Uber users suffered another blow courtesy of big government, Friday, when an English court ruled that Uber drivers are not self-employed but are in fact Uber employees. Concurrent litigation is also proceeding to force Uber to pay Britain's 20 percent sales tax and the app is technically banned due to a separate issue. If these various efforts succeed, the price of an Uber ride will likely increase by 25-35 percent.
After all, if British Uber drivers are legally defined as employees, Uber will have to pay them a $9.80/hour minimum wage, pay social security taxes, while also providing vacation and sick time. Add the 20 percent sales tax to each ride and the problem quickly becomes clear.
Or maybe it doesn't.
Maybe, like the left-wing agitators behind this effort, you believe that everyone will benefit because Uber drivers will simply take home more money and the big corporation will simply pay a bit more in taxes.
I hope you don't feel that way, because such a thesis is fatally flawed.
The simple fact is that Uber’s business model is designed to operate on very small profit margins. Indeed, the company currently loses vast sums each year: $2.8 billion in 2016! This means that were they introduced, the various additional costs above would have to be passed into the business model, rather than simply absorbed by Uber.
And that would mean big problems for the business model.
For a start, were drivers now forced to pay sales taxes, they would need to pass on those costs to riders in the form of more expensive rides. Absent that action, the tax burden would make driving economically untenable outside of peak or surge pricing situations.
Similarly, the added regulatory burdens would have two immediate effects on Uber headquarters. First, the company would have to shed all but the most prolific of drivers from its ranks so as to reduce its vacation/sick/social security obligations. This would cull part-time drivers who drive to save for education costs, debt payments, or simply to help pay the bills. How many drivers have you had who are students, or otherwise unemployed, or retired?
Well, you can say goodbye to them if these regulations go through.
That speaks to the crux of the issue here: morality. While the ride-sharing market is imperfect, Uber, Lyft, and other companies are providing a service of proven value. Millions of riders use these apps because we find material value in paying less to travel more easily with greater frequency.
So why risk screwing everything up with the regulations?
Because the left-wing central planners believe they know better.
And because the taxi unions are pushing their political patrons to get rid of Uber by any means possible. They know they can’t compete with Uber’s entrepreneurial business model, so they want to purge it and force travellers to pay more for their inferior service.
There's an important lesson here for conservatives: we need to stand up in defense of the free market. This isn’t just about the particular moral and economic benefits of Uber’s business model, it’s that this battle defines the struggle between capitalism and socialism. And facing young Americans who user Uber but call themselves liberals, there’s no better opportunity for conservatives to challenge them to look in the mirror. As in Europe, were Sen. Bernie Sanders, I-Vt., and company to have their way, costs would increase, service provision would decline and future entrepreneurs would find fewer reasons to take a risk.