How Uber and the sharing economy could pave the way for worker-owned companies

The rise of the "sharing economy" — Uber, Feastly, Airbnb, and the like — has been causing some consternation as of late.

One complaint is that these companies are competing unfairly: Their business model allows them to skirt the regulations that apply to traditional taxi or restaurant companies. Another complaint is more subtle, but more frightening: that these technologies are exacerbating inequality and driving us towards a "servant" economy, where large pools of poorly paid and economically insecure workers will spend their lives providing all manner of petty services for the well-heeled elite.

Pascal-Emmanuel Gobry laid out the grim logic succinctly: The efficiency gains of connecting workers to customers via the internet applications will drive down prices and thus incomes, while the new profits created will all get sucked up by the small group of Silicon Valley companies that created the platforms, along with their shareholders.

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But last Friday, a taxi service opened in Newark, New Jersey, that might show a way to resolve that Gordian knot.

The Transunion Car Service will run 24 hours a day, seven days a week. It will operate off an Uber-like mobile application, passengers will be able to pay with wireless credit card machines, and they’ll be able to see advertisements and public service announcements on an interactive screen in the cab.

Most importantly, it was put together by a local union and will be owned by its workers. "Through the nonprofit organization the drivers will be part of an employee stock ownership plan," NJ.com reported. "They will also have health care, retirement benefits, and free legal representation."

Back in December, Bryce Covert and Mike Konczal argued in The Nation that worker ownership is exactly where platform services like Uber should go. Uber's drivers provide the labor, they provide the vast majority of the capital in the form of their cars, and they pay for their own maintenance and gas. All Uber itself does is set the rates and terms of their work, then slice off a 20 percent cut of the revenue. "If any set of companies deserves to have its rentiers euthanized," they concluded, "it's those of the 'sharing economy,' in which management relies heavily on the individual ownership of capital, providing only coordination and branding."

As Covert and Konczal note, the conventional wisdom is that worker-owned cooperatives succeed when the labor the workers provide is relatively homogenous. Taxi cooperatives are successful because all the workers are supplying the same basic type of labor, for example. But when the labor and other inputs are heterogenous and diverse, coordination within firms becomes really hard, because everyone has competing interests that don’t easily match up and can be at cross-purposes. Management can play different factions off each other to line its own pockets, and politics infects the company.

That's why most companies revert to ownership by shareholders. Their input to the firm — money — is always the same, no matter what the firm is or does.

The interesting thing here is that it's not just Uber that has the "homogeneity of input" advantage; pretty much all the services the sharing economy is getting into have it. Feastly workers cook, people on Airbnb provide rooms to stay in, and so on. And given how many American jobs are being created in the service sector — and how many more will likely be created in the coming decade — it's worth noting that this logic applies widely: housecleaning, janitorial work, shipping, the list goes on.

Interestingly, there's a big push in Silicon Valley right now to make tech companies insist on good standards — living wages, benefits, predictable schedules, etc. — from the contractors they rely on for security guards and bus drivers and cafeteria workers and so forth. It's not clear how far the effects of the sharing economy could push into those sectors. But it's not hard to envision such a shift as service work grows, contracting increases, and the economy becomes more specialized.

The other challenge to worker ownership that Covert and Konczal note is big upfront capital costs. The sharing economy technologies help enormously with that as well, by linking up workers who already own the necessary capital (cars, kitchens, etc.) or who can easily obtain it. And while not all of those broader service fields include this feature, many of them do.

The rise of smaller union bargaining units could fit in with this trend as well, as workers organize into more cohesive groups of service providers in regional areas.

The big breakthrough represented by the sharing economy technologies is that they massively lower transaction costs. Suddenly the traditional business models we needed to link customers up with house cleaners, cooks, taxi drivers, shipping drivers, and rooms for rent are no longer needed.

What's encouraging about the Transunion Car Service is that it's adapting this technology to a model in which workers control their own labor, enjoy better benefits and job security, and get the profits from those efficiency gains pumped right back into their own pockets. Transunion could conceivably drop its prices below Uber's if workers were willing to take the same pay, because it wouldn't be sending that extra 20 percent to Silicon Valley. Or Transunion could charge Uber's prices while returning that 20 percent to workers as increased pay. And customers still get the service they expect.

We may be seeing is a tipping point, where America's transformation into a service economy is intersecting with new technology to make worker-owned cooperatives viable on a scale they weren't before.

If you're looking to push back against the dark side of the sharing economy, this might be a start.