What the Ola, Uber Strike Tells Us About the Nature of 'Informal' Exploitation

The explosion of monetary incentives and subsidies triggered a gold rush. With that coming to an end, are Uber and Ola simply reproducing old exploited and informal labour markets?

Uber and Ola drivers shout slogans during a protest in New Delhi. Credit: Reuters

Uber and Ola drivers shout slogans during a protest in New Delhi. Credit: Reuters

Who said that the theories of classical political economy have become outdated? In fact, as the recent Ola and Uber driver strikes show us, the theory of surplus value has never before been so animate and sophisticated.

To put it in crude terms, the difference between a worker’s wage and the value she produces through her labour power is ‘surplus value’. In the classical theory of surplus value, it is generally seen as a measure of exploitation.

For the past week, thousands of Uber and Ola drivers have been demanding better benefits, accident insurance, relaxation in working hours and higher pay. How did things get to this point, considering how benign and wonderful the ‘uberification’ of the economy seemed to many barely a year ago?

The initial explosion in monetary incentives given to Uber and Ola drivers by these online taxi aggregators not only attracted existing drivers (drivers who earlier worked for Meru or other radio-taxi cab companies) but also new entrants. The average earnings of a cab driver in India was about Rs 15,000 to Rs 20,000 per month before players such as Ola and Uber entered the market. With them, drivers started earning anywhere between Rs 75,000 to Rs 1.5 lakh per month. Daily earnings hit as as high as Rs 5,000 per day if drivers were able to complete a certain number of rides.

Owners of local cab-hiring agencies themselves started driving for these companies. Many started working overtime, others took up night shifts. Young professionals quit lower-paying call centre jobs to take up the Uber and Ola cause. Others decided to cheat the system, resulting in a wave of fake and fraudulent bookings to achieve the company-set targets. That’s when Ola introduced the CRN/OTP number that drivers had to collect from their passengers in order to start the meter.

It didn’t take long for Ola and Uber (and at the time TaxiForSure) to be viewed as a revolution in the private transport segment. A revolution that generated thousands of jobs, raised the standard of living for drivers and most importantly, revamped the commuter experience through convenience, safety and price.

Schemes such as Rs 49 per ride for 8 km or to the nearest metro station threatened not only auto rickshaws but also transit-feeder vehicles such as cycle and battery rickshaws. Moreover, navigation systems that allowed pick/drop to and from exact locations, and the near-abolition of the classical Indian tradition of haggling over fares upheld the principle of ‘customer is the king’. A combination of this and dramatically lowered prices resulted in the (artificial?) creation of high demand.

On the supply side, with initial entry barriers like driving experience, educational degrees, background checks and stringent feedback systems, the class of drivers got somewhat streamlined. However, eventually, one can see how this artificially high demand led inevitably to an oversupply of cabs and drivers. Due to the lucrative picture shown by the online taxi companies – in the form of incentives, low commission rates sliced out by the companies and constant customer flow – drivers took loans, bought cars and got into debt without thinking twice.

The companies took pride in this fact. TaxiForSure CEO Arvind Singhal at the time noted that he was happy many of his company’s drivers had become mini-entrepreneurs. “We have so many educated people approaching us to become cab drivers. We even have an engineer contracted with us as a driver, who says he loves the entrepreneurial mindset associated with the profession as compared to some IT job.” Singhal said.

The only question was: How could these companies continue to ensure high earnings for their drivers while charging low prices? With fuel costs, devices, car maintenance and so on, how much money could Ola and Uber continue to pump in?

Towards the end of 2016 it became clear that the model was perhaps not sustainable. Consequently, the classic tactics of squeezing out surplus labour power began by finding way to shrink the wage bill. Incentives were cut, commission rates were raised (in some cases, from 0% to almost 25%).

Within a span of few months, Ola and Uber went from being one of the most desired companies to work for to becoming a nightmare for drivers who finally woke up to the fact that online taxi aggregators would not provide security, protection or compensation in the case of accidents or unintentional damage.

By the end of 2016, nearly every informal calculation or analysis showed that driver earnings had plummeted.

Now another pertinent question that one would ask is whether these companies are even claiming to offer “formal” jobs with fixed or minimum guaranteed earnings? The answer is no. Ola and Uber have always referred to their drivers as contractors or freelance drivers, who can choose to leave or switch off the app at any time. This flexibility in the modern, so-called formal sector – a process of informalisation within the formal sector – allows for easier extraction of surplus value.

In the context of the current strike, if Ola or Uber suddenly decide to exit markets that they believe have become troublesome, the drivers are not guaranteed severance or lay-off packages.

In this scenario, it would be interesting to see how the companies respond, especially because while commuters have been facing a lot of inconvenience, they have also started going back to “imperfect” older alternatives such as auto-rickshaws, public transport or private vehicles.

Finally, acknowledging a few caveats, Ola and Uber drivers clearly do not represent the traditional “working class” who have nothing but their labour power to sell. Many of them belong to the educated middle class who are technology-savvy,  who could lobby, come together, assert their demands and might also be able to sustain their strike for a longer period due to savings or alternative job opportunities available to them. The Uber business model is based on using low fares to undercut other transport providers while relying on informalisation and exploitation to earn a profit. But the model requires a steady supply of ‘aspirational’ drivers who buy into the perception that Uber and Ola genuinely offer the chance of upward mobility. Can these companies hold up their end of the bargain? That is the question on which the fate of the drivers’ strike – and also the future of the two companies – will eventually turn.

Akriti Bhatia is a doctoral candidate at the Delhi School of Economics.