A Worker-Owned Cooperative Tries to Compete With Uber and Lyft

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For years, Uber and other ride-hailing companies offered the promise of entrepreneurship to drivers. Drivers who were eager to set their own schedules signed up in droves, propelling the gig economy into a multibillion-dollar industry.

But some drivers never received the control and independence they had expected. They struggled with the costs of vehicle maintenance, loans and insurance, and they questioned whether Uber and Lyft paid a fair wage. Legislative efforts to grant them employment benefits were thwarted.

Now, dissatisfied drivers and labor advocates are forming worker-owned cooperatives in an attempt to take back some of the money — and power — in the gig economy.

The Drivers Cooperative, which opened for business in New York this week, is the most recent attempt. The group, founded by a former Uber employee, a labor organizer and a black-car driver, began issuing ownership shares to drivers in early May and will start offering rides through its app on Sunday.

The cooperative has recruited around 2,500 drivers so far and intends to take a smaller commission than Uber or Lyft and charge riders a lower fare. It is an ambitious plan to challenge the ride-hailing giants, and it faces the same hurdles that tend to block other emerging players in the industry: Few have the technical prowess, the venture capital dollars or the supply of readily available drivers to subvert an established company like Uber.

Still, drivers who joined the effort said even a small cooperative could make a big difference in their work, allowing them to earn more money and have a say in the way the company was run. The Drivers Cooperative said it planned to pay 10 percent above the wage minimums set by the city’s Taxi and Limousine Commission, and return profits to drivers in the form of dividends.

In normal times, the higher wage might attract drivers to the cooperative. But these are not normal times. Many drivers have been hesitant to return to the road given the pandemic, creating a national shortage.

During an earnings report this month, Uber said it had 3.5 million active drivers and couriers during the first three months of the year, down 22 percent from the previous year. The company has responded by aggressively increasing its spending on bonuses and incentives, branding the effort as a “stimulus.” In March, Uber said drivers in New York City earned a median of $37.44 per hour.

But once the supply of driver recovers, Uber’s wages will most likely fall. The founders of the Drivers Cooperative said members of the group struggled to keep up with their expenses when they earned typical ride-hail wages.

A spokeswoman for Lyft, Julie Wood, said, “We’re constantly working to improve the driver experience on our platform and share the goals of allowing drivers to work efficiently and independently.” A spokesman for Uber declined to comment on the cooperatives.

The economic stress caused by the pandemic has prodded workers to use cooperatives as a lever against existing companies and — they hope — to increase their pay, said Ariana R. Levinson, a professor at the University of Louisville’s Brandeis School of Law who studies employee ownership.

Although it is challenging for gig workers to organize, Ms. Levinson said they had formed small food delivery and ride-hailing cooperatives. “Independent contractors are really successfully using the co-op model to organize themselves and be able to compete for a living wage,” she said.

“I’ve never seen this hunger for change that exists with drivers. Every single transaction reveals exploitation,” said Erik Forman, a labor organizer and a founder of the Drivers Cooperative. “They feel like a way to regain control is to have control and ownership over the platform.”

Mr. Forman started the cooperative with Alissa Orlando, a former head of operations for Uber’s business in East Africa, and Ken Lewis, a black-car driver in New York City. Ms. Orlando said she had left Uber after witnessing driver outcry over pay reductions.

She started researching cooperatives during the pandemic as Uber and Lyft drivers struggled to gain access to unemployment insurance and adequate protective gear. Mr. Lewis and his brother worked in the taxi and black-car industry, but he said they had dreamed about running their own business.

The Drivers Cooperative gets technical and business assistance from volunteers in the tech industry, Ms. Orlando said.

The cooperative aims to raise pay for drivers, and to address other common concerns, like predatory loan rates and surprise deactivations, which cut them off the apps that connect them with passengers. The group is teaming up with the Lower East Side People’s Federal Credit Union to help drivers refinance their vehicle loans, an effort it hopes will further reduce their expenses.

In 2017, Uber agreed to a $20 million penalty with the Federal Trade Commission to settle claims that it misrepresented driver earnings and loan terms. The company no longer offers vehicle financing.

Drivers said they would most likely continue to drive for gig companies or black-car services in addition to the Drivers Cooperative, adding it to the array of ride-hailing and delivery apps on their phones.

“Working with Uber has been something you do because you don’t have another alternative,” said Michael Ugwu, who has driven for Uber for six years. He said he would continue driving for Uber, but would give priority to customers who requested rides through the cooperative’s app.

“Having your own business is the way forward and the way out,” Mr. Ugwu said. “Even if I make less money, I will focus on the co-op to make sure we succeed.”

Other groups of workers are also turning to cooperatives to exert more influence in the gig economy. The Driver’s Seat Cooperative, which incorporated in 2019 and operates primarily in Denver, Los Angeles and Portland, Ore., helps drivers harvest industry data about which ride and delivery apps are the most lucrative, and keeps an independent record of their earnings.

“The starting point for this was hearing drivers’ frustrations and their sense of being manipulated by the algorithm,” said Hays Witt, the chief executive of Driver’s Seat. “Data is reported back to drivers in different ways on each platform. Drivers have a hard time evaluating what works best for them.”

Mr. Witt said Driver’s Seat aimed to sell congestion and traffic data to cities, which get little transparency from gig companies about their environmental impacts. The cooperative also plans to open membership to drivers this year.

“People are trying to figure out: ‘How do we hold on to the value that we’re generating and pivot away from this superextractive model?’” Mr. Witt said. “It’s popping up because there’s a real problem, and co-ops offer a real solution.”

Mr. Lewis, a founder of the Drivers Cooperative, said drivers like him had wanted to create apps like Uber since it was introduced, but did not know where to start. Although a few efforts have sprung up across the country, like the delivery co-op LoCo, New York did not have a place for them to go.

“Drivers would be saying, ‘Why couldn’t we do this by ourselves?’” Mr. Lewis said. When the opportunity to join a cooperative came along, he thought: “We’ve struggled with no change. Let me give this one last effort.”