What's going on?
Uber – the ridesharing company – took a blow on Thursday as New York City’s council announced a one-year cap on new taxi licenses and a minimum pay for taxi drivers.
What does this mean?
Uber and other ridesharing services have flooded major cities in recent years. However, the increase in taxis has caused more congestion on the roads and made it increasingly difficult for drivers to make a living. While the new ruling won’t reduce the number of cabs currently on the road in New York, it should stop congestion getting worse.
It seems like Uber might not be able to have taxi drivers’ cake and eat it – not without a fight, at least.
Why should I care?
For markets: Uber’s IPO might become a little less… uber.
Uber’s been preparing itself for a hefty IPO in 2019. However, this NYC ruling may become a headache as it could limit Uber’s growth (because it won’t be able to put as many cars on the road to transport people) and profitability (under the new law, taxi companies like Uber will have to make up the difference between fares and a driver’s minimum wage). Uber’s going to need to show signs of profit for a successful IPO – last year, it burned through $4.5 billion of investors’ cash. (tweet this)
The bigger picture: Gig economies are great, for now.
The gig economy – labor markets with lots of short-term or freelance contracts – has helped disruptive businesses like Uber to make hay. But there are now many examples of governments pushing back to make sure people don’t get run over by these companies (Uber has fought legal battles against its service in Germany and the UK, nearly losing its license in London). Other industries using the gig economy, like food delivery services, may also be looking on at Uber’s battles with interest.