Uber Strikes Could Be the Start of Something Bigger

(Bloomberg Opinion) -- I booked a 7:00 a.m. flight on May 8, and for once I’m glad I’m flying so early. Otherwise I wouldn’t be able to take an Uber or a Lyft to the airport. From 7:00 to 9:00 a.m., drivers across the U.S. are going on strike. The strikers’ demands include more job security and a larger cut of the ride-sharing companies’ revenues.

Sadly, the strikers are unlikely to win their fight anytime soon. With Uber poised to issue shares to the public and Lyft’s stock price having dropped since its IPO, and the companies are under pressure to reduce their persistent losses. The quickest solution is to cut driver compensation, which the companies appear to have been doing despite increasing dissatisfaction.

Eventually, the government will probably resolve the issue by deciding whether gig economy workers should be classified as employees or independent contractors. If it’s the former, wages and benefits will rise substantially, and companies like Uber and Lyft will be in trouble. Donald Trump’s Labor Department has come down firmly on the side of the corporations, rescinding an Obama-era statement declaring gig workers to be employees, and ruling against the workers in a recent dispute.

The battle lines are thus being drawn for a new struggle between capital and labor in the U.S. The gig economy itself is small -- maybe around 1 percent of the workforce. Even including independent contractors and other arrangements, non-standard work represents only a modest slice of the economy: 

But gig economy workers are typical of another, far larger category of workers -- those whose jobs involve providing services rather than making goods. These always represented a majority of the economy, but in recent decades the proportion has become overwhelming:

Within this broad category, labor-intensive industries like education, health care, leisure and hospitality, transportation, and warehousing occupy an increasing share:

This trend is not surprising. As manufacturing, retail and other industries become increasingly automated, labor will shift into the industries that involve more human-to-human interaction. Although this can pose a problem for productivity growth (since it means a larger share of the economy is represented by industries where technological progress is more difficult), it represents a healthy labor market at work. Despite the rise of the machines, the market keeps finding things for humans to do.

The question is whether the new jobs will pay as well. Some have blamed the shift from manufacturing to services for increased wage inequality. Indeed, until recently, manufacturing workers tended to earn more:

But the manufacturing pay premium may have been as much about bargaining power as it was about productivity. High rates of unionization allowed manufacturing workers to insist on higher wages and better benefits, as evidenced by the so-called Treaty of Detroit between the United Auto Workers and the big auto makers in 1950. Unions weren’t just a way of translating high productivity into high wages -- in fact, economic historians have found that unionized workers were generally less skilled than their non-union counterparts.

Could a new Treaty of Detroit improve jobs in education, health care, restaurants and other service industries? In some ways, service workers may have more potential bargaining power than the manufacturing workers of a hundred years ago. Manufacturing is relatively easy to relocate: The movement of factories to other countries and to less union-friendly states played a big role in undermining unions. But you can’t move a restaurant or a school or a hotel or a taxi service to China or Kentucky. At least in theory, this means local service workers could wield great power if they figured out how to unionize a large percentage of the workers in an area.

The strikes at Uber and Lyft are one sign that a new wave of labor activism is finally taking hold among service workers. Another is the wave of teacher strikes that swept the country in 2018. In San Francisco, 2500 hotel workers staged a successful strike in 2018, winning raises, pensions and better worker protections. Overall, 2018 saw 485,000 workers involved in stoppages of some sort. That’s almost 20 times the level of 2017, and the most since 1986:

Is this the start of a new labor movement in the U.S.? Will local service workers finally demand that corporations stop treating them as a floating, disposable labor pool, and create a new Treaty of Detroit for the new working class? It’s too early to tell, but a union revival looks less like a pipe dream than it did two years ago.

To contact the editor responsible for this story: Mark Whitehouse at mwhitehouse1@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.

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