WHAT’S ON THE OTHER SIDE OF DISRUPTION?

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By Elise West

Business was certainly bad since Uber came along, my taxi driver (whom I will call D.) told me, but driving Uber himself wasn’t the answer.

“You need to have a new car, and I can’t afford that,” he said. “Anyway, I paid an agreement to drive this taxi for one more year. I pay whether I drive it or not, so I drive and hope to make enough money.”

D’s agreement with the taxi licence owner is known as bailment, a type of legal arrangement that dates “from the time of Charles Dickens,” according to Denis Nelthorpe. Nelthorpe is the CEO of community legal centre WESTjustice, whose Taxi Legal Service has been at the coalface of recent upheavals in the taxi industry.

D’s bailment agreement means he has paid a bond to the owner of the taxi licence, and must also hand over 45 per cent of gross fares. He must drive the hours the owner has given him, and get fuel and repairs at places the owner tells him to, but he’s not even an employee – he is legally an independent contractor, and must manage all his own tax and super. He reckons he often ends up driving for little more than $10 an hour. The national minimum wage in Australia is $18.29 per hour before tax.

Denis Nelthorpe says that his Taxi Legal Service has, for many years, seen cases of “gross” exploitation of taxi drivers. “Drivers working unhealthily long hours, for a pittance, and being exploited over insurance arrangements.” Nelthorpe told a 2012 senate inquiry that bailment was akin to serfdom, and had no equivalent in any other Australian industry

“One reason that the taxi industry was so ripe for disruption by a company like Uber,” Nelthorpe told the Westsider, “was that it concentrated on exploiting drivers and customers rather than on improving its service.”

Uber launched in Australia in 2012. By 2016, more than twelve thousand Australians were registered as Uber drivers, and an estimated 14 million Uber rides will be taken this year. Young people like it. Uber has been praised as an ‘agile’, ‘disruptive’ innovation, and a prime example of the sharing economy. A 2016 report prepared by Deloitte for Uber claims the company has created the equivalent of $81 million dollars of “benefit” for Australian consumers.

Yet Victoria alone has committed $54 million in special funds to ameliorate the financial impact of Uber and associated legislative changes on people in the taxi industry. When New South Wales legalised Uber, in 2015, $250 million in compensation to the taxi industry was simultaneously announced. Much of this compensation is directed to taxi licence owners, or taxi operators.

The value of a taxi licence has plummeted from $450 000 in 2011 to as low as $130 000 in 2016. “We saw people whose taxi licence was their one asset,” said Denis Nelthorpe, “they’ve gone into debt to get it, and when the value went backwards they were in real trouble.” The Taxi Legal Service saw relationships break down through financial stress, and at least one case that ended in homelessness. WESTjustice filed more than one hundred applications for financial support.

Little has changed for taxi drivers though. Whilst the value of the taxi licence has gone down, D’s bond amount, and the share of fares he must hand over, have not. He remains in a ‘Dickensian’ employment arrangement. He must compete with more and more Uber drivers, but as yet has been given few resources – no fancy apps, or service innovations – to do so.

But D. finds himself in a Catch-22. Even if he could get his hands on a swish car, he may not be better off driving Uber. Ride Share Drivers United, a lobby group, calculated that driving 40 hours a week for Uber would net about $12 an hour. Uber drivers are still ‘independent contractors’, and fully responsible for their own vehicle and expenses. “I know people who started driving Uber,” D. said, “then they came back to Taxis. Taxis are safer, and you have other drivers to work with and meet. But maybe it’s all the same. You drive all night and hope for the best.”

The economic viability of driving taxis is important, not least because driving is a well-established ‘employment niche’ for international students and newly arrived immigrants. (In 2011, two out of three taxi drivers were born overseas. Demographic data for Uber drivers is not available.) The non-recognition of overseas qualifications, racial and cultural discrimination, language barriers, lack of targeted support, and the preferences inherent in government policy all contribute to the concentration of overseas-born people in low-skilled and low-status jobs.

Most immigrants will be overqualified for their first jobs in a new country: the ‘doctor driving a taxi’ of Australian urban folklore is established in fact.

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