19 Pages Posted: 15 Mar 2017 Last revised: 6 Sep 2017
Date Written: March 13, 2017
In August 2014, the online transportation network Uber launched a new service named “UberPool,” which allows Uber users to share the cost of a car ride with strangers traveling along a similar route. In a blog post announcing UberPool, the company hailed the new service as “a bold social experiment” bringing the company and its customers into a “brave new world” of ridesharing. In the two years after the August 2014 launch, more than 100 million UberPool rides were recorded, and UberPool came to account for approximately 20% of Uber trips. In that respect, Uber’s experiment in pooling was a resounding success.
While Uber has successfully facilitated pooling among its millions of customers, it has done little to facilitate a different kind of pooling among the 400,000-plus drivers who compose its workforce. This article focuses on risk pooling (or lack thereof), and specifically on five types of risk: health risk, longevity risk, mortality risk, disability risk, and productivity risk. Millions of employees participate in workplace-based pooling arrangements that serve to insure them against risks of these types. Platforms such as Uber, however, have thus far failed to provide the same sort of pooling benefits to the workers on whose labor they rely.
This article examines the present state of workplace-based risk pooling in the age of Uber. Part I reviews the basic problem of adverse selection in individual insurance markets. Part II describes the ways in which workplaces have served to pool particular risks, and then goes on to highlight the advantages and disadvantages of workplace-based risk pooling as against individual insurance markets. It also notes the many ways in which current law—and in particular current income tax law—serves to encourage pooling within workplaces. Part III provides an overview of economy-wide trends: while Uber and similar online platforms have contributed to unpooling in specific sectors, a bird’s-eye view of the labor market makes clear that workplace-based risk pooling has always left a significant segment of the U.S. population unpooled. Part IV considers possible private-sector and public-sector responses to the problems that unpooling poses. The conclusions drawn are pessimistic: cooperatives and state-based arrangements may lead to an archipelago of risk pools, but with many workers stranded outside. What has become known as the “sharing economy” looks more like a go-it-alone economy, in which risks are individualized rather than collectivized. While Uber trumpets the arrival of a “brave new world,” its workers are left to brave that world on their own.
Keywords: pooling, unpooling, adverse selection, Uber, gig economy, sharing economy
JEL Classification: K31, K34
Suggested Citation: Suggested Citation
Hemel, Daniel Jacob, Pooling and Unpooling in the Uber Economy (March 13, 2017). 2017 University of Chicago Legal Forum (Forthcoming); U of Chicago, Public Law Working Paper No. 638; University of Chicago Coase-Sandor Institute for Law & Economics Research Paper No. 813. Available at SSRN: https://ssrn.com/abstract=2932569