up to customers to make tipping the exception and not the norm. But that's hard: because the individual tip goes directly to that starving poor devil who served you and has a relatively big impact on their life, but only a very small impact on workers' expectations when changing jobs, there's a 'tragedy of the commons' going on: each individual tip you give provides you with a nice warm fuzzy feeling of altruism, but it damages your total goal of having decent base pay.
So, it's very hard for individual customers to change that. But: individual employers can drive change. They can forbid tips and prominently display that they do so, so that both prospective workers and customers now what they are in for.
Prospective workers will demand higher base pay. Customers will take the lack of tip into account when comparing prices.
A Google search for 'restaurant bans tips' shows a lot of write-ups about experiments. It's not a panacea, of course.
I don't think the system will fix itself by banning tips. That doesn't help anyone.
What society should do is require a decent base pay (regardless of tip). That way I know that my server can make ends meet if I tip them or not, and tipping them becomes a curtesy, not a necessity.
I think a lot of people making comments like this don't realize that the market price of waitstaff's labor is probably similar to fast food or other retail work--$10/hour, maybe a bit more. With tipping, waitstaff can make really good money, to the point that any efforts on the part of a restaurant owner to replace tipping with higher wages tends to result in the entire staff quitting.
My point: If "society" "requires a decent base pay", then waiters are going to get shafted, unless by "decent" you mean $40+/hour. The people getting screwed by tipping culture are not the front-of-house workers, but the other employees and the customers.
I think the most compelling argument is to point out that the people doing the real work in a restaurant--the cooks and the dishwashers--are paid much worse than the waitstaff, who really aren't even necessary.
> I think the most compelling argument is to point out that the people doing the real work in a restaurant--the cooks and the dishwashers--are paid much worse than the waitstaff, who really aren't even necessary.
the qualifications for FOH vs BOH staff are really not that different, except that you have to speak decent english to be a server. either one you can get hired on the spot with no experience if youre willing to start on the low end. ask any cook whether they would rather do the server's job and they'll probably say no.
I'm not suggesting to "replace" tipping with anything. I'm saying you should pay waiters enough so they don't depend on tips. Tips are a nice bonus, but they shouldn't be necessary.
Which is the situation in most places other than the US.
Here in Austria waiters are grateful if you tip them, and they might think you're cheap if you don't tip, but they still make enough to live even without tips.
It's not up to customers if the laws in the US are changed to stop the (IMHO abusive) practice of paying below minimum and then expecting tips to make up the shortfall.
This is just a natural outcome of the way venture capital funding works at the moment. When you care more about speculation than what's actually fundamentally occuring, you're going to get businesses funded that are not even able to survive on those basic fundamentals. If it weren't backed by large capital, it couldn't exist.
This isn't always a bad thing, but on a whole, it does distort the market. At some point you have to weigh up if the good effects of this are worth the bad effects. If there were higher taxes, costs, or otherwise more risk for investing, it would limit that a lot.
I feel like the VC game is a massive bubble, similar to what happened in 2000. There are a ton of high profile startups with tons of VC capital that (from the outside) don't seem to have a clear path to profitability, yet they continue to grow regardless. Sometimes they find a niche before going bankrupt, sometimes they don't. It's a huge house of cards, and I'm worried what will happen in the next recession.
I have business ideas, but I'm completely avoiding the VC game for now because I don't want to play the "build now, figure out profitability later" game where I'll likely be be forced into a profit model I don't agree with. My current approach is:
1. brainstorm solutions to problems I see
2. brainstorm a few profit models for the best ideas
3. Build an MVP, waiving the profit model initially (free trial and whatnot) to validate the idea
4. Implement profit model
5. Seek funding for growth
6. Exit
The VC game seems to go 1, 5, 3, 2, 6 (step 4 comes when?), which seems super broken. It seems like VC funding -> IPO is the profit model for many projects, and the board (after IPO) is left to figure out how to sustain that.
Sorry for the late reply. I think you're probably right about it being in a bubble, but I'm not sure we'll see it having a large crash that we typically associate with bubbles (some people would even say there is no bubble, if it does not pop).
VCs are backed by large amounts of capital because most government policy has been to stimulate growth and the only way they know how is by giving away large loans at insanely cheap (in many cases even negative in real terms) interest. This means that VCs can actually lose out on money by not taking those loans and investing it, and that in turn drives a lot of speculatory investment, as well as inflates asset and stock prices which the government then uses to show how good it is.
This is why you correctly spotted that step 4 is not a requirement for start ups anymore, because so long as you are big enough to be speculated on, you're good for funding. Whether that means it's broken really depends upon your definition of working, as a lot of people believe it's fine because all seems to be going great. This is the gambler's fallacy. It's all fine, until it isn't.
In many cases they may find the price cannot be raised enough to generate profitability, and the service can really only exist in a speculative VC-funded bubble.
We can, stop using and supporting these predatory companies.
Never use Uber, Lyft, Doordash, Uber Eats, AirBnB etc. No exception irregardless how easy or cheap it may be. It's a small sacrifice but can and will make a difference.
Using these services to me is like asking a waiter to pay for part of my meal. When it comes around to paying the bill are you able to face someone and ask them to pay for part of what they just served you knowing that they are barely making a living?
- incumbent taxis are also predatory services that abuse drivers, arguably worse than Uber/Lyft - and they're a shitty rider experience in many many ways.
- hotels are OK but rarely provide kitchens, let alone friendly hosts who bake you killer banana bread (yesterday's stay)
- delivery from individual restaurants is rarely available at all, and thus you're going to call a Postmates/etc to help pickup. Delivery is all-but-required when feeding a large group, e.g. work function.
One has to decide, do I give up some comforts to make things better for others or not?
I'm sure it's usually pretty easy to convince oneself that others won't give up the comforts so nothing will change and just continue using the services.
How does it make things better for those people? By taking away their opportunity? So they go home, and rethink their life, and come up with a better way to make money?
Great, but is taking away bad jobs really the best way to do that?
Just to be clear, whose life is being made better by you not taking delivery of food? The now unemployed delivery worker? The restaurant workers? Yourself?
> delivery from individual restaurants is rarely available at all
You can thank the likes of Uber Eats, Deliveroo, etc. A lot of restaurants would've otherwise had their own service, and some actually replaced their own service with these companies.
That's not going to happen, the majority will always be drawn towards the cheaper choices. Work conditions and minimum pay are things that need to be regulated, because people won't chose their burger place based on how much their staff earns.
But the law you have now is the result of the political power you are summoning. How do you parse that neither consumers, drivers, companies or the electoral body has your preferences in mind?
If you are hosting guests at the home where you also live, I doubt anyone in this thread would oppose that. It's literally a bed and breakfast in the traditional sense.
Airbnb corrupted that by incentivizing a business model where investor groups buy up entire properties solely for Airbnb use. That's very different from what you're describing. They're acting as full-scale hoteliers, but evading hotel regulations and zoning laws by setting up shop in residential neighborhoods. And of course, reducing the overall housing supply for all the people who actually live in that area.
Is AirBnb as bad as the rest? I had understood the problem was that it was so lucrative it hurt people looking for a place to live. This is very different from the problem with Uber, Doordash etc. In Uber and Doordash, the person being hurt is a member of the transaction; in the case of Airbnb, I had thought they're a third party who couldn't get in.
My gut non-PhD economist feeling is that AirBnb has very few people from the bottom 2 quartiles participating in it in the first place. It's wealthy land owners offering short term rentals to people with substantial disposable incomes.
Cash and capital poor people are largely excluded (priced out) from the platform altogether, whereas on DoorDash and Uber/Lyft they comprise the vast majority of the service providers.
Out of curiosity, are there any more ethical alternatives to AirBnB? My partner travels a lot for work and doesn't like staying in hotels. He's fine with staying in rooms vs. whole apartments (which seems to be the biggest strike on AirBnB's model) but it's pretty tough to dig up credible renters for each place he visits. Is there a Craigslist-like option or are hotels the best bet if we decide to drop AirBnB?
There are traditional B&Bs--though much less so in cities and many presumably cross-list on AirBnB these days. Honestly, for regular business travel, chain hotels may be boring but they have 24 hour desks and a certain level of standards (which varies by chain). When I'm travelling for business, the last thing I need is lack of predictability.
I can't think of a tech company with more ethical well-meaning employees than AirBnB. Have you actually ever interacted with someone who works there? They even have a pretty strong ethics/value interview to weed out unethical people. If you don't believe me, go apply for yourself.
This isn't about the moral qualities of people there, it's about the impact the company has on the housing market and how it treats AirBnB owners. There are links in the comments here to studies on the harm AirBnB does, nobody said a thing about the employees being unethical.
I've stopped using the "move fast and break things" garbage but for an additional reason: customer service is outsourced to monkeys and respect isn't a thing. Some of these companies would argue and bullshit me about a 10£ refund on a 2 year old account which has been used daily and netted them over a thousand in revenue. Eventually did a chargeback (it isn't about the money even, but being treated like shit meant I was out for revenge) and switched to the local companies that big tech was supposed to "disrupt".
How they fob you off when things go wrong (secret camera in the room, outright scam with no actual place to stay, etc) until the media gets wind of it at which point they make it right and issue a BS apology?
The latter part is the worst. It's one thing to be a dick but at least if you are then own up to it and be a dick to everyone equally. But this is literally the worst, as it explicitly aims to exploit the most vulnerable (who may not have a huge social media presence or a contact within the press) while attempting to keep a good public image (given the company is still around I guess that's working).
I'm fortunate to live in a city with restaurants within walking distance and a solid public transport system. As such my use of food delivery services and Uber/Lyft is almost zero.
When I need delivery, I'll check to see if they offer it in-house. For pizza places I know they hire their own delivery staff, so I make sure to tip well.
You don't know what the waiter's situation is, so how can we presume to know better than they do? Are you sure the people who are choosing to work for these services would agree?
Secondly, you have the option of giving a nice tip. I suspect they'd prefer that over not renting their Airbnb or whatever service they're offering.
Read the article. They say they don't take tips, but the relationship between tip and actual pay is so arcane, that driver payment is higher when you tip $1 than when you tip $8. Obviously they don't know what the algorithm is, but it's not as simple as "we'll pay the driver the delivery fee and keep the service charge, and you can give them something on top of that". It's more like "we'll take as much of the tip, the delivery fee and the service charge as we possibly can get away with, even though that's completely in contradiction to what the purchaser thinks their doing".
You could book an Uber to two streets away and tell the driver that you actually want to go to somewhere else, and you'll pay the guy under the table. Bet they won't mind that.
Illegal. At least where and when I drove for Uber. And there were plenty of local government inspectors posing as passengers trying to catch these sorts of shenanigans.
Is there any reason why the law would be involved? Uber might not be happy but why does that have legal implications? Does this also mean they're not allowed to drive for anything else but Uber?
Ride hailing is regulated, in part, to ensure that people aren't being taken advantage of. It's also regulated to make sure that taxes and fees are being properly collected.
Taxis and private bus services weren't always regulated, but they became regulated because they took advantage of their customers. Similarly, regulations are placed on ride hailing to that passengers get what they paid for and there is at least some accountability.
I recall the relocation agent I was setup with when hubting apartments in SF..
She was freelancing and looking forward to Obamacare -- having not had healthcare in 15 years.
I took note of that, because to me not having health insurance seemed completely unreasonable. I almost left the continent when HR tried to convince me I should trust "retroactive" insurance -- and I would get the policy after 30 days, lol.. maybe in just paranoid :)
Oyo is worse than the others. They think they can offer the same type of hotel quality without employing all the quality inspectors of Marriott/Hilton/IHG/Hyatt/etc. I don’t think any educated adult could be dumb enough to fall for that.
I have to assume any VC taking part in a business that needs additional human labor to scale and hence has significant marginal costs is simply betting on being able to dump the company in the public markets.
Yes, his current strategy seems to be find a magazine article worthy “leader” like the we work guy or the oyo kid and hype them up and hope he can dump it before there are no buyers. I don’t know what his strategy was in the past, but he commands quite a bit of money so maybe it worked at some point.
If you try to compete with DoorDash using that model, you will either have to charge much higher prices than they do, or you will lose money on every transaction. Either way you will go out of business as long as DoorDash or similar companies are able to compete with you.
Well, if the other employer existed first, you might be right. The other employer might be able to deplete the labor pool of unemployed people with cars to a sufficiently size that DoorDash wouldn't be able to get started, if there were so many people willing to pay for grocery delivery (at the higher prices the other employer charged) that they could employ all or essentially all of the potential deliverypeople. But if there were more potential deliverypeople than potential customers, including at the lower price point that DoorDash can (hic) deliver, or if DoorDash already existed and could therefore prevent the new company from breaking into this two-sided market, then no.
The reason the sequence matters is that, for DoorDash to need to raise its payments to its workers in order to keep them from running to the other employer, that other employer needs to be able to hire all of them, or at least so many that DoorDash finds its access to the labor market significantly restricted. But clearly a new entrant starting small will not be able to do that; they can only do it once they get big. But they will not be able to get big if they are charging higher prices for the same service as DoorDash.
So, no, much more reasonable assumptions are available to justify my inference.
These companies have discovered that there is a large market of people whose need for quick cash with no friction exists and is willing to lose money (in terms of car wear and tear) to do so.
>Why can’t we have normal businesses where you employ your workers and charge your customers the real cost of the transaction ?
You have those. What's wrong with trying alternatives? There are good reasons to contract out services. If you're building widgets maybe it doesn't make sense for you to also employee cleaning crews or maintain your own transportation infrastructure - why not contract out these non-core services?
On a side note, the kind of question you raised typically can be reduced to "I don't understand why anyone would do something different, therefore they shouldn't do something different" ... it's in the same spirit as a UFO consipracy theorist who may say "This light in the sky isn't Venus, isn't a satellite or a plane and isn't anything else I'm familiar with, therefore it must be aliens". You have to be careful with setting constraints on innovation because YOU can't envision why it makes sense.
Because these companies are still finding enough labor after lowering what they pay out drastically. It's the market in action. You're right that as a society we have a duty to step in with policy here, as we do with minimum wage, but this isn't a violation of "first principles".
It is a violation of fair market principles, at least in spirit. While legal, the "gig economy" is based on abusing contractor laws and regulations (e.g. lack of employee protections, sick time, ...) - which means that companies that follow the letter and the spirit by properly hiring and paying their workers are priced out of business.
That's when I thought the economy was doing really great and unemployment was all time low. But wait people want to work for below minimum wage? Something is broken
Well that happens when there is no meaningful social security system... when the options are working for a dollar an hour or not having anything to eat, people are forced to work such "jobs".
People are being mislead. It appears that DoorDash has preemptively scrubbed anything from their website stating that drivers can make n dollars per hour, but at one point, I remember seeing the claim, somewhere between $15/$25 per hour.
I'm not trying to disparage people, but without some level understanding of economics, it's not obvious that whatever rate you receive is not your 'wage'. These gig jobs don't pay wages, they pay something closer to a fee. Maybe it's more like rent. Somebody else can comment on the pedantic differences. Point is, the relationship is skewed in favor of the party doing business, not the party providing the service.
So what? This is capitalism, you have the freedom to seek other opportunities elsewhere. Hold up. If this is your business model, you are dependent upon the current wave of de-regulation. What are you going to do if/once the pendulum swings the other direction? What happens if minimum wage ever becomes something reflective of a living wage?
These gig jobs posit themselves, subtly, as a 'side-hustle'. Something which shouldn't have to exist, but does, simply due to the lack of well-paying jobs for those without advanced education.
Which first principle is opposed to taking VC bucks?
Because that's the model. Let's make a story good enough to be funded and then pay ourselves with that money. The business just has to appear to be a good enough bet to sell it to the money.
I mean the idea is that you operate at a loss until the economies of scale catch up and you begin being profitable. Starting with the low price let’s you maximize growth, and you make it up on the back end. That’s not a problematic system. What is problematic is if there are no economies of scale.
Economy of scale applies to production think chips & screens. What economy of scale can DoorDash achieve? Persuade everyone to be paid below fair wage? Push the margin of restaurants down?
I see a kind of future where restaurants are reduced to a kitchen and packing area, with no seats. Then several kitchens bunched together to save on rent and utilities. Then cut out the drivers with air or land based drones. Then start lobbying so that the drones can move underground, and new buildings have to include a drone delivery vent / conveyor belt.
You already can live your whole life and never leave a house, working remote or playing the stock market, having everything delivered. It's grim. And it's coming.
> I see a kind of future where restaurants are reduced to a kitchen and packing area, with no seats. Then several kitchens bunched together to save on rent and utilities.
Isn't that a food court? I'm not sure you've described a particularly grim future. I mean, there's lots of grimness in the future. But you haven't described it.
Most restaurants in my city use UberEats. A fraction of them have bothered to setup with the 2nd most popular competitor. Fewer yet with the 3rd. And you never see the 4th or 5th. UberEats becomes an obvious money-on-the-table might-as-well for everyone with its incumbency.
Same with the user perspective. I use UberEats because it has all the restaurants. I'm not going to download the 2nd most popular app.
I'm not saying DoorDash, I'm saying the business model, which is what the poster was rallying against. I've no particular opinion that DoorDash will achieve an economy of scale.
What you lose on transactions today you make up on transactions in the future, when the volume reduces your cost basis to the point of profitability :)
It’s not clear how that would ever happen with last-mile delivery, unless we’re talking about something like drones or self-driving cars, and of course, those problems seem like they would be better solved by drone companies and self-driving car companies.
In the part where I have to deliver it 10km away ($3 in gas round way), and if I reject your kind offer you’ll blacklist me from ever being offered a job again?
Except what every startup in Silicon Valley doesn’t seem to realize is there’s a revolving door of VC funded “businesses” that fail because they can’t make a profit after 10 years. And if they try to make a profit (for example by raising prices) users move on to the new cheap option.
