Unionize the Gig Economy? That’s a Bad Idea

The current push for unionization among some food couriers at Foodora Canada, and also among hundreds of Uber drivers in Canada, will ultimately do more harm than good for workers […]
Published on September 15, 2019

The current push for unionization among some food couriers at Foodora Canada, and also among hundreds of Uber drivers in Canada, will ultimately do more harm than good for workers in the “gig economy.” The reason is that the drive for unionization is a drive for increased unemployment and underemployment.

The problem with unionization is the law of demand, which is the central concept in economics. Unionizing Foodora would make it more expensive for the company to hire food couriers. The result would be that fewer food couriers will be hired.

Even without unionization, it’s already hard enough to get a Foodora shift. The Toronto Star reported that according to a union representative at the Canadian Union of Postal Workers (CUPW), with which Foodora couriers are attempting to unionize, there is a “mad dash by couriers to score a Foodora shift.” Of ten workers he spoke to who wanted a shift, the union representative said, only two were successful.

Unionization, which would discourage Foodora from providing shifts to workers by making it more expensive to do so, would surely be unhelpful for those looking for more work. As the late left-wing economist Joan Robinson wrote, “The misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all.”

Foodora and other gig workers who are unsatisfied with their wages and working conditions might feel “exploited”. But the result of unionization would mean fewer employment hours and fewer jobs. The workers might be unsatisfied with their current position, but it’s certainly better than unemployment.

Proponents of unionization like to imagine that rather than cutting employment hours, companies will just accept lower profits. Here again, they are ignoring basic economics. Making Foodora less profitable would slow its expansion, reducing the number of food courier jobs available. In general, making it less profitable to do business means less business will be done, which means fewer workers are hired.

In fact, businesses often react to inflated labour costs by replacing labour with machines. Just as minimum wage increases have hastened the adoption of ordering kiosks and mobile ordering at McDonald’s and other fast food restaurants, the unionization of Uber drivers would provide incentive for the company at the margin to increase their efforts to make self-driving Uber cars a reality. 

Nor can the higher labour costs resulting from unionization simply be passed on to the consumer. The law of demand doesn’t just apply to labour, but to food delivery and car rides as well. Higher food delivery prices means fewer people will use Foodora’s services; more expensive Uber rides mean fewer people will take Uber. This means fewer jobs for food couriers and Uber drivers.

There is no escaping the reality that unionization would lead to employment hour cuts. It gets worse, however. Not only would workers get fewer work hours under unionization, but for some of the hours they do work, their income goes to the union instead of to themselves. According to the CUPW website, union members pay approximately three hours’ worth of wages each month in union dues. 

Delivering food for Foodora or driving for Uber may not be a glamorous or lucrative job, but the calls to unionize should be resisted. By cutting employment hours and burdening workers with union dues, unionization would do more harm than good.

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