Download This PaperUber's Unintended Burdens
Uber’s Unitended Burdens”, in: Services Marketing: People, Technology, Strategy, 9th edition by Jochen Wirtz and Christopher Lovelock, New Jersey: World Scientific, Forthcoming
9 Pages Posted: 6 Jan 2021
Date Written: November 2, 2020
Abstract
On August 13, 2020, Uber CEO Dara Khosrowshahi explained that Uber is backing Proposition 22 that would exempt it from Assembly Bill 5 (AB5), a California law that would require Uber to treat its drivers as employees with benefits effectively on January 1, 2020.1 To win over California voters, Uber and Lyft were considering to shut down their services “temporarily” in California as a means to appeal to voters who vote on Proposition 22 in the November ballot.
Given Uber lost over US$8 billion in 2019, and was expected to lose US$6 billion by October 2020, the AB5 law was expected to increase Uber’s operating cost dramatically. Also, it would be a major blow to Uber and other gig economy (e.g., Uber Eats, Grubhub, Deliveroo) if other states in the United States and other countries were to propose labor laws similar to AB5. In that case, Khosrowshahi’s premonition that Uber may never be profitable when it filed for IPO in 2019 would come true.2 Was this law to become the beginning of the end for Uber?
Keywords: Uber, Platforms, International Markets
JEL Classification: F00
Suggested Citation: Suggested Citation