Are Ola and Uber Drivers Entrepreneurs or Exploited Workers?

The binary of employment versus entrepreneurship that forms the framework indicates a failure of public policy to keep abreast of changing times.

Early 2017 was a difficult period for Ola and Uber drivers: Their earnings plummeted[1] by 30-45% throwing their economic planning and household incomes off kilter. This led to widespread protests by the drivers across the country. This period marked a significant turning point in Uber-Ola dynamics, with both companies seeking to end their competition and narrow-in on their bottom lines. Both companies had found it extremely difficult to turn profits, despite a business model that allowed them to jettison all or most operating costs. Uber and Ola typify the intra-capitalist competition that has become the hallmark of digital capitalism where growth is seen as more important than profit, making companies beholden to what investors choose to do with them (Sundararajan 2016, Srineck 2017, Allen 2017).

The platform, or the two-sided digital market, is one of the most compelling models for the distribution of technologies of the Fourth Industrial Revolution (4IR). These technologies use networks, data and information to create the operative environments for companies and determine their success. This has deep and structural effects on what it means for capitalism at large (Beckner 2007). Technological innovation has outpaced regulatory innovation, a reason for why debates in policy and scholarship focus on how different people situated in different parts of the platform need to be treated.

The Protesting Indian Driver

Where does the protesting Indian platform driver locate himself in the context of emerging digital capitalism? The claims made by drivers’ associations and unions reflect agential economic actors whose modes of organising, grievances and demands reflect the differences in their city histories which shape labour rights, public taxi services, and so on. It is not enough to decode how the platform business model works globally or at the level of the driver. It is necessary instead to see how this interacts with the incumbent mobility industry in cities and city-specific patterns of migration and labor dynamics.

Speculation tells us that the Indian transport platform market is headed for a reckoning, either through a brokered merging of Uber and Ola or through a definitive upstaging of a competitor and the eventual retreat of the other. A large part of these dynamics is “within the DNA” of the platform model which has a tendency towards intra-capitalist competition and monopolisation causing players to vie for industry leadership early on (Srineck 2017). This is partly the story of drivers affected by the rising competition between Uber India and Ola Cabs. What is the strength of this collective voice in the face of the surge in speculative investments that sustain platforms in the technological era that is the 4IR? This pattern of technological innovation and investment have spurred technological revolutions in mechanisation, automobiles and mass production (Simone and Pieterse 2017), allowing us to think about how drivers’ demands today matter for the digitising city of tomorrow. 

The Business Model

Platforms disseminate technology that gives millions of people easy access to the efficiencies of algorithmic management through applications that can be easily downloaded. At the same time, they are companies interested in profit. These characteristics cannot be separated and this makes the platform an interesting study for the future of capitalism, and digital capitalism in particular. The platform mirrors a two-sided market model which in itself is not a new economic form. But the networked information environment that digital platforms have created through which they operate is new. It is what scholars anticipate will cause deep structural changes to the formation of markets, economic organisation, and social practices of production (Benkler 2006). This discussion has great implications for the nature of digital capitalism even as it takes hold in the economy, and in visions of technological efficiencies in everyday life.

Platforms incentivise users towards particular behaviours which allow for cross-side network effects, where distinct user groups benefit, constantly and at scale, from each other. Put simply, the more riders and drivers that exist on the platform, the more value is served to both sides. Currently, Ola and Uber India hold 95% of the market for platform taxis, and in between late 2017 and early 2018, Ola held an estimate of 56.2% majority of that share. Market monopolisation will ultimately give a platform more power in deciding the conditions of transport provision, and a captive market for products it may launch in the future (such as food delivery, bikeshare and so on).

Users are often incentivised through pricing. For example, among transport platforms, if the rider fare is subsidised, riders keep returning to the platform for their mobility needs. On the other side of the market, the drivers will stay attracted to high and steady demand.

Platforms control what they consider to be the more valuable side of the platform. This has been the tendency of most companies employing this model, and it assumes that the other side of the market will find its way to the platform to seek its product offering (whether service or good). Ultimately, Uber and Ola want the user end to have all mobility needs met from their platform. In this mix, they have invested in improving their technology, adding new products to keep riders happy.

Creatures of Habit

Drivers in India adopted platforms by the thousands in 2014-15 when they were attracted by the possibility of earning well, to the tune of Rs 90,000 per month. This incentivisation shaped drivers’ investments in cars and multiple smartphones that enabled participation in the platform. The degree and measure of this investment and its concomitant debt has kept drivers on platforms for the most part, allowing the competing companies to create a stable base of service providers. But this has also allowed platforms to lower incentives for drivers: A change in policy that has drivers protesting, striking and demanding better terms of earning.

In a curious if not unexpected move, both companies have decided that to protect the habits of Indian consumers and price behaviour is far more important than protecting drivers’ ability to earn and work. Low fares keep an ever-widening market of riders attached to the platforms, despite the degree of elasticity afforded the platform companies in the Indian market. Quite simply, while the public hail taxis go at a rate of Rs 22 per kilometre (approximately for an AC taxi), the economy platform rides go at Rs 8-10, allowing platforms a wide range for experimentation.

This move is not to be taken lightly. Technology companies aim to create widespread change in behaviour. The products of the platform acquire the force of habit, through various elements, such as, simple and smart commerce, intelligent marketing that builds on the inherent value of the technology they create. There is much to gain in opening their platforms to new demographics for Uber and Ola: Those who might have chosen auto rickshaws or buses for their low prices can now use a shared/pooled cab or cheaper platform auto-rickshaw. Even if drivers do stand to benefit from a larger base of riders, the fact that companies have chosen to pull back investments from their end of the business is quite telling. The companies rely on a structural vulnerability they have created for the drivers. In 2017, this unsaid strategy of forcing the drivers into a corner backfired. Driver supply dropped by 10%, from 2016 fourth quarter into 2017 first quarter due to strikes and protests which caused a 5% decrease in cab bookings across the industry (RedSeer 2017).

Protecting Earnings

These protests have coalesced around the discrepancy between promised and actual income, where the former was calculated with high incentives and the latter without. This is a direct result of the pricing strategies set up by platforms. Drivers’ grievances with platforms are about actual earnings, calculations of profit and loss that determine drivers’ household earnings. Drivers’ claims articulate their positions as defrauded consumers: They were sold on a particular guarantee that was undelivered. Transport platforms give drivers a curious mix of a consumer identity that depends on their work and labour. Such a mix amounts to hidden employment with no benefits, and a very constrained micro-entrepreneurship. This has led to a worldwide debate in courts and employment tribunals about the nature of these companies. Diversity in drivers’ associations and demands echo some of these debates.

A Delhi-based association, the Sarvodaya Drivers Association of Delhi (SDAD), calls for protections of entrepreneurship showing us that in their view, capital is not only the purview of the elite, middle-class, well-educated entrepreneur.

SDAD’s primary demands[2] are this:

  1. Deliver the marketed income (Rs 1.25 lakh per month)
  2. Regulate apps such as Uber and Ola by passing them through government-cleared third-party certifications
  3. Ensure that commissions from rides for the company remain reasonable and not extravagant.

Missing from this is a demand for a flat rate of earning or salaries: What they want is to safeguard and protect their investments through a scheme of earning as per the earlier one marketed by the company. While the drivers’ earnings vary in unfair ways, their investments (cars, smartphones, data) to earn on the platform do not.

Platforms have fashioned an ecosystem that encourages the rider to keep using them, making concerted actions that align public policy to allow for this. This is why platform taxis outnumber public hail taxis in cities all over India. Concerted action by platforms have undone the barriers to finances that had so far kept taxi driving a limited option. These barriers included the cost of cars, medallions or licenses, and access to social capital or networks. Platforms have circumvented some of these by creating a financial ecosystem feasible for drivers by working with car manufacturers and skill development agencies. This has included partnerships between business lenders, industry and state governments and MOUs that facilitate work opportunities through small business loans. The current government's flagship credit programme, Prime Minister Mudra Yojana, has been extended to technology companies. This acknowledges that these companies have given the "unfunded" an economic ecosystem within which they deserve funding.

This line of thinking is inclined towards maintaining the definitions set by platforms which claim that drivers run their own small business on the platform and are not employees of the platforms. The “self-employment versus employee” debate has been at the forefront of the imagination of how the drivers need to be protected from these complex dynamics that affect their household’s sustenance. This debate has been raised in the Indian scenario as well.

The Delhi Commercial Drivers Union petitioned the Delhi High Court in 2017, demanding that the nature of control and supervision and thus terms of employment that Uber and Ola held drivers to, be determined. While this case moved to an employment tribunal, it raised a significant question about the terms on which these debates are conducted. Are the drivers entrepreneurs or exploited workers? Are they defrauded asset owners? These questions that have emerged from the tribunals do not fully reflect the new economic form emerging from digital capitalism.

Protection from whom?

Regulators have gained significant insight into the question of how to control platform companies, the effects of the platform on the incumbent mobility industry, and what to do with the ever-growing number of drivers on city streets. Protests by drivers in 2015-17 spoke out against unfair harassment from regional transport offices, from traffic police and against municipal decisions around platform taxis. Hedged in by state transport agencies, municipalities, traffic policy, companies, technical application glitches, and the ire of the incumbent taxi industry, more associations of drivers continue to form around the country. Drivers’ and car owners’ associations have cropped up over the last four years in the face of threats from multiple parties. Where there have been driver-specific regulations, such as in City Taxi Schemes (New Delhi (2016), Bengaluru (2016), and Mumbai (2017)), the impetus has been to regulate driver behaviour first; not how and how much they earn, the hours they drive or welfare schemes for occupational health and hazards. While rider safety should always be paramount, the demand for good moral behaviour by drivers does not make the companies responsible for this or the training of drivers.

It is in these real-world conditions that SDAD’s impetus is driven by the drivers’ need to take control of their operative environments. These associations demand that the state develop a regulatory relationship with companies that are not based on whether they employ drivers, but the software and digital architecture of platform apps. The SDAD knows that there is a stronger relationship between the state and firm, than between the state-firm-worker, in the current economic and political climate. This association demands that platform apps undergo mandatory certifications like the Standardisation Testing and Quality Certification, from Directorate of the Ministry of Electronics and Information Technology. This acts like a third-party certification for devices, public e-governance software and hardware and algorithms (like UIDAI). This will sustain the logic and rationality of drivers’ investments and even more to hold larger market players to their promises.

Social Protection and Socio-economic Aspiration

The demands of the driver associations are a keen reflection of the imagination of social protection and socio-economic aspiration within the regional economies of cities. It is challenging to contextualise these collective actions historically, since much of city service provision of taxis is under-reported, neither captured by formal statistics nor in popular imagination and often taken for granted. If the last four years of proliferating media reporting on taxi drivers tells us anything, it is that the story of the Uber/Ola driver is far more interesting than their counterparts who existed offline in the recent past. The platform driver is impacted by the history of the public hail taxi, its regulation and the recognition of drivers as public workers with rights, especially in the way they protest and act. Drivers working in the incumbent, offline mobility industry across different cities have existed in labour markets that have their own entry and growth barriers, and specific ways for accessing capital.

Platforms have levelled a particular playing field for drivers, but have not yet flattened pre-existing differences. The mechanisms that drivers have used to cope with these dynamics from offline work have been thrown into disarray because they also bear the brunt of the shifts in technology investments. Drivers are directly affected by market share amongst platform competitors and patterns of profit and loss in the international platform market. Both companies have raised money through venture capitalists, but have found it extremely difficult to make profits over the years as they are forced to invest capital in beating their competition in an effort to command market monopoly. Uber India, with its reach, in 31 cities is seriously challenged by Ola’s spread in 110 cities. Recent reports also indicate that Ola is close to turning profits. Still, neither Uber nor Ola have profits that outstrip their investments currently, and profit margins remain low for companies and for drivers.

Agenda for Protection

It is said that technology businesses of today will find themselves in a bust, not unlike the technologies of the “dot com era.” This bust will usher technology into the mainstream where only its most efficient or pertinent characteristics will remain. It is this flux in which Indian drivers and platforms drivers find themselves globally: They are the potential for regulatory innovation or blindness. The response by governments will eventually catalyse cultural and institutional change. The binary of employment versus entrepreneurship that forms the framework indicates a failure of public policy to keep abreast of changing times. The entrepreneur is the new celebrated figure in Indian pop-culture, public policy and the global economic climate. But entrepreneurship should only be widely facilitated with fail safes through fiscal and legal protection. Given the widespread privatisation of service provision, employment generation and consumer identity, there is a great need to open this conversation up to consumer courts and strengthen legislative and judicial processes that surround these systems. The agenda for regulatory innovation is waiting to be set.

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