Earn What You Spend

As you may know if you read this blog, I live in Brooklyn, New York.  Although the subway is my primary means of transportation, I occasionally indulge in using a car service to get to the airport or during exceptionally rainy days.  This is not, as those who live in Brooklyn can attest, an extravagant luxury, but rather a necessity: Brooklyn doesn’t really have cabs.  So calling a car service on occasion is the equivalent of hailing a cab in midtown Manhattan.

New York Magazine had a great profile about one such car service a while ago.  Being a driver for a car service is not unlike purchasing a taxi medallion from the City.  Each driver is basically running an independent business: they pay the company a weekly fee to field calls and direct customers to them. So the money I pay a car service only indirectly goes to the company I call: it first goes directly to the driver, who then pays a fixed weekly fee “for the chance to compete for every job.”

My last two experiences using a car service have underscored how even those who are technically employed are struggling in this economy.  I have on two separate occasions called for a car, and had two cars respond to my call in less than a minute.  The drivers argued vociferously with one another that I was their customer before I was forced to choose one.  A few years ago it was common to wait ten times as long for any one driver to pick me up.

Disputes about who should get which call are somewhat natural: without the call from the dispatcher, there is no customer.  Since these drivers cannot pick up passengers off the street, they are simply out of luck when they don’t get enough calls. The dispatcher in the NYMag article clearly understood that he wields considerable power over these drivers’ economic fortunes:

“I’m the dispatcher,” he says. “I’m the one who gives out money, because the calls are money.” On any given night, he finds himself caught in the middle of a hundred hungry drivers, each determined to ensure that no other driver gets more work. Until recently, [they] received about 14,000 calls a week, but that was before the economy plunged, before livery cabs came to seem like a luxury. Now, with fewer calls coming in, the drivers are hungrier than ever.

If all their costs were variable (like gas), this might be bearable for the drivers.  But they aren’t.  Each driver is paying a high percentage of fixed costs: the weekly fee to the company to have calls fielded to them, the price of their car, and monthly insurance.   It is possible that each driver can not only not make money when there are  few calls, they can in fact lose money while working.  That is a particularly cruel twist of fate most of us do not face.

9.5% unemployment is certainly a bad number on its own.  But when you scratch below the surface - and take a look those who fall into that other 90.5%  - you realize just how deep this recession cuts.