“This is like a lame relationship with a nouveau rich girl who is insecure about everything including her wealth; she has good reason because her wealth is volatile and she is selfish and entitled. The more attention you pay to her the worst she will treat you. The best thing you can do is leave her alone and she will come back begging” (Forum post, uberpeople.net)

In a 2016 landmark court ruling, two former Uber drivers – Yaseen Aslam and James Farrar – successfully argued that they ought to be treated as employees vs. independent contractors. Their main arguments? The excessive control powered by sophisticated algorithms that the company was exercising over them (e.g. the control over prices). Uber is appealing now for the third time to the UK Supreme Court to overturn the decision. While the world is watching the debate that could set a precedent for cities around the world, regulators face a delicate decision: should companies operating in the so-called ‘gig economy’ be regulated or left to self-regulate?

In a new study published in the Journal of Management Studies, we set out to find an answer to this question by considering the perspective of drivers – a fleet that numbered 3 million across the globe in 2019. How do drivers respond to novel organizing solutions like the rating system and algorithmic management and how do these vary with the extent of regulation? To find out we analyzed 36,531 posts from the popular online forum UberPeople.net across twelve US cities and one European city – London, using the advanced machine learning technique topic modeling.

We find that regulations not only influence how drivers’ respond to Uber’s novel organizing solutions (e.g. assigning rides via an algorithm), but more importantly, they can alter the power balance between Uber and its drivers.

Transport Network Companies (TNCs) are mostly regulated on the municipal level but cities have largely opted for one of the two approaches: direct or indirect regulation. Under direct or strong regulation, ride-hailing companies need to obtain a license to operate in the city and drivers need to undergo a lengthy licensing process that can include fingerprinting and background checks. This process can cost drivers as much as few thousand dollars. Examples of cities include New York City and London. On the other hand, under indirect or weak regulation, municipalities pass control over regulatory policies to ride-hailing companies, which are obliged to conduct checks, such as background checks, on the drivers. The initialization process can be a matter of days and mostly all the drivers need is a driving license. Examples of cities include Los Angeles and San Francisco.

We find that in cities with stricter regulations, drivers are more ‘cooperative’ and try to help Uber to its end. For example, they supplement Uber’s organizing by initiating meetups, investing considerable time in giving each other tips about best times to drive or best cars to lease. In these cities, drivers are very much dependent on Uber — not only to recoup invested time, effort and money that went into becoming a driver, but also due to a lack of alternative TNCs to switch to. However, the regulations also ensure that this dependency between Uber and its drivers cuts both ways — Uber also depends more on drivers whose market entry is constrained, leaving a limited pool of eligible drivers. Drivers essentially ‘fill the gaps’ where Uber’s system is unavailable or deemed insufficient. This creates an incentive for both parties to make it work.

When cities adopt more lenient regulations, however, this mutual dependency collapses and we see drivers move to oppose Uber by ‘gaming the system’ (e.g. manipulating surge pricing), and engaging in other activities that can be directly harmful for Uber (e.g. collecting tips when Uber did not allow it). Even if drivers in these cities may have some alternative TNCs to switch to, weaker mutual dependence tends to favor Uber, which can more efficiently use the larger pool of available drivers to bolster their power position. In short, when given a leeway by regulators, Uber can more systematically use it to outmaneuver its drivers. This leaves disgruntled drivers with few options but resistance and protest.

These findings shed light on an important regulatory debate and inform policymakers as well as platform companies. In terms of the policies, our findings strongly suggest that regulators can influence the balance of power between platforms companies and their workers. While we 

focused on distinction between directly and indirectly regulated cities, perhaps there is a middle ground where regulations can be cohesive across the cities, enforced with attention to the workers’ perspective, who are in the frontlines and have significant stake in this debate.

There are also take-aways for platform companies. It is evident from our study that platform workers who were required to pass more rigorous checks to become drivers also tend to be more committed to recoup their investment, which aligns their interests with those of the platform. At the same time, more rigorous initiation process can better serve society at large and ensure drivers are competent. We also see that in these cities where regulations are stricter, drivers engage in finding new solutions to Uber’s organizing problems and go beyond the design intended by the platform, which can also be beneficial for the company. For instance, drivers in Chicago, New York City and Miami regularly inform one another of the events happening in their city. Drivers may have better location-specific knowledge thus these driver-led initiatives can be very beneficial in meeting the demand in places that are beyond the sight of the algorithm.

Overall, regulators, platform companies and workers need to work together to find a right balance which protects their interests as well as those of the society at large.

Read the full study here:  https://onlinelibrary.wiley.com/doi/full/10.1111/joms.12577