Uber Is Taking a Big Political Risk by Delaying Its IPO

(Bloomberg Opinion) -- The timeline for Uber's initial public offering appears to be firming up, with the company saying this week that it's on track to go public in late 2019. That could prove to be an expensive delay.

While the company works to get its own house in order, by hiring a chief financial officer and moving closer to profitability before testing the public market waters, the economic and political environment are changing. If there were ever a time for a strong labor movement in the U.S., it's now, and Uber could find itself once again in the political crosshairs around the time it seeks to go public.

Uber's problem is that the labor market continues to tighten, especially for the types of people it needs to be drivers. Adding to that, the next 24 months could be a generation-defining period for the Democratic Party, with the politics of labor key to that debate and with Uber emblematic of the rapacity of the gig economy.

The story of the tightening labor market has become ubiquitous, but it's worth thinking about just how tight the labor market might be in late 2019. The Federal Reserve's projection for the unemployment rate at the end of 2019, last made in its March meeting, is 3.6 percent. But since that meeting the unemployment rate has fallen by two-tenths of a point, to 3.9 percent. What's remarkable is that not only is the unemployment rate nearly the lowest it's been in 50 years, but also it continues to decline at a fairly rapid rate, having dropped a half percentage point over the past year. If it were to continue to fall at that rate, it would be near 3 percent by the time Uber seeks to go public, a level the country has not seen since the early 1950s.

This labor market is a catalyst for two political shifts, both creating unwanted uncertainty for Uber.

First is the inevitable Democratic electoral wave this fall. We don't know just how big it will be nationally, but based on everything we know about the cyclicality of politics and the results in regular and special elections since the 2016 presidential election, Democrats are going to pick up seats nationwide. Uber's home state, California, is likely to have a new progressive governor. Newly elected Democrats are likely to be more progressive on economic issues than their predecessors, and they will want to take action – including by helping workers.

The second issue is that the moment midterm election night is over, the 2020 Democratic presidential primary election begins. By the middle of 2019, every Democratic presidential contender will have declared, and they'll all be seeking to make a name for themselves. In a field likely to be large, it's inevitable that one or several candidates will make labor issues a core concern.

Uber, with its checkered reputation, will find itself at the mercy of a historically tight labor market and an uncertain, volatile political environment – just as it seeks to do a big, splashy IPO. The company has already been dealing with labor issues, especially whether its drivers are classified as contractors or employees. The last thing the company needs is a push to unionize drivers. But it's easy to imagine.

In a labor market as tight as 2019's is likely to be, drivers will have lots of leverage, with employment alternatives in other industries at competitive pay rates, especially factoring in all of the costs that go into driving. Uber, on the other hand, needing to go public, will be at its weakest point, having to prove to markets and investors that its labor model is sound and that it will always be able to secure enough drivers.

Organized labor leaders could coordinate with drivers and presidential candidates to call for a nationwide strike of Uber drivers, making demands such as higher wages, paid time off, or any number of other things. Perhaps this would have sounded like a ridiculous theory a few months ago, but teacher strikes around the country should show how fast things can change when workers have leverage.

Perhaps Uber will end up bookending the decade of the 2010s at first, a hot startup that used an app to take advantage of a weak labor market, and at the end, a tech behemoth chastened and forced to adapt.

©2018 Bloomberg L.P.

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