What could be more American than the rise of the “sharing economy?” Airbnb lets anyone, anywhere in the world, rent vacant spaces, for less than a hotel sticker price. JetSmarter lets users charter private planes from a smartphone. For a variety of services like these, new online platforms enable ordinary Americans to slap a price on the otherwise unused.Thousands of them have begun making money with an extra set of wheels and a few hours of time through Uber.
Uber may be the most successful example of the “sharing economy.” Supporters back its business strategy as simple and efficient. Its new model, sometimes referred to as a “helping industry,” boils down to one core idea—easy connections between buyer and seller. But this new economic trend has generated controversy. Are companies like Uber empowering new sectors of the economy? Or are they unsafe threats to more regulated industries? Ridesharing services in Illinois, especially the widely-used Uber, have recently borne the brunt of these questions.
The debate centers on Uber’s ability to safely transport passengers. But the controversy has largely overlooked the livelihoods of drivers--for both taxis and rideshares. If lawmakers shorten Uber’s leash, these drivers will feel a direct impact on their bottom lines.
At the moment, a resolution to the debate is anyone’s guess. However, this controversy is already influencing the daily routines and futures of Illinois drivers.
The New Year marked twelve months of conflict between policymakers and Uber. The clash came to a head over the summer, when lawmakers unveiled a proposal—House Bill 4075—that would subject Uber to some of the same regulations as taxi drivers.
The bill passed overwhelmingly in both houses. But fans of the “sharing economy” and Uber’s rideshare service derailed the idea. In the second half of 2014, Uber secured a spirited online petition and a favorable veto from Governor Pat Quinn. Uber continues to operate under loose regulations, as before, but ongoing concerns over Uber’s safety and business practices signal this debate will continue for quite some time.
Ata, who asked us to omit his last name, is a Middle Eastern driver for Flash Cab in Chicago. He supports the taxi companies over Uber. Though Uber has had its share of safety concerns, taxi companies have also faced both criminal and civil safety concerns over the years. Still, Ata views taxi companies as more legitimate establishments, and their employees as more trustworthy.
“You have confidence in the taxi driver, not [like] Uber,” said Ata.
Ata explained that, unlike Uber drivers, he and other taxi drivers required intensive education. Taxi drivers learn the layout of Chicago and how to best navigate the city’s streets. According to Ata, this training ensures that taxi drivers get customers to their locations quickly and safely.
Education is just one part of a larger taxi regulatory framework, often referred to as the medallion system. This structure helps ensure safety and quality, but also creates significant barriers to entry.
There are three major players in the medallion system: the legal owners of the medallions, the driver, and the dispatch company. After Ata completed training and obtained a chauffeur's license, he was required to pass a written test, a vision test, and a criminal record check. Only then did he acquire a medallion, which sell for hundreds of thousands of dollars. Medallions are set at a fixed number— seven thousand in Chicago—and insurance is mandated. Ata argues these regulations protect both the customer and the driver, in all aspects of the transaction.
“Taxis are more commercial. The insurance is better. Commercial is insured up to $2 million while private only gets around $200,” said Ata.
Not everyone agrees that taxis are a better deal. Uber’s convenience and lower cost have drawn customers away from drivers like Ata. This movement has thrown the taxi monopoly and its regulations into question for the first time since the early twentieth century.
For taxi drivers like Ata, sharing the road with Uber and Lyft devalues their occupation. Operating in the same market means sharing business, leading to less earnings for taxis. A rising share of their earnings is going to virtually untrained drivers. Ata believes that this trend discredits a taxi driver’s training and time commitment.
What’s more, medallion prices are plummeting with the spread of Uber. A medallion currently averages around $270,000 in Chicago, down from $330,000 last June. From a cabbie’s perspective, years of hard work have become irrelevant with a new wave of self-proclaimed chauffeurs. These concerns prompted the drafting of HB 4075.
Also known as the Transportation-Tech Bill, HB 4075 underwent revisions, vetoes, and amendments over the course of 2014. The bill originally proposed a total revamp of the Illinois Vehicle Code, but eventually centered on one goal: to apply similar regulations to both Uber and taxis.
Had HB 4075 passed, Uber would have lost the freedoms it currently capitalizes on. Uber would have faced restricted airport drop-offs, required emblem labeling on its vehicles, regulated hours, mandatory increases in insurance, and further regulations.
HB 4075 would have effectively halted ridesharing in Chicago. While Uber users were understandably against the bill,, HB 4075 enjoyed overwhelming support in both houses. To the public’s relief, the bill was vetoed by Governor Pat Quinn in September. At first, Mike Zalewski (23rd District), the bill’s primary sponsor, hoped to override Quinn’s veto.
According to 11th district representative Anne Williams, that outcome appears unlikely. “I have been hearing there have been some developments with the legislation,” she wrote to the Gate. “[It] looks like the override will not be called and instead Uber may look to pass some regulatory language similar to what they have agreed to in other states. It seems to be a work in progress, and looks like further compromise language may be an option.”
Zalewski is currently working toward a compromise bill, willing to settle for a portion of the original proposal.
While the finalized terms are still in flux, this pared down bill would focus on transparency between the state, the customer, and the ride-sharing company, all as a means to increase safety. The bill states that ridesharing companies should comply with local governments’ chauffeur regulations, which are less stringent than taxicab statutes. At the moment, Uber doesn’t require drivers to obtain chauffeur licenses, though taxi drivers must as part of their training.
Insurance is another emphasis. Dispatchers would be required to demand liability coverage, and drivers would need to provide and display proof of insurance for themselves and the vehicle. Though no amount is specified in the bill, Uber currently holds up to $100,000 in coverage for injuries, and up to $25,000 in property damage insurance.
In discussing these regulations, many politicians are mindful of Illinois’ high unemployment rate: 6.6% in Illinois and 7.2% in Chicago, well above the national average of 5.8%. With over one-third of the Illinois population in poverty, Uber could provide a valuable source of income for struggling residents.
One of those residents is Joseph, a middle-aged Uber driver from Chicago. Until six months ago, Joseph worked a variety of manual labor jobs. But after suffering back problems, manual labor was out of the question. When Uber provided a lifeline, Joseph grabbed it. Uber enables Joseph to earn a livelihood. He now drives Uber full-time, and has been loving his new job for the six months he’s been a member.
Joseph believes the taxi versus Uber debate can be easily simplified.
“If you could pay $10 instead of $20, why would you pay $20? To me it’s all the same—you get the same product and it’s more of a convenience. It’s all a ride. You are paying someone to take you somewhere. And that’s your choice,” said Joseph.
Joseph is referring to the different pricing models between Uber and taxis. Taxi companies follow a strict per-mile pricing structure, but Uber’s model is more flexible. Each Uber customer in Chicago pays a base fare of $1.70, in addition to 90 cents per mile and 20 cents per minute.
Supporters claim that Uber’s lack of regulation drives down prices. In most cases this holds true—but not always. Prices vary depending on traffic. My ride with Joseph cost $7.81 to travel 2.5 miles from Randolph to Columbus Drive, coming out to $3.12 per mile. Ata’s ride, from Hyde Park to Midway airport, was 15 miles and cost $26.35—only $1.76 per mile. While Uber and the “sharing economy” may usually be the cheaper option, it’s still one of several.
While Joseph acknowledges his pay rate has decreased, he says that to make up for it, you just have to “work a little bit harder.” But he also knows that the price breakdown translates directly into more work.
“Slip a few bucks [to the driver], you can guarantee it’s going to be hushed up. That’s a fact.”
Not all drivers share Joseph’s acceptance of Uber’s pricing model. Current taxi driver Victor has seen both sides of the issue.
Since immigrating to the US from Nigeria over twenty years ago, Victor has dabbled in both Uber and Lyft before returning to taxi driving. Victor welcomes any set of regulations stemming from HB 4075. He’s hoping for greater driver protection, a neglected talking point in the conversation.
“I switched to Uber from taxi...but then they decided to slash the money we make so I quit,” he explained. They didn't consult us at all about it. It is not democratic. Top thing is: if someone complains about you, Uber doesn't say anything to you about it. They can just fire you with no due process. That's not right. Uber doesn't protect its drivers.”
During the ride to Midway Airport, Victor emphasized the well-being of the drivers.
“If they pass the law, it has to address the issues of the driver. Uber has to pay drivers at least minimum wage,” said Victor.
Victor makes an important point. Politicians crafted the original HB 4075 to focus on quality control and passenger protection. The current set of regulations does not fully address driver protection.
“Uber is a great concept but [they’re] doing it wrong,” Victor explained. “They need to be equitable to everybody. Uber drivers before were very happy to be Uber drivers, now not anymore. We all used to support the legislation but now I can't say the same. The people that work for a $17 billion company should be happy!”
These concerns are hardly limited to Chicago. In the past few months, Uber has garnered an impressive amount of attention in the global arena. Though Uber has shown what success in a “sharing economy” can look like, its employment and pricing practices have been increasingly questioned. In Sydney, Australia, Uber is doing damage control over excessive “surge pricing” during a recent hostage situation. In New Delhi and France, the company has been banned from operating altogether. In Philadelphia, anyone caught driving for Uber is fined, and taxi companies have sued Uber. Other restrictions have been implemented in Colorado, Florida, Texas, and many other states and cities.
What does all of this mean for Uber in Chicago? Mayor Rahm Emanuel supports Uber, but only if it operates on an equal playing field with taxi companies. Chicago has begun to create Uber-like apps that will enable customers to summon taxis, part of a larger Taxi Driver Fairness Reforms package. This plan is supported by taxi unions and City Council members.
Uber’s model is a key component of Chicago’s version of the sharing economy—one that is lightly regulated. This developing market intertwines regulated and less regulated services, ensuring convenience for customers. If Uber can provide the same benefits for drivers, it may be the proving ground for this new model’s success. Not only in Chicago, but perhaps worldwide.
Still, it is unclear what the current debate will mean for transportation prices, the drivers earning those payments, and the customers relying on their services.
According to Victor, “people say they won't take UberX if it's more expensive, but that is life.”
(Serina Wu and Jenny Kreps contributed reporting to this article)