Uber is growing fast -- and its economic value has become a topic of political debate.
Politicians are grappling with how to approach the ride-hailing app and the "on-demand economy," also referred to as the "sharing economy." In her economic policy speech Monday, Democratic presidential candidate Hillary Clinton seemed to distance herself from Uber, focusing instead on the implications for the labor market and the risks faced by drivers who aren't shielded by benefits and job security.
“This ‘on demand’ or so-called ‘gig economy’ is creating exciting opportunities and unleashing innovation, but it’s also raising hard questions about workplace protections and what a good job will look like in the future,” she said.
GOP candidates, meanwhile, have rushed to align themselves with Uber, touting its role as an innovator and job creator. Politico reported that Jeb Bush plans to take an Uber ride in San Francisco, and Kentucky Sen. Rand Paul fired back at Clinton's speech, writing on Twitter, “Services like Uber, Airbnb, and Lyft stimulate our economy and work towards lower prices. How is this bad @HillaryClinton?”
Uber, which has run into regulatory roadblocks in numerous U.S. cities, has emerged as a polarizing symbol of the sharing economy. A major concern is that its business model, which relies on drivers whom it defines as independent contractors rather than employees, is leaving these workers exposed without benefits and forced to pay any costs they incur during trips. While Uber offers drivers schedule flexibility and relief from high taxi medallion costs, it also creates uncertainty when it comes to drivers' wages and job statuses.
Drivers have complained of Uber's exploitative tactics, including failing to pay up on promised fares earned.
The California Labor Commission ruled last month that an Uber driver was an employee, not a contractor. But the ruling applies only to the driver involved in the case, Barbara Ann Berwick, and Uber has beaten back attempts in other states to have its drivers classified as employees.
“Our economy is designed to provide a social safety net to people who have full-time jobs, but we don’t have the infrastructure to provide a similar safety net for people who do productive work but are not full time,” said Arun Sundararajan, a professor at New York University's Stern School of Business. “Uber drivers are trying to become full time because that’s where benefits are, but classifying them as full time is retrofitting an old system. There’s a new way people are making a living, and it’s about finding a way to extend protections to more of them.”
In her speech, Clinton also outlined government action that would combat income inequality. Some research has suggested that companies like Uber may help alleviate some of those tensions. “There’s a growing recognition that these sharing platforms can help reduce inequality,” Sundararajan said. “They’re democratizing access to a lot of things that used to be reserved for richer people, like cars.”
Like many startups of its kind, Uber capitalizes on the gaping inefficiencies in traditional systems. “Uber is easier to be upset with because it highlights the weaknesses of transportation systems in towns, specifically taxi franchises,” said James McQuivey, an analyst at Forrester who studies digital disruption. “It might create new problems, but it does solve some old ones.”
That hasn’t stopped Uber from aggressively expanding into new markets and continuing to battle with policymakers and local taxi commissions. It grew six times in size in 2014, and is currently valued at $50 billion.
“Uber opposes anyone that opposes them. It’s the same message: We are the future, get used to us. That may be true, but not in a politically adept way,” McQuivey said. With the election cycle kicking into high gear, Uber should be wary of not becoming the “poster child for the excesses of Silicon Valley exploitative innovation,” McQuivey said.
Uber has appeared much less willing to work with regulators than its peers in the sharing economy. Airbnb, for example, has made efforts to appease concerns over the shrinking number of affordable housing options: It removed 2,000 hosts in New York from its website last year after a report by the state attorney general claimed that almost three-fourths of its listings were operating as illegal hotels, and in April cut ties with hugely profitable vacation-rental firms in Los Angeles.
After repeatedly running ashore of local regulations, Uber might need to pedal back as politicians begin to take a harder stand against it.
“Uber realizes it needs to adopt a more collaborative approach,” said Alex Stephany, who studied the sharing economy in his book The Business of Sharing and serves as CEO of JustPark, an app that matches drivers with parking spaces. “The challenge for Uber now is still to be aggressive operationally, but begin to forge bonds with the people it has alienated.”
More from the Huffington Post: