Of all the effects Uber and its disruptive counterparts are having on society, one of the biggest is as an economics teaching tool for millennials. The ride-sharing app has made free-market believers out of twentysomethings who had thought themselves left-leaning progressives.
Uber offers a crash course in creative destruction that's relevant to their own lives. They've seen first-hand how innovation works and how entrenched interests, in this case the taxi industry and the bureaucrats whose jobs depend on regulating it, resist change. Uber users love the idea of passengers rating their drivers, and vice versa, and understand it as a guarantor of high standards.
They're not bothered by the fact that Uber's drivers are freelancers, earning their income in a so-called gig economy in which the term "employee" is increasingly rare. Indeed, for many millennials, the gig, or on-demand, economy is all they've ever known themselves. Many prefer its go-getter ethos to the secure but monotonous jobs of their nine-to-five parents.
Many of their elders don't see it that way, of course. The gig economy (its name reflects the brief "gigs" that musicians work) has become a wedge issue in U.S. politics that pits the champions of innovation, technology and free markets against those who consider Uber and its cohorts a threat to workers' rights and a middle-class society.
The debate has created an opening for Republicans, as millennials and tech-industry types find themselves at odds with the Democratic Party's anti-Uber economic doctrine. Last week, Republican presidential contender Jeb Bush took an Uber cab to the San Francisco offices of Thumbtack, a website that links freelancers with customers looking for DJs, painters, tutors and other service providers in the gig economy.
"The government today in Washington looks more like General Motors in 1975. The government of the future should look more like Thumbtack," Mr. Bush said. "Lower cost, higher quality, focused on outcomes, really committed to the citizens – in [Thumbtack's] case, your customers."
A few days earlier, Democratic front-runner Hillary Clinton delivered the first major economic address of her campaign for the party's nomination with a vow to "stand up to efforts across our country to undermine worker bargaining power." While she conceded that the gig economy is "creating exciting opportunities and unleashing innovation," she warned that it is also "raising hard questions about workplace protections and what a good job will look like in the future."
Ms. Clinton did not single out Uber. But as the poster company for the gig economy that has hired several top Democratic strategists, including President Barack Obama's 2008 campaign manager, David Plouffe, her speech underscored the fault lines within her own party. The union leaders backing her campaign want new labour laws to govern workers in the gig economy.
Uber is appealing a June ruling by the California Labour Commissioner's Office that concluded that one of its drivers should have been classified as an employee, not as an independent contractor. Labour activists say the ruling, if upheld, has the potential to upend Uber's entire business model. That's unlikely. Authorities in several other states have sided with the ride-sharing service in similar cases. Besides, Uber maintains that most of its drivers prefer their contractor status.
No matter where you come down on Uber, almost everyone agrees the gig economy is not going away. Some people see this as existential threat to our way of life that further tilts the playing field in favour of capital over labour. While many workers will thrive in this survival-of-the-fittest economy, many more are likely to eke out a living without much hope of getting ahead.
In an article in the left-leaning Democracy Journal, U.S. venture capitalist Nick Hanauer and union leader David Rolf call for a new social contract that reflects the realities of the gig economy.
"A basic set of benefits and labour standards must be universal across all employers and all forms of employment, with few exceptions or exemptions," they write. This "would put all employees and employers alike on an equal footing, while providing the economic security and certainty necessary for the middle class to thrive."
The debate about the gig economy is certain to extend beyond the U.S. presidential race. It calls for a rethinking of not only labour laws, but of benefit programs that are available only to "employees."
Uber is teaching millennials that there's much to like about the free market. But it should also teach them that creative destruction is never a smooth ride.