The True Cost of Prop 1 for Austinites: $29M, Jobs, Funding and Lives

Opinion:

Courtney Powell, courtesy photo.

Courtney Powell, courtesy photo.

By Courtney Powell
Special to Silicon Hills News

This has been a difficult week for many Austinites. The Prop 1 campaign has galvanized the community, and rightly so. There was no shortage of opinions, interests, or ego on either side of the debate. I believe it was a poorly executed campaign on both sides, but I’d like to put aside the campaign itself for a moment and discuss the implications and true cost of Prop 1 for Austin.

I took 45 trips with Uber in the last year. I voted for Prop 1, but prior to the election, I hardly paid attention to the campaign or the issues. I’m not affiliated with Uber, Lyft or the City of Austin. I’m the CEO of Austin-based, Real HQ, but these opinion are entirely my own. I’m not heavily involved in any form of politics — in fact, I voted for the very first time in the most recent presidential primary. I’m not proud of my lack of political involvement, I guess I’ve always told myself that given the current state of politics, a single vote wouldn’t make a difference. I was wrong.

Thousands of Austinites Lost a Primary or Secondary Source of Income

There are over 10,000 Uber and Lyft drivers in Austin. More than 60% of these drivers are estimated to drive less than 10 hours per week.
On average, nationwide, a part-time Uber driver earns around $19 per hour. The federal minimum wage is only $7.25 per hour. By contrast, a full-time taxi driver makes, on average, $10.19 per hour.

For thousands of Austinites, Uber and Lyft was the “perfect second job,” allowing moms to drive during the day when the kids were at school, allowing students to earn money for living expenses and tuition, or simply allowing someone a profitable, change of pace from their normal routine.

But for many Austinites, driving for Uber or Lyft was their primary source of income. In addition to increased earnings, Uber drivers are their own boss, set their own hours, and have the benefit of knowing who they will pick up, in advance. Here’s one Austinite’s personal story about driving for Lyft.

Beyond higher pay and flexibility, Uber and Lyft created opportunities for underrepresented communities. I’ve seen Austinites who are deaf, or for whom English is not their first language, drive for Uber and Lyft successfully. Imagine an entire underrepresented community offered a new opportunity to earn a living, now part of the more than 10,000 people that have lost income.

In the startup community, I think it can be easy to overlook how difficult finding a well-paying, flexible job for most people can be. I’ve even seen people refer to the Prop 1 aftermath as “first-world problems.” This issue is not just about finding a faster, cheaper way to get to the airport. It’s about the financial impact on real people. Over half of American children receive free or subsidized lunches and 22% of American children live BELOW the poverty line. According to a heartbreaking article from CultureMap Austin, Austin now has the 8th fastest-growing poverty rate in the country, with over 230,000 locals were considered to be living in poverty.

This issue is not just about finding a faster, cheaper way to get to the airport. It’s about the financial impact on real people.

Uber and Lyft offer many people a chance to earn money they desperately need to make ends meet. Note that in the requirements to become an Uber driver, although you need a safe vehicle, insurance, a clean driving record and no criminal history, there are no educational requirements. This is important. 68% of Americans do NOT have a college degree but more and more jobs now require one. Compare the Uber driver requirements with those of a Testing Assistant at Austin Community College, where you’ll need at least a high school diploma and preferably an associate’s degree. The hours are not flexible, and the pay is $10.75 per hour. For most Americans, every dollar counts.

Many have said that the resulting job loss is Uber and Lyft’s fault. I disagree. The inherent role of a business that has taken on (in this case massive) outside funding, is to produce a financial return for their shareholders. This doesn’t mean funded businesses shouldn’t operate ethically, care deeply for their employees and customers, or contribute to the communities they do business in, but at the same time, they are bound by a fiduciary responsibility to shareholders.

The City of Austin, however, has no such constraints. The Office of the Mayor and City Council is beholden to the people, and people alone. Their job is to protect the interest of the city and it’s citizens. I know of no greater interest for Austinites than enabling every opportunity for as many citizens as possible to earn a living.

Uber and Lyft Leaving May Cost Austin Over $29M Per Year

If we estimate the total wages earned by part-time Uber and Lyft drivers in 2015 using the numbers above — 10k drivers in Austin multiplied by 60% part-time drivers, multiplied by 5 hours per week (as the only data I have says 60% of drivers work less than 10 hours per week, I‘m using this as a safe estimate), multiplied by $19 per hour — that’s $29 million in part-time yearly earnings alone that will no longer be fed right back into the local economy in the form of income, spending, and taxes.

In addition, Uber and Lyft agreed to pay an additional 1% of revenue earned in Austin to the city. In Uber’s first year in Austin, they conducted 2.5 million rides. Uber’s minimum fare is $5.30. The 1% revenue fee paid to the city of Austin for Uber each year alone, would be significant.

$29 million in part-time yearly earnings alone will no longer be fed right back into the local economy in the form of income, spending, and taxes.

Many ask why if Uber and Lyft are making so much money in Austin, would they leave over something as seemingly simple as fingerprinting? Incorporating fingerprinting (and the many other requirements put in place by the city) is challenging for the Uber and Lyft model because they are operating at international scale. Ridesharing is built on quickly enabling new, part-time drivers to join the supply side. Uber has managed the background check process themselves, typically via a third-party, and it only takes a couple of days for a driver to be approved. This low barrier of entry not only contributes to quickly onboarding new drivers, but it is also crucial to offset driver turnover each year which Uber estimates is over 50% due to the part-time nature of most drivers — if their circumstances change, they move on.

Most cities are not set up to process fingerprinting-based background checks quickly or effectively. The City of Austin cannot even enforce the ordinance as it is written today.

Without Uber and Lyft, Austin’s Transportation Crisis Worsens

I’ve heard people say that Austin got along just fine before Uber and Lyft arrived. Fortunately, Uber and Lyft’s arrival in 2014 came at the same time that Austin was experiencing extraordinary population growth and increased popularity as a tourist destination. According to the Austin Chamber of Commerce, 7.1% of Austin residents in 2014, did not live here the year before. The population has grown 37% since 2010 and there are no signs of it slowing.

We are not the same city we were even two years ago, and we were not at all prepared for this level of growth. Previous attempts to pass massive transit improvements over the past few decades were voted down and the entire city is now paying the price.

Austin’s traffic and mobility crisis is to Austin what housing is to the Bay area.

Austin’s traffic and mobility crisis is to Austin what housing is to the Bay area. Poor legislation, and voters who dug in their heels in the name of dogma or a moral high ground, as opposed to pragmatism, will continue to cost its citizens dearly. Just as in the Bay area, it’s the least advantaged citizens who will pay the biggest price. The less transportation options, the less job opportunities, the greater the economic divide will become.

Damage to Austin’s Reputation as a Tech Friendly City Will Cost Jobs

Paul Graham, arguably one of the most influential people in startups and venture capital, tweeted the following about our city.

This is bad. Fundraising isn’t everything, Silicon Valley isn’t everything, and Austin is still one of the best places to launch a startup, but the ability to raise funds in order to grow a company is essential. There are very few companies in the last few decades who have reached meaningful scale without some outside funding.

Until you have years of profitability under your belt, banks don’t want to touch you — they’re not built to invest in innovation or unproven markets. Several great venture capital firms are based in Austin, as are a few angel investor syndicates, and a number of independent angel investors. However, relatively few deals beyond the seed stage — and especially beyond a Series A financing — get done without the participation of at least one investor that is not based in Austin.

Many investors are biased against startups from outside of the Bay area. It’s nothing personal, it’s statistical. In the last two years, 47% of all exits came from Bay area companies. The next highest exit concentration was in London, at 10%. Austin ranks 14th. Given the negative perception of Austin post-Prop 1, and the fact that influential investors and tech leaders are now tweeting things similar to Paul Graham’s sentiment, I fear that Austin will become a “negative signal” for investors. No matter how silly this sounds, perception is reality when asking other people to part with their money.

If the impact on fundraising isn’t bad enough, think about recruiting. Recruiting in tech startups is difficult. Tech companies are dependent on software engineers. The majority of Austin tech companies must compete with big, well-funded companies like Facebook, Dropbox and Google for the relatively small supply of engineers in Austin. Real HQ is a remote company, but I’ve already heard engineers and other tech employees say they wouldn’t move to Austin because, in a city where a car seems like a necessity, not having Uber or Lyft just seems backwards.

Will Prop 1 result in more startups in heavily-regulated industries being forced to leave Austin?

For startups aimed at disrupting existing incumbents in industries that are heavily regulated, the negative impact on fundraising will be even greater. Mike Maples has already stated publicly that Floodgate will not invest in on-demand startups in Austin, and he’s from Austin! Imagine what the rest of the investment community must think. Will Prop 1 result in more startups in heavily-regulated industries being forced to leave Austin?

Making fundraising and recruiting more difficult for Austin entrepreneurs means fewer jobs will be created for Austinites across the board. The City Council does not create jobs, they exist off of the taxes of working citizens. Check out the top 20 non-government employers in Austin right now. Dell, Home Away, BaazarVoice…nearly all of them have raised capital to get where they are now — a top employer of Austinites.

Entrepreneurs need to be able to fundraise and recruit in order to create jobs. We need a Mayor, a City Council, and community that prioritizes job creation.

Uber and Lyft Help Save Lives

The city of Austin has over 50k college students and one of the liveliest party and drinking scenes in the country. Everyone who comes to Austin knows about Sixth Street. Austin was even ranked as the 5th drunkest city in America. Sadly, some Austinites choose to drive drunk rather than wait long periods for a taxi, ask a friend to be a designated driver, or take advantage of designated driver services like Sober Monkeys.

Driving drunk should never be a solution but the reality is, it happens every single night in Austin (and other places across the country). According to this study, 20% of college-aged students have driven drunk and over 40% have ridden with a drunk driver. It is no surprise that Mothers Against Drunk Driving (MADD) endorsed Prop 1.

UberImage

In 2015, eleven Austinites were arrested for manslaughter for driving and killing someone while under the influence. During the 2015 winter holiday season alone, APD arrested 229 individuals for driving under the influence during No Refusal periods.

In 2014 and 2015, ridesharing reduced drunk driving crashes in Austin by 12%. It has been proven that Uber and Lyft can help save the lives of our loved ones. If for NO OTHER REASON, Austin needs Uber and Lyft.

We’re Not Safer. Unregulated Transportation Options are Filling the Vacuum Left By Uber and Lyft.

During the run-up and fallout from the Prop 1 election, fingerprinting-based background checks for drivers has been the linchpin of those in favor of Prop 1— even though there is no correlation between fingerprinting and increased safety for passengers. None. Zero. Check out this Atlantic article for a nuanced view of the fingerprinting and background check issues on both sides of the argument.

There is no correlation between fingerprinting and increased safety for passengers. None. Zero.

Following my last time in a cab (where the driver repeatedly asked me to move to the front-seat throughout the duration of the ride), I’ve not felt comfortable enough to get into a taxi by myself. I feel safer with Uber, where I can see the person’s rating history and make a choice, based on data, whether or not I will take the ride. If there is an issue with a driver, I can instantly provide feedback to Uber and they have the ability to immediately remove the individual from the pool of available drivers. That is simply not possible with a taxi.

Aside from the comfort, tracking, and accountability we’re now lacking with taxis, without Uber and Lyft, Austin is experiencing a tremendous ride shortage. Check out Twitter to see examples of hours long lines for taxis at Austin-Bergstrom Int’l Airport and the thousands of Austinites experiencing difficulty getting where they need to go.

Can you imagine F1, SXSW or ACL without Uber or Lyft?

I’ve heard many comment that this vacuum creates tremendous opportunity for a newcomer. Building platforms that are as easy to use, dependable, and as safe as Uber or Lyft takes years of work and BILLIONS of dollars. I’m sure that someone could put together a ridesharing platform that works in a limited function, just without enough trips to make it worth a driver’s time OR affordable rides AND none of the accountability of Uber and Lyft. Also, no sophisticated investor would commit to a ridesharing company in Austin given the current climate, especially knowing that any newcomer will be instantly marginalized if Uber or Lyft returns. The City of Austin has been encouraging people to use the Get Me app, which by all accounts, has not been going well (though I applaud them for the hustle).

Building platforms that are as easy to use, dependable, and as safe as Uber or Lyft takes years of work and BILLIONS of dollars.

Humans are inherently creative and will attempt to find a solution, even if it poses a greater risk to their safety than a traditional taxi or Uber or Lyft. Over the last couple of days, Arcade City has amassed 12k+ likes on their Austin community Facebook page. Arcade City is a movement that facilitates messaging between potential drivers and would be passengers to plan rides and handle payment. The goal is to create a non-centralized, community driven initiative. I understand and respect the right of consenting adults to do anything they please, and I think Arcade City is interesting, but this is hardly a better, safer option that Uber or Lyft.

What Can We Do to Bring Uber and Lyft Back to Austin?

Prop 1 could cost Austin millions of dollars in income, new revenue for the city itself, opportunity for entrepreneurs to create more jobs in Austin, much needed solutions to our transportation crisis, and worst of all, the very safety of citizens it purported to protect.

We must work together to make our voices heard, get educated, and engage at the local level to fight for policies that enable continued economic growth and prosperity for the city and all Austinites.

Here’s a few suggestions to make your voice heard and help bring Uber and Lyft back to Austin.

  • Educate yourself about the issues surrounding Prop 1
  • Email, tweet, write, or call and tell Mayor Adler *and* your City Council rep that you want them to do everything possible to bring Uber and Lyft back to Austin. Continuously remind them that the current state is unacceptable.
  • Ask Uber and Lyft to come back to Austin and meet with the Mayor and Austin representatives to craft a solution and move forward.
  • Join the Austin Tech Facebook group to keep abreast of policy issues that affect Austin and the greater tech community.
  • Share your position with fellow Austinites, and encourage them to make their voice heard too.
  • Treat every citizen with respect! We don’t all share the same viewpoints and that’s okay.
  • Educate yourself on how and when to register to vote and then show up!
  • If the Mayor or city council doesn’t represent you, VOTE THEM OUT!

One Final Note

I’d like to acknowledge the many people working hard both publicly and behind the scenes to bring Uber and Lyft back to Austin. Thank you.
And thanks to Shelly and A.T. for offering feedback on this post.
You can find me on Twitter.
Thanks to Shelly Leonard.
UberAustinLyft

Reprinted with permission. This post originally appeared on Medium.

Courtney Powell is the CEO of Real HQ, creator of Agent Pronto, the largest real estate agent matching service in the United States and Canada. Prior to Real HQ, Courtney founded PublikDemand, a platform that empowered consumers to get better customer service. Courtney was named by Forbes as one of the Top 30 CEO’s Under 30.

Comments

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