After last months supreme court ruling, Uber drivers are now to be classified as workers instead of independent contractors. This means Uber drivers will be entitled to earning the minimum wage, on top of any tips they receive from customers. Uber will also give benefits such as holiday pay, where drivers will be paid 12% of their normal wage, as well as a pension plan. So far, Uber has stated that it will immediately extend the benefits to 70,000 drivers across the UK.
The decision will likely increase the disposable incomes of those who commit themselves to be Uber drivers. Certain individuals have made being an uber driver into a career, according to themoneybuilders, an Uber driver can make up to £15 an hour, meaning that for some, it may not just serve as a past-time to make passive income, but rather a job. According to the BBC, there are 45,000 Uber drivers in London alone, data from other sites also suggests that worldwide, the number of Uber drivers is in the millions.
With 2 million drivers in the US alone, likely, Uber has well over 70,000 drivers within the UK, which brings us to the impacts of Uber introducing a minimum wage.
The 70,000 drivers which have been chosen by Uber will undoubtedly see an increase in their incomes, the minimum wage combined with the current amount which some drivers make will result in being an Uber driver becoming a comfortable profession for some individuals to work within.
However, we have already established that Uber likely have more than 70,000 drivers within the UK. So, what will happen to the others? The introduction of a minimum wage will result in Uber being forced to make a large portion of drivers redundant as Uber may not have the funds necessary to keep all the drivers employed.
Hence, only 70,000 drivers have been given these benefits, and others will be unable to keep continuing working for Uber. For some people, being a driver may be their livelihood and so the decision will have adverse effects as individuals will lose their main source of income, and for some, they will lose the additional funds they generate from being a driver on the side.
Additionally, the market disequilibrium which is caused by this decision will also have adverse effects on consumers. Uber has already had to make large cuts of 3000 drivers during the pandemic, and the increase in costs associated with paying a minimum wage will undoubtedly decrease the number of drivers within circulation as they cannot keep every driver employed. This has reduced the supply of Uber drivers within the UK, which may make renting an Uber more expensive for consumers as the company will need much more revenue to keep their drivers employed as well as to expand their services.
An alternative to Uber, Bolt, which also offers riders to be independent contractors may greatly benefit from the Supreme Court ruling. Currently, the minimum wage policy has been applied to Uber, this means Bolt may gain a competitive advantage over Uber as they will be able to offer their services at a lower cost. The Supreme Court ruling has given other companies such as Bolt the golden opportunity to steal Uber’s market share to become king of the roads.