If Lyft can't keep its drivers as contractors, it may never be profitable

[newprint]

I'm kind of torn on this. My father has been truck driver his entire life and for the last 20 years worked as a contractor, while driving his own truck and trailer, since it gives him more $$$ than average driver who works as employee. However, he has non-existent social net. No health insurance, no pension benefits. If he out of work or has serious health issues that ground him for months, he has to dig into savings and I also have to help him.

So, if Lyft driver who was "gigging" for them for years gets sick and he is out of work, what kind of help would he get ? None, at least in US.

[chrisseaton]

If he's earning more than average, and professional truck drivers are pretty well paid, then can't be purchase that social net himself?

He can buy health insurance, pension, group income protection, everything you mentioned.

I know poor people can't do that, and that's the issue, but why can't a well-paid truck driver do it?

[Angostura]

>more $$$ than average driver who works as employee. However, he has non-existent social net. No health insurance, no pension benefits.

And when those essentials are factored in, does he actually earn mire or less $$$?

[freefal]

On the plus side, can't an independent truck driver or an Uber/Lyft driver claim tax deductions for all business-related expenses? From talking to a couple Uber drivers, my sense it that many are aggressive with the definition of "business-related" and deduct most of all their expenses. Appreciating the downsides (need to provide for one's own health insurance and retirement) I don't often see this increase net pay discussed.

[furi]

Seems like the problem here is that the various safety nets don't extend to such people in the first place. It would also probably go a long ways to curbing the "employ ten people for 4 hours a week each" strategy we see used to avoid similar obligations.

[toomuchtodo]

Is an ACA marketplace plan available to him? And subsides based on income? I know people in their 60s not yet on Medicare with $800/month premiums with $600/month tax credits based on their income, so their premium nets out to $200/month.

[matz1]

Yes none, at least from Lyft. Because its not Lyft problem to ensure health care, thats more of goverment job.

[badfrog]

> So, if Lyft driver who was "gigging" for them for years gets sick and he is out of work, what kind of help would he get ? None, at least in US.

Honestly, the same is probably true for most full-time and part-time employees in the US.

[denormalfloat]

How much help did he earn? How much does he deserve? The money a driver gets paid is the help. There is a market for non-fulltime jobs that would not exist at all if it was forced to be full time. Forcing Lyft to hire employees instead of contractors won't mean there will be more workers with a safety-net; it means there won't be any Lyft. That would be bad for both drivers and the people being driven.

[alkibiades]

he can... buy insurance?

[maehwasu]

This entire issue is a product of US health care costs. No one would give a shit about the classification of workers, if it weren’t for the fact that health care is insanely expensive and brutal to manage without insurance.

The US needs to address this issue, and now. However, as someone currently working in the field, I’m starting to think that the size of the country, and the sclerotic, poorly incentivized bureaucracy that controls health, will make it impossible to address until there’s a true crisis.

[seanmcdirmid]

This is really one of the bad problems with the gig economy in the USA. Even Switzerland, which requires private insurance, disallows group plans to detach insurance from employment, making labor markets more liquid and flexible (as well as preventing huge distortions in the individual healthcare market).

Your dad does have one social net: even 1099's must opt into SS and Medicare (paying both employer and employee shares, unfortunately), at least.

[ams6110]

They can deduct the employer share though? Or is that just self-employment taxes?

[jackschultz]

Anyone else see these and think about how maybe there should be some other type of worker other than employee or contractor? Those are hard definitions, and creating laws to reflect this type of worker is incredibly difficult considering people and companies figure out loopholes, but really feels like there should be another category to go with this type of work that's going to become more and more common.

[nradov]

Another alternative would be to decouple health insurance and retirement plans from employment.

[btown]

Something like “A contractor who accepts tasks through electronic communications generated by an automated system, and where the automated system could reasonably collect sufficient data to know how much time is spent exclusively on that task by the contractor, shall be entitled to at least minimum wage and ... for the time spent on the task.”

We don’t want to remove the ability for a true contractor to work on spec, or for non-cash remuneration, when they can negotiate with a human counterparty. But if you’re being given orders by an inhuman system, you deserve at least some of the protections employees receive against inhumane employers.

Unfortunately, this wipes out e.g. U.S. based Mechanical Turkers, some of whom have health or other restrictions preventing them from getting minimum wage jobs. Haven’t figured out a solve for that yet. But hopefully the actual drafters of legislation would!

(Also, this really makes me want an IDE to crowdsource lawmaking, linting to make the legalese exact, with verified lawyers reviewing PRs. Give the crowd the same ability that lobbyists have to spoon-feed legislation to lawmakers.)

[michaelmrose]

Maybe employees with all of the costs and none of the benefits of being independent just shouldn't be a category?

Why is it a given that its going to be more common or shall I say allowed to become more common.

Crack would be more common if we didn't keep locking up dealers.

[dkashbfldls]

Any alternative to employees is even more inhumane and enables explicit exploitation, as uber and lyft do (aka the gig economy). What would you suggest as a meaning for this third type of workin class?

[denormalfloat]

There's a non-trivial chance there will only be two jobs: employee and robot. Waymo and Uber are definitely betting on this model.

[AlexTWithBeard]

Like... what?

[Axsuul]

Isn't this just typical legalese that IPO docs are required to say on caveat emptor? It's typically worst case.

[m463]

This might be like warning labels on the side of ladders. Somebody somewhere did something stupid with a ladder, and then a warning label is added to every ladder to prevent a future lawsuit.

and of course, mentioning things like this then becomes "news", spawning articles like this:

https://www.tesla.com/blog/misfortune

[temp1928384]

Lyft can be profitable today if they wanted to. The only reason they aren't is because they are fueling growth by propping up the supply of drivers through driver signup bonuses.

Ride sharing is generally supply constrained (meaning there's plenty of demand but drivers are in limited supply). If they stopped paying driver bonuses to expand in new markets or maintain share of drivers in mature markets, then the number of drivers would likely start plateauing or declining (due to high turnover) -> prices would increase and/or rider wait times would increase -> rider demand would fall -> growth would stall.

In short, they're choosing growth over profitability because that's what investor want to see. As soon as they choose profitability (which they might have to after IPO), their growth will come to a halt and their share price will tank. Watch.

[subroutine]

I took a look at some of Lyft's metrics [1,2,3], but would be interested in seeing a more nuanced breakdown of their expenditures. You mention driver signup bonuses are a major expense, and is "The only reason they aren't" profitable today. Is this a fact?

[1] https://craft.co/lyft/metrics

[2] https://dashboards.trefis.com/no-login-required/zrRBRShU

[3] https://www.forbes.com/sites/greatspeculations/2018/10/10/a-...

[jonknee]

> Lyft can be profitable today if they wanted to. The only reason they aren't is because they are fueling growth by propping up the supply of drivers through driver signup bonuses.

Maybe, but subsidizing new drivers might be key to having enough drivers to satisfy rider demand. They're a commodity with very little stickiness, if Lyft has a wait people will use something else.

[fulafel]

I think it's actually less labour supply constrained than most businesses, since it's a job almost anyone can do without training other than a driver's license. And there are no big discomfort factors compared to jobs like long haul trucking or working in a mine.

[godzillabrennus]

Self driving cars would change the economics and create profitability in the markets it’s a viable solution within.

All ride sharing companies have the same problem.

[TylerE]

This always seemed obvious to me that this was the play - that the initial gig economy period was just a stop gap to gain market share (at a heavy loss) until self-driving tech became available.

That has proven to be a much slower process than they probably expected.

[User23]

Human drivers are just mechanical turks to build market share while self-driving cars become commercially viable.

[gotocake]

Human drivers are just mechanical turks to build market share while self-driving cars become commercially viable.

Don’t they have to exist before we worry about commercial viability? You’re not the only one talking like FSDV’s are just minutes away, when the truth is that when you cut through the hype and wishful thinking, they’re an indeterminate period of time away. The conversation around this subject reads like people in the 30’s planning for the dawn of the fusion age.

The technology is not there yet, we don’t know when it willl be or if the avenues being explored now will lead there. Anyone who tries to tell you otherwise is trying to sell you something, like shares in a fundamentally unprofitable endeavor. I get it, self-driving cars would be very cool, and maybe we’ll even live to see them. Maybe not. It’s still a crazy company that can only profit if nonexistent technology emerges quickly! On the other hand I have some shares in my new space elevator to sell...

[alexcnwy]

Market share and data. I actually think the market share angle is far less important because the switching costs from the perspective of the rider are very low.

[yalogin]

If we assume this is correct what does it mean for the company and it’s employees? They are going public which means there will be pressure to make a profit. How does it bode for their recruitment and in general well being of the company?

Also I cannot imagine Uber to be in any different situation.

[dkashbfldls]

Most of the affected people aren’t employees. Who cares about the company more than their workers?

[toomuchtodo]

It means Lyft and Uber are terminal and their insolvency is not about if but when. There are only so many $2 bills to sell for $1.

[ratling]

I'm fine with this if we get medicaid for all. This won't be an issue if all the 1099 workers did't have to take a 30% pay cut (or negotiate for 30% higher wages, I'm ignoring the tax issue of course) to be healthy.

[termau]

As far as I can see they have a good market position, if they can hold off the courts long enough for driverless to happen then they win, it they fall the other side they lose

[neonate]

https://outline.com/5F2Cyv

[mishkinf]

The epitome of how capitalism can and will cannibalize itself. As corporations move towards maximizing profits for shareholder value, the individuals upon whom they depend on for profits are squeezed out of the system. The more successful companies can produce profits, the less people can afford the very products and services being produced and the companies will have no customers.

[crb002]

I don't see how they can't be profitable with direct hires. Nothing stops them from having a 75% part time workforce. Have those amazing rated drivers as FTE with benefits.