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Uber issues its IPO this week. Tomorrow its drivers are threatening a worldwide strike.

Who’s for — and who’s against — regulating its relationship with its workers?

- May 7, 2019

In what has been called the most anticipated technology filing since Facebook, Uber is set to go public this week. A decade after the company’s founding, Uber could be valued at nearly $100 billion.

Not everyone is cheering, though. Uber’s public listing coincides with a planned global work stoppage, which some of its drivers organized to protest low pay. Presidential candidate Bernie Sanders (I-Vt.) backed their effort, tweeting, “People who work for multibillion-dollar companies should not have to work 70 or 80 hours a week to get by.”

1. Uber’s influence (and masters) are global

Active in more than 60 countries, the company has millions of customers who collectively use the app to take billions of rides. Uber’s monthly active ridership — the number of customers who use the service each month — is estimated at 75 million. From its headquarters in San Francisco, its expansion into overseas markets has created some jobs and threatened others in emerging markets such as South Africa, India and China. And in 2018, Uber’s 3 million drivers — spread across 600 cities — helped the company generate more than $11 billion in revenue.

Uber’s aggressive growth has been bolstered in part by hefty overseas investment. In 2016, the company received $3.5 billion from the Public Investment Fund, a sovereign wealth reserve owned by Saudi Arabia. An additional $7 billion in 2017 came from Japan’s Softbank, making the multinational conglomerate Uber’s largest investor. Both investments could pay off if Uber’s initial public offering is successful.

Europe just hit Google with a 10-figure fine. Again.

2. Uber has its share of problems

The company’s success has been marred by controversy. When President Trump barred certain foreign nationals from entering the United States in 2017, Uber was widely chastised for its perceived indifference. After sexual assault complaints against drivers, Sen. Richard Blumenthal (D-Conn.) asked that Uber make it easier for riders to publicly sue the company. The Sierra Club has criticized the company for causing “undue harm” to the climate. London Mayor Sadiq Khan supported levying an additional fee on ride-hailing drivers to reduce air pollution, although the move is being challenged in court.

Perhaps more significant, Uber’s business model has been politically contentious. Uber keeps costs low by considering its drivers contractors, not employees. This means they aren’t entitled to traditional employment perks such as pension plans, health insurance and paid leave. Nor are they protected by local minimum-wage laws. Some drivers report making as little as $3.75 an hour, although a 2018 study pegged the figure closer to $9.21. Uber hasn’t disclosed how much its drivers actually make after expenses; in addition to paying for their own vehicle, gas, insurance and maintenance, drivers must also pay Uber a service fee. Former presidential candidate Hillary Clinton said this setup raises “hard questions about workplace protections and what a good job will look like in the future.”

3. Support (and criticism) has been mixed

Clinton isn’t alone. Labor unions and U.S. lawmakers have also criticized Uber’s business model. “Transportation network drivers have no rights or protections on the job,” noted one United Auto Workers leader. New York Mayor Bill de Blasio accused the ride-hailing giant of “driving working New Yorkers into poverty.” De Blasio backed legislation to give local Uber drivers a pay hike. The new rules — which guarantee a minimum wage of $17.22 after expenses — came into effect in New York this year.

Earlier this year, a French court ruled that the relationship between Uber and its drivers amounted to a work contract. A British court agreed, saying there was a “high degree of fiction” in Uber’s working agreement with its drivers. The company has fared better in U.S. courts, and prominent Republicans such as Sens. Marco Rubio (Fla.) and Rand Paul (Ky.) — who see labor regulations as an affront to free-market principles — have praised it.

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4. Uber’s biggest challenge may lie ahead

Uber says its goal is freeing all city dwellers from owning cars. Chief executive Dara Khosrowshahi has said, “We have to have a solution for car ownership, and we have to work together to make sure that living in a city, living in an urban destination, doesn’t require you to own a car.” As a result, Uber is investing heavily in self-driving technology. So far that effort has had some snags; most infamously, an Uber self-driving car struck and killed a woman last spring.

But if Uber could do away with paying drivers, its costs would drop. And lower costs would encourage urbanites to get rid of their cars and switch to Uber “robotaxis.” The resulting uptick in demand would boost the company’s balance sheets and satisfy investors.

Our research suggests this is unlikely. Even if the technology were virtually perfect, for most people, hailing a robotaxi would still be costlier than owning a car. While driverless technology may eliminate some of Uber’s political and legal woes, it’s unlikely to deliver a fiscal windfall.

Uber’s failure could have an upside for the Trump administration. For one thing, the president isn’t thrilled by driverless technology; he famously quipped, “I don’t trust some computer to drive me around.” More important, ending traditional car ownership would shut auto manufacturing plants across the United States, resulting in widespread manufacturing job losses. That could erode the president’s support among voters, particularly in the all-important Rust Belt.

Ashley Nunes studies regulatory policy at the Massachusetts Institute of Technology and Harvard Law School.