Tuesday, October 27, 2015

Will the Revolution be Violent?

There is a technological revolution going on in the world around us. I have written about this again and again. The world is investing in technology, Technology is disrupting our workplaces and economy, there will profound impacts on the availability of jobs, and some even suggest that some of our occupations may become obsolete.

Some caution this technological revolution may be as disruptive as the mechanical revolution that changed the face of our nation in the 19th century. That era began with more than 50% of Americans working to produce food, and today it is something less than 3%. A vast migration from fields to factories. If the prognosticators are right, will there be another such migration? If from the factories, then to where?

Yahoo news reports that Uber is having another reaction. Most will know that Uber is a "middle man" by their own design. It intends to own no cars, employ no drivers, and simply take a cut off of the money that passes through. This model has run into some friction, with courts deciding some of those drivers are in fact employees. There have also been debates about what kind of insurance coverage may be necessary for these drivers. The regulatory issues are fascinating. 

Could it be a violent revolution? Well, remember that with every innovation there are displaced workers. The mule displaced farmers, and the tractor and combine displaced more. I worked years ago with a lady whose first job was in the "typing pool."  She sat and typed pages all day long, often seeing only parts of a given document. There were literally hundreds of people in the room, all typing away. She became a paralegal when the "memory typewriter" caused a downsizing in the typing pool. Innovation is ongoing and can erase some jobs, and will hopefully produce some new ones. 

Yahoo news reports that the Uber phenomenon has created anger. In June, the cab drivers in Paris blocked the roads leading to Charles de Gaulle and Orly airports. It was a clash between Uber drivers and the cabbies. You see the cabbies are regulated by the government. There are licenses and fees and insurance, etc. The cabbies see their fares being taken by Uber drivers who do not face the same restriction and constraint.

Yahoo reports that "3,000 cabbies took part" in this revolt. Police officers were injured, people were arrested, and "70 vehicles were damaged." This was not a few folks calmly holding signs. Authorities promised to work towards shutting down the service known as UberPOP and in the meantime "vehicles of UberPOP drivers should be systematically impounded." The conclusion is that these drivers are breaking the law with their performance of taxi-like services. 

Taxi drivers are convinced that the Uber produces unfair competition and that "the service is endangering their jobs by flooding the market with low-cost drivers." There has been violence, and officials note that violence is "unacceptable" and has been seen "in both camps."

If government regulates a population of service providers, like cabbies, and charges them a regulatory or licensing fee, it cannot very well allow another group to perform the same function without such costs. By doing so, government creates an incentive for workers to migrate. Imagine your choice is to pay the government for a license and drive a bright yellow car with a meter or to pay no fee and drive any car you like using your phone as a "meter." 

If you may perform the same services in either scenario, and thus perhaps maximize your income by minimizing expenses for equipment and licenses, you would be encouraged to do the work in your car with your phone. Government has requirements beyond licensing, and insurance is another good example. Commercial insurance is typically more expensive than personal insurance. Carriers see the risk as greater and therefore charge more for it. Another savings potential if government requires certain coverage for cabbies and does not regulate coverage for drivers with ride services. 

Change is sometimes not easy. With the advent of email, there have been challenges for the postal service. That agency will shrink, but perhaps slowly enough that the main impact can be absorbed through attrition? Perhaps not, and perhaps other industries will see more radical and dramatic change as technology increasingly disrupts.

As these changes occur, government will struggle to keep up. If there is justification for requiring insurance limits for cabbies, is there the same justification for requiring it for ride service providers? If license fees are appropriate for cabbies, are they less so for ride service drivers? Some of the regulation may be about government revenue generation. Some may be about limiting the population of ride providers. There will be many arguments and various positions on these questions. 

Today it is the cab drivers. What industries and services will be next? The simple fact is that technology and innovation are driving change and to a large extent it is not so predictable. Will that change be peaceful and thoughtful, or will it precipitate more violence? 

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