In recent days, we have seen app-based corporations on the offensive. They are blaming rising costs and slagging business on a “Seattle City ordinance designed to give food delivery app drivers a more livable wage.” In the post, “No, the Minimum Wage for Gig Workers Is Not ‘Backfiring,'” Hannah Krieg made it clear that “DoorDash, Uber Eats, GrubHub, and InstaCart” are, in this instance, an empty wagon that’s making a lot of noise. Or, put more visually than sonically, a cowboy who is all hat and no cows. What’s really at issue? Not so much the wage bill itself but the power that’s lost with wage standards.
For obvious reasons, app-based corporations want to operate in a low regulation regime. A minimum wage only diminishes the power to control workers. And what’s the nature of this power? The app itself. It can be turned on or off with the press of a button. Increased government management of this market would make it harder and harder to punish or reward its labor. And all of this is more sordid when one considers that app-based corporations have very low fixed-capital costs. How is it possible they can blame workers for rising costs when, indeed, the workers own much of the fixed capital? Why do we never talk about this absurdity?
I’d be curious to learn more, but it appears as if an SF Waymo tried to drive through a parade on Chinese new year and was appropriately destroyed. https://t.co/tUAI3GKuWU
— Jeff Speck (@JeffSpeckFAICP) February 11, 2024
One of the key debates in the robot-car industry has been: can the technology become cheap enough to replace gig workers, who are more and more troublesome? The CEO of Waymo John Krafcik believes it can if the fixed capital of the car itself is excluded.
Krafcik to Forbes:
“Let me paraphrase it like this: If we equip a Chrysler Pacifica Van or a Jaguar I-Pace with our sensors and computers, it costs no more than a moderately equipped Mercedes S-Class. So for the entire package, including the car – today…”
In short, his company is designing a car. It’s designing a driver. What is this signaling? What exactly is he selling? A future where app-based cab and delivery corporations remove labor while maintaining low fixed-capital costs. What I don’t want to get into in this post is how Krafcik’s science fiction will play out in reality. What I do know is that, today, the fixed-capital costs are comparatively low for the masters of the gig economy. And this fact raises a question that’s almost never asked in local and national papers: Why, if such is the case, are rising costs blamed on the group, workers, who own and incur the costs of maintaining much of the fixed capital?
Many may not know this, but pro-business economists have spent a great deal of energy and time defending the revenue claimed by capitalists, profit. Many, particularly between 1870s and the 1910s, asserted that it’s the price of waiting or, to use moralistic language, abstinence. Much of this waiting was caused by the transformation of liquidity into hard things like buildings, productive machines, transportation and communication technologies. Workers could only supply what Marx called “labor power.” That’s all they had. The capitalist provided the rest, the “means of production,” which included variable capital (the wage bill) and fixed capital (machines, factory, tools, and so on). This concept was not Marx’s alone. It was accepted by most classical economists, including David Ricardo, a speculator who, after making a fortune on the market, decided to spend what remained of life thinking about economics.
“The produce of the earth,” Ricardo wrote in Principles of Political Economy and Taxation, “all that is derived from its surface by the united application of labour, machinery and capital is divided among three classes of the community, namely, the proprietor of the land, the owner of the stock of capital, and the labourers by whose industry it is cultivated.” Ricardo was a conservative. Nothing commie can be found in the pages of his masterpiece of bourgeois reasoning. And so this order of things (capital provides the fixed-capital and workers the labor power of production) was taken as a given in his time. Even the neoclassical school that has dominated economics since the 1970s describes capital and labor as the key factors of production.
But something crazy happened with the gig economy. The factors of production were transferred to the worker but with none of the benefits capitalists enjoyed with this form of ownership. What does the gig capitalist now own? Just the app, whose value is found more in the brand than the technology itself. One would expect a revolution of this kind (the capitalization of the “consumption-fund“—domestic tools, appliances, automobiles and so on) to reduce costs in general: cabs should be cheaper, food delivery cheaper. But not at all. It has become more expensive for consumers and repressed the wages for workers, who must now suffer not only their cost of biological maintenance but that of their machines.
Nothing like this existed even in the raw days of capitalism. Where is the waiting? Where is the physical or real-world investment? How can a thinking person honestly blame rising delivery fees on labor?
Obviously there should be a maximum wage for CEOs and execs of $0.01 a day.
OK, that’s probably too high.
“And all of this is more sordid when one considers that app-based corporations have very low fixed-capital costs. How is it possible they can blame workers for rising costs when, indeed, the workers own much of the fixed capital?”
Charles, labor is a variable cost not a fixed cost. When regulations increase the price of that variable cost price has to rise to offset the rise in costs otherwise the business becomes unprofitable. I know you know this basic fact. Why is there always this assumed premise that these businesses operate at super high margins? They do not. They are low margin businesses so any changes to either the fixed or variable costs are going to result in increase in price. It’s that simple. If you think the regulations are just then argue that consumers should pay a higher price for the service but as several stories have already noted consumers themselves have a threshold they are willing to pay for this convenience and therein lies the problem.
These app services have limited influence on the pricing of the underlying food and products being delivered, there is only so much they can charge in restaurant commissions and customer fees before trashing the demand for their service. They may have lower fixed capital costs, but they also have next to know pricing control and built in razor margins by default. As a result they operate with negative to low margins, and have limited leeway to not pass costs along to the consumers, which as we’re seeing has hurt demand and reduced opportunities for their drivers and restaurants and stores. DoorDash has literally never made a profit, and UberEats has only made a profit in a single quarter since their IPO.
As a long time service worker with multiple clients (independent contractor), I include in my charges the investments I made in tools, transportation (truck), taxes, insurance, and bookkeeping time. Housecleaners , gardeners, window washers, pet sitters, home child and elderly care have existed before apps. Our market is limited to the rich and upper middle class. And often once we get a few clients, clients find us. Most of my clients are socially connected. At least that’s my experience.
When I look at food delivery, and what I think are the costs I would have to cover, I can’t imagine many people would want to pay that. So I don’t think food delivery is a viable business except for high end meals, unless you want to pay exploitative wages. Probably might be different in a dense city like New York City, where no cost for vehicle.
Pizza delivery has been around for decades – no third party techbro app was needed. DoorDash, UberEats, etc. are parasites preying upon the marginalized. Drivers should be employees just like the pizza delivery folks were / are.
Don’t be a sucka.
“An
autonomous
Waymo vehicle
is intentionally set
on fire in Chinatown,
according to SF Fire. Firefighters
said they got reports around 10 people were involved.”
Obv
They’re
Gonna Need
To be well-Armed
poor lil chimbley sweep
forver stuck iinna flu
least you had a Job
@3: “As a result they operate with negative to low margins, and have limited leeway to not pass costs along to the consumers”
And yet, Tony Delivers seems to have found a viable business model for his services. It’s not about charging restaurant commissions and customer fees. It’s about providing a service, priced separately from the meal production of the restaurant. Uber Eats, Door Dash, et. al. seem to be trying to build a business model around a multi-national market, inserting themselves into the transaction between the eateries and the customers. Tony is providing an add-on local service. When it comes to shuffling pizzas around town it would seem that Tony’s business makes more sense. Know your market and know your territory. I hope he succeeds and Uber/DoorDash die horrible deaths. And he’s working for himself. So, no corporate overlords. And the state won’t be able figure out who his employer is to enforce a fixed wage, employee benefits and strip him of his small business tax deductions.
@8- not to mention that Tony has rid himself of bothersome expenses like workers comp and taxes.
@8 There is Washington State B&O tax to be paid. Workers comp is intended to pay for lost wages. As a sole proprietor, Tony earns no wages. He just takes home the difference between his revenue and expenses (unless he is incorporated and paying himself wages).
Don’t like it? Get off the couch and pick it up yourself.
When regulations increase the price of that variable cost price has to rise to offset the rise in costs otherwise the business becomes unprofitable
The businesses are hardly unprofitable. Even with the onerous regulations of “making it so people can live” unfairly punishing the rich for their billions.
But the very notion that price is based on cost is the big lie that apologists like to push. It’s not like that at all and every economist knows it.
Price is based on what the market can bear. It has nothing to do with cost. Prices are raised because companies know they will still be able to sell goods and services at those higher prices. Everyone from Smith to Keynes to Friedman to Galbraith knows it.
The old Seattle City Council seemed determine to kill demand for Uber, Lyft, DoorDash, etc and put all the gig workers out of business.
Congratulations to Mosqueda, Sawant, Tammy Morales, Bruce Harrell–you succeeded in killing the gig worker industry in Seattle.
@11 sure, there is no doubt the market plays a role in determining price but to pretend cost has no impact (especially in a low margin business like food delivery) is wrong. Right now the market is signaling that the price is too high which is why demand is falling. So, if as you say price is really determined by the market, why haven’t the platforms dropped the price to spur demand again?
@2) How did you miss my point, which includes variable costs.
@14 you mention variable costs once but don’t make any connection to price. This is what I took as your central thesis
“And all of this is more sordid when one considers that app-based corporations have very low fixed-capital costs. How is it possible they can blame workers for rising costs when, indeed, the workers own much of the fixed capital? Why do we never talk about this absurdity?”
It seems you are saying that because there are low capital costs these apps have healthy margins and that’s just not true. Feel free to correct me if I misinterpreted your point.
Faulty analysis. If there is a business where capital supposedly contributes very little, then anyone with very little capital could enter and out-compete it. Or employees (like that Tony) could ditch it and organize and DIY.
A simple thought experiment always dispels marxist stupidity – why don’t any of these things happen? What is it that prevents one from starting another Uber? Software is only a small part of that and relatively easy to replicate. Nah, it’s the network; also its 2nd order effects – the reliable quality of service that comes with the network (that even heavily regulated taxis couldn’t provide) + trust that comes with scale. They spent a ton of effort and money building the network, reliability and trust, so obviously they want to be compensated for it. For Doordash and the like, it’s also the restaurant integration, that is probably harder than getting a bunch of drivers.
Of course, at some point we decide that this business model of paying market wages is unacceptable, so instead the wages paid to these workers become minimum, that is, 0! Kinda like we decided historical preservation, design review and other NIMBY BS is more important than market, so we don’t have enough housing.
I think one only has to look at housing cost and compare it to gig wages to realize it’s a failed business model. It’s really no wonder why homelessness is so prevalent. Of course if you live in your car then I see where it could work out for you.