Uber and Sharecropping

Dice_(PSF)

There have been several interesting items published recently on risk and inequality. First, a piece by Dillow making the point that workers often take bigger financial risks than investors

Better Capital’s stake in the firm took the firm of a secured loan, which means they’ll get first dibs on its residual value. Thanks to this, Jon Moulton, Better Capital’s manager claims to stand to lose only £2m – which is a tiny fraction of his £170m wealth.

By contrast, many of City Link’s drivers had to supply capital to the firm in the form of paying for uniforms and van livery, and are unsecured creditors who might not get back what they are owed. Many thus face a bigger loss as a share of their wealth than Mr Moulton. In this sense, it is workers rather than capitalists who are risk-takers.

Kemble makes the same point about Uber:

Drivers are responsible for all operational and maintenance costs. Most people who drive for Uber and Lyft do not carry commercial insurance and are, in fact, committing insurance fraud by not disclosing to their insurer that they are using their vehicle for commercial purposes.

If drivers are injured on the job, they are not covered by workers’ compensation. All the risk and capital investment are shouldered by the driver, while the fat cats at Uber and Lyft headquarters in San Francisco reap a risk-free reward.

As does Asher-Schapiro:

But under the guise of innovation and progress, companies are stripping away worker protections, pushing down wages, and flouting government regulations. At its core, the sharing economy is a scheme to shift risk from companies to workers, discourage labor organizing, and ensure that capitalists can reap huge profits with low fixed costs.

This phenomenon isn’t new to Uber and other driving companies, though. The NYTimes review of Sven Beckert’s “Empire of Cotton,” for instance, explains that sharecropping was the 19th century’s “sharing economy”:

With the American Civil War and the end of slavery, the labor question became urgent. Southern planters turned to sharecropping and tenant farming rather than a wage system. The formerly enslaved agricultural workers, eager for autonomy, preferred this arrangement to one with a former master as boss. This solution to the labor question became the global standard. It shifted considerable risk from capital to labor.

Crop failures, whether caused by weather or insect infestation, were the burden of the tenant farmer, not the planter. Moreover, the financial structure kept agricultural workers chronically in debt. Everywhere the state favored capital at the expense of labor, notably vagrancy laws and crop lien protocols. Large landowners and merchants dominated.

In a population that tends to see outcomes and overlook probabilities — and to blame those who lose and credit those who win — risk-shifting is a relatively invisible and pernicious way of reallocating wealth. And the legal system is implicated: from vagrancy and crop liens to worker’s compensation and unionization rules.

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