Uber wins a major coup for the gig economy

Uber can keep on trucking.

Credit: Creative Commons Lic.

The most important tech startup in the world just scored a major victory.

A settlement with Uber drivers -- the pay-out will be around $100M total, or a few hundred per driver -- means proponents of the gig economy can breathe easy.

Two cases reached a resolution yesterday in California and Massachusetts. The 450,000 drivers who essentially work as freelancers running their own business will not be viewed as employees. Uber will not have to pay expenses or deal with any employment issues, like social security, health insurance, or unemployment compensation. As part of the settlement, Uber has to give drivers multiple warnings before they deactivate them from the service.

Uber is valued at $62.5B, which is a far cry from Google and Microsoft but is impressive considering the company is still private. Most of that value is related to the incredible number of drivers that tool around and pick people up and charge a fare.

What it really means is that the gig economy is alive and well. Drivers who decide on a whim to start using their personal car to drive people around don’t have to deal with any roadblocks. You could freelance for Uber after signing up, although it takes about a week before you get approved. After that, you pay for your own insurance, maintenance, and gas. Off you go, raking in the cash. 

Most importantly, it means other tech companies might not have to worry about this issue as much. I wasn’t that impressed with an app in Austin, Texas during the SxSW conference called Favor -- which lets you order a sandwich and other items from a local shop and have someone bring it to you -- but I could see how people could make a living doing that. (Sorry, UPS.) It means apps like this that involve delivery, house cleaning, babysitting, and other services can soldier on.

Or, let’s say you want to run a “company” that provides a place for people to live. You sign up for Airbnb or maybe Overnight, of course. You pay for your own insurance and wait for the money to pour in as you live somewhere else or in the room next door. It might all sound a bit ridiculous in some ways, but the reason I’m in favor (excuse the pun) of this arrangement is that I’d rather people have a way to do work and start their own business. The alternative for companies like Uber is that they’d have to hire all of those workers, which would be mind-numbingly complex. The reason the gig economy is so attractive is because of how quickly it scales. Anyone with a car can sign up. Anyone with a house. Anyone with a bike. The potential is amazing.

Now, so are the abuses. I’ve written before about a few Uber rides that went south. I held on for dear life. But then, I needed to get across town again and used another one. I wish there was a better certification or driver training program, and I believe that’s inevitable, but I also like the idea of giving so many people an opportunity to run their own business. We put up with the annoyances to the gig economy can survive.

Uber is more secure now, mostly due to this settlement. You can argue with the total amount of the payout, which is a small portion of what Uber makes in a year, but it means the arrangement can continue and Uber can keep trucking along.

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