From the BBC:
Uber drivers have won the right to be classed as workers rather than self-employed.
The ruling by a London employment tribunal means drivers for the ride-hailing app will be entitled to holiday pay, paid rest breaks and the national minimum wage. The GMB union described the decision as a "monumental victory" for some 40,000 drivers in England and Wales…
Fair enoughski, but this is just people fighting over the same source of income. Taxi drivers, collectively have a monopoly - each licence is a little monopoly. the tell tale sign is that an increase in demand for taxi rides does not increase the supply of taxi licences (which are at the whim of a local council or similar), it merely pushes up the value of the licences.
From the point of view of the consumer, Uber busted the taxi drivers' monopoly, bringing down prices and increasing supply, but from the point of view of drivers, it created a new one of its own. The trick with these platforms is to persuade passengers/buyers that they are the biggest and have most drivers on call, while simultaneously persuading drivers/suppliers that they are the biggest and have most potential customers.
Things being what they are, it is far easier and more efficient if everybody uses the same platform.*
Which brings me to this…
The ruling accused Uber of "resorting in its documentation to fictions, twisted language and even brand new terminology", adding: "The notion that Uber in London is a mosaic of 30,000 small businesses linked by a common 'platform' is to our mind faintly ridiculous."
No, that is exactly how it is. Presumably, if you register as a driver with Uber that does not stop you from registering as a driver with other platforms at the same time. Question is then - whose employee are they now? Do they have two employers? How is the holiday pay, rest pay and national minimum wage while on call but not driving supposed to be split between the two?
Here comes the maths fail:
Alex Bearman, partner at Russell-Cooke solicitors, said Uber could look to meet any additional costs by increasing the percentage of each fare that it kept as commission: "It seems likely that this decision will be appealed and we may not see a final determination for some time to come."
Again, no. It appears that Uber takes about 25% of the total fare paid by the customer. If Uber takes a higher percentage, then that leaves less for the driver, not more. So either:
- Uber takes a lower percentage (which won't kill it, their income is pure profit/rent once its minimal overheads are paid) or
- prices overall go up by a third to get driver's average hourly earnings up from £5.03 to the National Minimum Wage. And you can't just put prices up, the result will be less demand and fewer Uber drivers. So those at the margin will be unemployed again and those who keep their jobs will earn more for less work. Which is classic rent seeking, it is just when trade unions do it, they dress it up as A Good Thing.
Then there are taxes on output and employment to consider. Let's assume our driver is genuinely self-employed and is below VAT registration threshold. He makes £10/hour gross, Uber takes 25% leaving our driver £7.50/hour, on which he pays 29% income tax/NIC = £5.33 after tax. The self-employed will also get a full tax deduction for motor vehicle costs.
If the drivers are all now employees of Uber, the full fare will be liable to VAT, so out of £10, £1.67 goes in VAT. This leaves £8.33. Even if Uber generously slashes its fee to 5% (42p after VAT) to cover its minimal overheads, this leaves £7.91 to pay gross wages. 96p goes in Employer's NIC, leaving £6.95 employment income taxable at 32%, leaving our driver with £4.73 per hour. The tax deduction which employees can claim for business use of private car is also much more restrictive than for the self-employed and is more difficult to claim.
So an epic fail all round**!
* Which is why the answer is for the government to simply set up its own low-cost ride sharing app, it can provide it for free to all and sundry and will make its money back ten times over from all the extra income tax/NIC it can collect (even at self-employed 29% rate) now that it knows who is doing what. That still looks like a monopoly in the old-fashioned sense of there being a single provider, but in practice it isn't a monopoly at all.
** Unless you are totally cynical and think that the Employment Tribunal is an arm of government and decided the case this way because it vastly increases the tax take from Uber drivers...
Sunday, 30 October 2016
From the BBC: