Uber and Lyft, well known ride sharing services, offer drivers flexibility and control over their schedules and workload. This independence, however, came at higher costs than anticipated for some drivers, who struggled to manage costs for maintenance, loans, and insurance. Further, some questioned whether the companies paid a fair wage. In 2017, Uber paid a $20M penalty to the Federal Trade Commission to settle claims that it misrepresented driver earnings and loan terms.
Out of this dissatisfaction, drivers and labor advocates formed a worker-owned cooperative: The Drivers Cooperative (“Cooperative”). The Cooperative, which was founded by Alissa Orlando, a former operations head for Uber’s business in east Africa, Erik Forman, a labor organizer, and Ken Lewis, a black-car driver, started issuing ownership shares and opened for business in New York last month. The Cooperative intends to take a smaller commission than Uber and Lyft, charge riders a lower fare, pay 10% above the wage minimums set by the Taxi and Limousine Commission, and return profits to drivers as dividends. In addressing predatory loan rates and loan costs, the Cooperative partnered with a federal credit union in New York City to help drivers refinance their vehicle loans.
But a small newcomer faces several obstacles in addition to challenging two well-established companies in the industry. The Cooperative must overcome technical hurdles, capital needs, and a national shortage of drivers. In Uber’s earning report, active drivers and couriers for the first quarter of 2021 were down 22% from 2020. Uber aggressively offered bonuses and incentives to encourage drivers to return, but it is likely that once the supply of drivers normalizes, Uber’s incentives will no longer be offered.
Despite these challenges, cooperatives are often an ideal model to organize independent contractors or workers and provide better financial incentives to its members. Unlike traditional corporations, cooperatives are owned by their members and operate for the members’ benefit. In addition, members are entitled to participation in governance and management. Although there are potential hurdles, the Cooperative offers incentives to its drivers that are not currently available to them from Uber and Lyft, which during this unique time, could yield greater benefits to both drivers and riders.