Pando

Uber's claim to be a Euro jobs-creator is full of Volkswagen-sized holes

By Michael Carney , written on January 19, 2015

From The News Desk

With Uber fighting for its life in many of the world’s most valuable markets, it’s no surprise the company is looking for any way to appeal to global regulators and consumers alike. The company’s latest tactic, currently on full display in Europe, is to tout its impact as a job creator.

There’s no argument that in each city it enters Uber does create meaningful income opportunities for thousands of drivers (even if calling them “jobs” is a bit disingenuous when its driver “partners” are independent contractors). But where this argument starts to show some holes is when the company trots out the subsequent statistic that it’s looking to remove hundreds of thousands of vehicles from the road.

Speaking at the DLD Conference in Munich over the weekend, Uber CEO Travis Kalanick delivered exactly this pitch, claiming that if Europe would relax its taxi and ride-hailing regulations to allow the company to operate, it would create 50,000 new jobs in 2015, while taking 400,000 cars off the roads. (Yeah environment, right?) The company reiterated this claim in a blog post. But a simple back of the envelope calculation shows that this could in fact be a be a net job killer and pose a real threat to the EU (and global) economy.

According to the European Automobile Manufacturers Association (EAMA), the auto industry employs 12.9 million people across the continent, representing 5.3 percent of the total workforce. What’s more, the industry’s high-skilled manufacturing jobs represent a full 10 percent of such jobs in the EU. The auto industry also represents 6.9 percent of the EU GDP. So the question is, what would happen if Uber eliminated the need for 400,000 of these vehicles?

It’s a complicated question that belies a straightforward answer. But if we make the admittedly simplistic assumption that a one percent reduction in autos demand results in an equal one percent reduction in employment within the sector, the impact of Uber’s expansion begins to look much less positive.

Those 400,000 vehicles eliminated represent approximately 2.4 percent of the 16.2 million vehicles (cars, vans, trucks and buses) produced per year in the EU. Applying this percentage to the employment within the sector and we get approximately 320,000 jobs. So, while Uber is making headlines with promises of creating 50,000 new jobs – low-skill, low-stability “jobs” at that – behind the scenes, the company is threatening more than six-times as many jobs in one of Europe’s most critical industries. Even if we make the generous assumption that each of Uber’s new drivers purchase a new vehicle, offsetting a portion of this car removal, then the impact would still be in the region of 280,000 autos jobs in jeopardy – not to mention the taxi jobs that it threatens. And all this is just in year one.

Of course not all cars purchased in Europe are European-made, but with Uber being a global company and putting pressure on vehicle demand around the world, this is likely a wash.

We can run a similar analysis on the US autos industry. According to the US Bureau of Labor and Statistics, the auto industry represents nearly 11.6 million seasonally-adjusted jobs in this country (or 4 million non-seasonally-adjusted jobs). And according to International Organization of Motor Vehicle Manufacturers (OICA), the US produced 11 million vehicles in 2013. The industry represents 3.5 percent of US GDP, according to the Department of Commerce.

If Europe's ratio of one driver-job created to eight vehicles removed holds true in the US, and if we apply the same straight line analysis that one percent of vehicle demand removed equates to one percent of jobs lost, then every additional Uber driver threaten 8.4 US automotive jobs.

Again, this analysis is admittedly overly simplistic, but it’s enlightening nevertheless. And even if off by 50 percent, then Uber still comes out a job-killer, rather than a job-creator. You can bet that regulators (and their tax-paying and campaign-financing constituents) will be thinking along similar lines as they look to interpret Uber’s claims. Adopting Uber may be a net-positive for cities from a transportation and quality of life perspective – if you ignore those rapes and data privacy issues – but arguing that it’s a job-creator seems to be massively misleading.

The last decade offered the world (and the US in particular) a painful glimpse into what a weakened auto sector means for the economy and employment. Uber would be wise to tread lightly in celebrating its intentions to drive a repeat performance.