While sitting in heavy traffic, it is easy to fall into conversation with your taxi driver. In one such conversation, my taxi driver in Berlin expressed his annoyance with the idea of ride sharing. Since the practice, as far as he knew, was illegal in Germany, it hadn’t really affected him yet, but he had heard of its growth in other countries and seemed to view it as a wave that would eventually hit him — hard. His frustration came from the fact that taxi drivers in Germany (and in many other European countries) need to go through robust training in order to become certified — a formality that doesn’t exist for ride sharing services like Uber or Lyft. With many taxi drivers concerned about the possibility of being put out of business by these operations, more and more people are calling on the government to intervene.
Most would argue that Uber epitomizes the idea of capitalistic ingenuity, creating a new product to build on the flaws of the existing one. In a country as wary of economic regulation as the US, the mere thought of restricting such innovation would alienate the average citizen. Traditional economists who share this thinking might argue that the gradual decline of the taxi industry in favor of ride-sharing is an inevitable result of long-term economic shifts. But Uber is merely the most emblematic symbol of the rapidly growing sharing economy.
The Economist loosely defines the sharing economy as “peer-to-peer lending” facilitated by, and frequently conducted on, the Internet. It is informal, making commerce personal as opposed to professional. And, despite its convenience, it is dangerous: The rise of the sharing economy, particularly ride sharing services like Uber, has only exacerbated wealth inequality worldwide by heightening the distinctions between skilled and unskilled labor and disincentivizing qualified work.
Across the ocean from the nation where the word “über” originates, this ride sharing company has become a household name; aside from their presence at airports, where they have monopolized business, taxi companies in the United States might as well be obsolete. Primarily because of the convenience that comes with social media integration, services like Uber and Lyft have replaced local “Red Top” companies as the default third-party ride system, making phrases such as “I’ll call a cab” archaic: In fact, Uber has become so integrated into American society that “to Uber” (as “to google” developed in its day) is now a commonplace verb. Uber is quick, reliable, user-friendly, and affordable — qualities that may not necessarily characterize the traditional American taxi.
An American tourist who thus arrives in Berlin expecting to call an Uber to get to his or her hotel would likely be disappointed. “UberPop,” the European equivalent of the US’s most popular “UberX” service that allows uncertified drivers to provide rides, has been heavily restricted since March 2015. In order to operate an Uber in Germany, drivers must have a taxi certification, akin to the requirement to drive a commonplace cab in the country. This regulation is actually a lightening of Germany’s previous policy towards ridesharing: In 2014, the company was banned entirely from operating, facing heavy monetary penalties. The court’s justification? “Unfair competition” to local taxi industries and the option for Uber drivers to refuse rides to certain individuals, a principle that collides sharply with German law stating that taxi service must be provided to anyone who asks for it. Furthermore, the courts were baffled by Uber’s indistinct line between employer and employee: Were the drivers in fact employed by Uber? Answers remain indefinite; such is the nature of the sharing economy.
Germany is not alone in trying to restrict Uber. Across the world, from Japan to Australia, Uber’s expansion has been impeded. However, these restrictions are most prevalent in Western Europe. France (where the government has openly declared itself “pro-taxi”) and the Netherlands have also banned UberPop. In Spain, the company was banned entirely in 2014, though a recent court ruling has permitted licensed UberX drivers to operate in the Madrid area. All of these nations have seen immense and sometimes violent protests against the ride sharing company.
The rationales for such frustration and legal action all revolve around the issues of certification. To obtain the legal right to operate in all of these nations, taxi drivers must undergo intense and strict educational and certification processes that span from driving abilities to knowledge of road layouts and street names. In the US, by contrast, anyone seeking to become a New York City taxi driver must simply complete a 6-hour, $50 defensive driving course and a 24- or 80-hour approved taxi school course. The differences are obvious: In the US, taxi driving is considered unskilled labor. In Europe, the prevailing mentality is that anybody in any profession ought to be a certified expert in their field: Unlike in the US, “skilled” does not always equate with “university educated.” In fact, most professions — even ones considered “low skill” in the US, such as retail or bakery ownership — have specific apprenticeships that lead towards certification in nations such as Germany.
An important factor comes into play here: Countries that have created legal restrictions against ride sharing companies such as Uber — nations seeking to protect skilled labor — also have some of the world’s lowest wealth inequality. The Gini Index, as defined by the CIA World Factbook, “measures the degree of inequality in the distribution of family income in a country,” 0 indicating perfect equality and 100 describing perfect inequality. The Netherlands, Germany, and France have Gini Indexes of 25.1, 27.0, and 30.1, respectively, as compared with the United States’ 45.0. To put that into perspective, the US is the 43rd most economically unequal country in the world while the three aforementioned nations rank 140th, 133rd, and 122nd out of 145 total nations. In societies where the appreciation and expectation of skill isn’t limited to specific sectors and jobs, economic inequality is far lower than in ones that have a class-specific understanding of skilled labor. Moreover, a product or service provided by an individual with the proper know-how inherently has a higher value, which contributes to the higher general welfare and distributional equality. In this way, broadening the understanding of skilled labor not only increases the quality of services, but also increases the economic well-being of a population.
With that reality in mind, the sharing economy is threatening. It challenges the need for training and certification, even though the idea of specialization is central to our economic system. Moreover, wealth inequality has only been increasing: Between 1820 and 1992, global inequality has increased from 0.42 to 0.83, along a scale similar to that of the Gini Index. This undeniable trend ought to be a warning, especially with the dawn of new economic systems such as the sharing economy that have the potential to exacerbate such a rise in inequality.
Ideally, Uber and other institutions in the sharing economy would reach agreements similar to those forged in Europe, functioning as companies that play by the same rules as everyone else; in other words, they should exclusively employ certified and skilled workers. To do this, however, Uber would have to restructure, or at least define more precisely, its business model. Currently, the company describes its drivers as “partners,” as opposed to “employees,” given that Uber itself, unlike typical taxi companies, has no ownership of the vehicles utilized for ride services and merely provides a platform for organization. However, the company’s profits from the ride sharing process complicate matters. This ambiguity has resulted in legal controversies on more than one occasion: Proceedings in New York and Frankfurt have led to legal restrictions against Uber, which was deemed to unfairly compete with local taxis. But that conclusion overlooks a key difference: In the current globalized and interconnected economies, localized industries like taxis — that rely on the need to physically traverse distances — have increasingly become archaic. Uber’s challenge is to find a way to establish itself as a competitor to a local taxi service, but one that operates through slightly different means.
Uber can start responding to this challenge by shifting its employee base to full-time, certified drivers. Uber’s current United States business model describes its target drivers as individuals seeking an “additional source of income,” implying that drivers typically have a different primary job and that the money earned through the platform is simply supplementary. This trend is disturbing and further underscores issues with the lack of widespread skilled labor; the concept of second and third jobs is a unique consequence of a sharply divided economy. In order to succeed in Europe and minimize its negative effects on wealth distribution, it is imperative that Uber redefine its employee base to a group of full-time workers whom they subsequently verify are qualified.
Uber is not all bad; in fact, the sharing economy epitomizes the very innovation that our global economy relies on to move forward. Technology and social media are driving forces that will undoubtedly dictate the future of commerce, but they should not be left unregulated. The economic wellbeing and future of the global population are of utmost importance and cannot be compromised by the interests of a few Silicon Valley moguls.