Toronto vs. Uber, and the future of rideshares everywhere

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Jordan: I’m going to start out with a story that shows you I’m a hypocrite. Last week I had a big package to take with me into the office. So I called an Uber. It took a handful of minutes just to find me a driver, and the driver was like seven minutes away. It was already running late and I was annoyed. And then I remembered this

CLIP: More than 50,000 ridesharing vehicles on the road in Toronto, but at this point, city council is putting on the brakes with a surprising vote. New licenses will no longer be issued.

Jordan: Now I understand all the reasons for this cap and you’ll hear about them today, but still in the moment I was a little ticked. That’s not what makes me a hypocrite though. That happened when the car got there just when it was promised and then began to compete with thousands of other single passengers just like me and other Ubers to get into downtown Toronto. And I was mad at the congestion too. That is hypocrisy. And I tell that story because what is happening right now between Uber and the city of Toronto provides an excellent opportunity to look at just how Uber’s business model has evolved, how the way people make a living or don’t on the platform has evolved, and how all that in turn has changed the way the company approaches cities and certainly the way cities approach it. This fight will offer a legal test because Uber is now suing the city over who exactly controls the licenses to drive Ubers. And whether or not the drivers with those licenses are able to make a real living or just circle blocks in empty vehicles in Toronto, traffic burning fuel and emptying their own pockets. This is a battle that’s been fought in New York. It’s being fought in Toronto right now. If your city is big enough to impact its bottom line, you better believe that Uber is prepared to fight your city hall too. I’m Jordan Heath-Rawlings. This is The Big Story. Thorben Wieditz is an urban geographer and the co-founder of MetStrat, a researching campaign firm that specializes in public interest campaigns, including notably RideFairTO, and it should be noted that his piece for Ricochet argues in favour of Toronto’s cap on new Uber licenses. Just so we know where we’re starting from Thorben,

Thorben Wieditz: No, that’s exactly what we are looking for to establish in Toronto and hopefully in other marketplaces as well.

Jordan: Well, why don’t you start, for those who are not in Toronto who haven’t been following it, and we’ll be talking about it in other places in Canada and beyond, what exactly has Toronto City Council done to Uber licenses?

Thorben Wieditz: City Council passed a motion in October of this year to essentially pause the number of Uber licenses at that particular level until a very comprehensive sector study returns back to council in quarter four of 2024. Sometimes I think about it as an interim controlled by law that is often passed by municipalities to say, okay, let’s stop development in this particular area until we get a good sense of the infrastructure needs required to accommodate this type of development. And that’s usually not very controversial. So that’s basically what the city has done in October said, okay, they are 54,000 licensed Uber drivers and Lyft drivers, I should say, in the city

Jordan: 54,000,

Thorben Wieditz: 54,000.

Jordan: Just for a reference point, I mean, how does that compare to way back pre Uber when we had a number of cabs only in the city and how does it compare to even a few years ago when we had some Ubers give us a sense of the growth here

Thorben Wieditz: Before Uber arrived in Toronto in 2014, the city actually had hired a transportation expert to ask that person give us a good sense of how many taxis and cabs are needed to service Torontonians in an efficient manner. And that report came back saying that one to 500 caps is probably a good number to compliment existing modes of transportation in the city. And this one to 500 number has increased with the arrival of Uber in 2014 and the deregulation of the sector in 2016 to a point where we had one Uber for every 23 residents pre pandemic in 2019. So we went from one to 500 to one to 23 at the peak pre pandemic, we had about 120,000 Uber licenses in the city. While caps and taxis have remained capped since 2016 at about 6,500, the decline in drivers is basically a consequence of the pandemic orders to stay at home and just generally like a complete downturn in the economy declined the number of drivers and demand essentially.

Jordan: And so it’s shrank back down to 54 and rather than continued to grow it, the city has paused it. What does Uber say to that?

Thorben Wieditz: They are coming out saying that this will increase fares, this will increase wait times, and it discriminates against potential drivers because existing drivers, many of them have come out say, we like this pause because it will allow us to make a better living on a platform that makes it very difficult to survive on if you work full-time on this platform because there are just too many drivers out there that eat each other’s lunch. But what is really interesting is that people tend to forget that the city of Toronto already passed the issuance of licenses. They did this in November of 2021, and this pause lasted until May of 2022. And during that period, none of what Uber is claiming is happening now has happened. We have not seen any of these consequences then. And Uber didn’t oppose the pause then. And the other thing that Uber always says, and they’ve been doing this in markets around the world and even in Toronto, they have brought out organizations like Mothers Against Drunk Drivers to say that a pause in licensing will increase impact driving incidences because people go to the bar, they will then drive their own car back, which again is something that hasn’t materialized in the past that we saw in November of 2021 till May, 2022. In fact, during that time, the Toronto Police Service actually showed that the number of impaired driving incidences declined during that period. Why

Jordan: Would Uber want more and more licenses if drivers are making better money and fares are higher, if there’s fewer licenses? And if we’ve achieved the right number, why would Uber want to saturate the market? I’m just trying to understand the business plan really,

Thorben Wieditz: They want to create a monopoly for themselves, and they somewhat successfully achieved this in Toronto in their sector. What people don’t really realize is that a lot of drivers leave the platform. City data shows that in 2022, more than 2200 drivers each month cancel their license because they figured out that they cannot make enough money on the platform. So Uber churns through tens of thousands of drivers, and so it’s very important for them to have an open entry and exit onto their platform and into the market. And the other thing is that what this does is it allows Uber to be everywhere. So if you oversaturate the market, Uber is able to pick up customers very quickly and create a sense of customer convenience that makes them very popular. But what people don’t realize is that it’s the drivers that are subsidizing that feature for Uber because the drivers are operating unpaid because they’re not paid for the time that they’re empty and idling on our streets.

Jordan: Tell me a little more about that. How do we know how much Uber drivers make? I understand that we’ve got some relatively reliable reporting on how the actual wages break down.

Thorben Wieditz: Uber claims that median for a driver in Toronto is $34. So we also know from the city data that 48% of the time drivers are actually driving empty and unpaid. So if you take the $34 for engaged time and you multiply this by the 48%, you end up at $16 and 32 cents essentially. Now that is the money that drivers make before they pay their expenses, the cost of buying, leasing or renting a vehicle of paying for fuel for charging if they have an EV for insurance, maintenance, depreciation, et cetera, et cetera. We have data for this too from the CRA and if we use that kind of data, how much it costs to maintain a vehicle per kilometer traveled, we have to subtract another $12 from the $16, which shows you that by the end of the day, drivers make way below minimum wage. And because that is happening in key markets, we also see literally thousands of drivers leave the platform every month. And this is another data set that we retrieve from the city of Toronto that showed that in 2022, I believe 36,000 or more drivers left the platform. There was a great piece in Forbes yesterday that showed in the US that Uber is over-promising what drivers can make on their platform.

Jordan: How did it go from, as we kept hearing about it in its early days, a way to earn a little bit of extra money with your car, pick up a couple hours at the end of the day and you’ll have some extra money for the weekend to a way to make a living comparable to becoming a taxi driver. How did that shift happen?

Thorben Wieditz: This is a very good question. Uber or other gig platforms, they say that they enable people to make some extra money when they fall on rough times when they get laid off or maybe to have a second or third job on top of what they’re already doing. It just turns out that our wages have declined for many decades, really, workers’ wages and the great financial crisis in the US provided a condition in which these platforms could flourish because people were falling on hard times and gig platforms were figuring out how to offer them work but also exploiting them at the same time. And I think what we see is that there is a huge need for work out there which drives people onto gig platforms to make some extra money, but it also, a lot of people depend on these platforms to earn an income full-time and they may not all work on Uber’s platform, but they may work on several different gig platforms simultaneously. And Uber, in many ways leads the way with regards to reforming labor law around the world that sets them up and other gig platforms in a way that they can hire and fire workers without them having the same employment standards and the same rights as workers in other sectors of the economy. The more precarious the workforce, I think the more profitable and the more beneficial this is to gig platforms.

Jordan: We learned last week. Speaking of the rideshare cap in Toronto, that Uber is going to sue the city over it, in fact already has filed suit. What does that tell us about where Uber is placing its efforts going forward?

Thorben Wieditz: Thousands and thousands of confidential files were leaked about Uber last year in 2022 that showed how Uber bulldozed its way into cities around the world and how they literally duped policymakers, lobbied governments in order to establish themselves in these marketplaces. And one key factor and one key thing that Uber has been using all along and other gig platforms do the same thing. They have access to hundreds of thousands of people that have signed up to the app, used to be on the app or are prospective drivers, and they can weaponize these existing contacts and ask them to engage their government officials sending emails and that often overwhelms elected officials. We have seen petitions floating around asking drivers to sign, and now we have been speaking to city councilors who parrot back the talking points that Uber leaves with them. So I don’t think anything has changed on that front really, Uber has really been involved in a very large scale effort to capture regulatory processes in cities around the world, and they have done this in Toronto in 2016 under then Mayor Tori. And I believe one reason why Uber is freaking out right now and fighting back so hard is because they knew under Mayor Tore and Mayor Tori’s administration that they essentially will be put in charge over right hailing policy over licensing. What is different now is that the city of Toronto has a new mayor and a new administration, and what Uber now sees is a real risk to their business model. If this new administration is indeed trying to gain power back over the sector, because at the end of the day, if you leave Uber or large corporations to be the regulator of its own of their own industry, it only benefits their shareholders, does not benefit the public. And I think this is exactly what the city of Toronto is trying to address, allowing tens of thousands of vehicles to be part of this market, increases congestion, increases emissions, removes riders from the public transit system and lowers the wages of those participating in the industry.

Jordan: You mentioned that it increases congestion. Do we know how much of congestion or what kind of levels Uber itself is responsible for? And I ask this because obviously Toronto has a huge problem with congestion with or without Uber, but for other cities in Canada who may not have the same traffic issues but who could use another form of transportation, they should know the risks.

Thorben Wieditz: We know that Uber cars are circulating empty about 48% of the time. This contributes to edit vehicle kilometers traveled in the city of Toronto. We also know that most of Uber’s trips in the city of Toronto are taken in the downtown core, which on the one hand are best served with public transit access and on the other hand, already most congested by traffic. One important aspect about Uber’s business model is that it really treats transit users as a huge market opportunity, and that was very clear in initial filings to the Securities and Exchange Commission where Uber stated that public transit represents a market opportunity for them to grow and that their goal is to move each transit users one by one off transit and into private vehicles. This is something that we have seen in cities in North America, in cities in Europe, but also in Toronto. When we got data for 2019, we saw that 31 million trips had been taken out of the city’s transit system and replaced by private vehicle rides, and that sort of equated about 74 million in lost revenue for the ttt C. We also know that compared to other modes of transportation, right, hailing is significantly more environmentally harmful because of the debt heading required in this industry, the time that drivers spend circulating empty, if you do not increase this optimization rate from 48% to something that is closer towards 60 70%, as we see in places like New York City, you also end up with more detrimental impacts on congestion and on emissions.

Jordan: I want to ask a devil’s advocate question now, which is from the perspective of a potential Uber user or a potential Uber driver, which is, yeah, the congestion is an aspect of it that I don’t love, but if I’ve just lost my job, I’m considering alternative ways to make an income and you are taking away one of the potential ways I might have to make a bridge income or from the perspective of a user, there aren’t enough cars on the street for me to get an Uber and the wait times have become longer and public transit in this city is a mess and et cetera, et cetera. I’m not saying I agree with this, but there are use cases for more Uber licenses in the city.

Thorben Wieditz: So I mean, again, I would go back to the utilization rate. If customers are saying there are not enough cars available, I think this is just wrong. At 54,000 cars, we have 10 times essentially the pre-Uber average of vehicles available in the city of Toronto. The population hasn’t increased 10 times. It was considered to be completely fine to have five to 6,000 vehicles available to transport the public in the pre-Uber days. Obviously it impacts people’s convenience, but I think we have to check ourselves sometimes and think, how long can I actually wait for a car? Is it okay to expect a car to be in two or three minutes or can I wait five minutes? And if they expect a short pickup time that this pickup time is subsidized by the drivers, by unpaid labor time, by the cost of their expenses and costs to operate a vehicle, none of that is born by the platform. It’s all downloaded to an individual driver.

Jordan: Last question. What happens now with the lawsuit and the cap on new licenses in Toronto? And depending on what happens, is this something that other cities are looking to follow? Would it set a precedent around Canada?

Thorben Wieditz: We have already heard from drivers in BC that was reported last week that drivers are calling on the province to cap the number of licenses in the province of British Columbia because drivers there are saying that they cannot make a living. There are too many drivers, and we have to realize in BC we’re looking at 11,000 licensed Uber drivers in a province of 5 million in Toronto, we are looking at 54,000 licensed Uber drivers in a city of 2.9 million. So it looks to me as if Toronto’s got enough drivers to service right requests, but it also shows that the notion of a campus is spreading for sure because it addresses something very fundamental. Uber also lobbyists, provincial governments, and Uber is remaking labor law in these provinces and enshrining a second category of workers into labor law by saying that people that work on our platforms are not employees, and B, should not be paid for their entire time at work. They should only be paid for engaged time in places like Ontario or BC where they engage in these lobbying efforts, they increase the pay for engaged time to say, well, we pay it, let’s say 120% of minimum wage for engaged time to ensure that drivers make a living wage and take into account the time that drivers spend debt heading without a customer and unengaged. If you enshrine this exemption into labor law, you have to also realize that governments and states are dealing with the highly racialized workforce. A lot of new immigrants coming to Canada, they start working on platforms, on gig platforms including platforms like Uber. And if the governments enshrine labor law that tells these workers, these newcomers that, Hey, you are not considered a worker like any other worker in this country, you are considered an independent contractor. You don’t have the same labor rights and you don’t get paid for the time that you spend at work. You only get paid for engaged time. I think governments should be very careful participating in this process. But also what it shows is that if this is set up provincially, one way of increasing workers’ wages is by optimizing their utilization, meaning by reducing the number of licensed drivers that are legally able to work, because that means that there’s more work available for those that have a license and they spend less time driving empty, less time unengaged and can make more money in this market. So I think what we’ll see is the notion of cap coming up in all kinds of different marketplaces. We have seen this in New York City, which already implemented a cap. Uber sued the city, Uber lost, and what we see in the city is that they have substantially increased the utilization rate, reduced congestion and emission in the sector, and drivers can make more money than they would if they would be driving in Toronto. So these kind of precedence is spread and drivers are asking for them, and Uber is very, very concerned that this is what’s going on because this really cuts into the business model and they have to be profitable now. They have to show that they can actually earn some money. And I think by capping the number of drivers, which is great for the workers, which is great for the environment, great for cities and good for public transit, it really impacts them in making money because they only have two ways of making money. One, by paying less to workers, which is happening as Forbes reported yesterday. And second, by taking more from consumers, which is also happening because Uber has increased their take rate in US markets substantively over the last two years.

Jordan: Torbin, thank you so much for this. It’s a fascinating look at this fight and what comes next.

Thorben Wieditz: Thank you for having us,

Jordan: Thorben Wieditz of MetSrat writing for Ricochet. That was The Big Story. For more from us, head to The Big Story podcast.ca. You can also talk to us if you have a question or a suggestion for an episode. The suggestion for this episode came from a listener and we appreciate it. Or even if you have criticism about this episode or any other, we are happy to hear it. I heard the criticism from a couple of farmers over our climate friendly beef episode. I will say just one thing that I don’t think when we in general talk about agriculture on this program at scale, that we are talking about individual ranchers or farmers. I think for the most part we are talking a about policy that everybody, or be specifically the gigantic factory farms and huge cattle industry operators, those are the people that we’re normally looking at. So I hope you don’t feel targeted personally. I didn’t mean to say beef is bad, I guess to make you feel like it was a bad product. I love a good steak, however, I know that I shouldn’t if I want to save the planet. Anyway, if you have questions, comments, or concerns about episodes like that, you can always find us on Twitter, The Big Story Fpn via email, hello at The Big Story podcast ca, and with a voicemail 4 6 9 3 5 5 9 3 5. As you can tell, I take them seriously and I read ’em all. Thanks for listening. I’m Jordan Heath Rawlings. We’ll talk tomorrow.