Jun 13 2018, 05:16 PM, updated 8y ago
Grab has become an essential part of people’s daily lives as more and more choose to avoid driving due to rising fuel prices, exorbitant parking fees, wasted time and energy being stuck in traffic, looking for parking, and on maintaining a car. Private cars for personal use are increasingly considered obsolete and by virtue of its now monopoly power for rideshare in Malaysia, Grab has taken full advantage.
However, in the absence of effective regulation, the unethical business practices of Grab are reaching a critical level. These include driver exploitation, price fixing, price gouging, absence of grievance policy, and overall lack of management responsibility towards the needs and safety of its customers and drivers. Both Uber and Grab have recently made more high-level marketing claims on their ethical policies, however based on the experience here, it is clear that the reality on the ground is far from ethical. Investors and regulators of rideshare companies need to be more aware of these issues.
I write from experience having been a ride-sharing driver and user since 2014, taking hundreds of trips both as a passenger and as a driver since the service was made available a few years ago. I have also had multiple interactions with Uber and Grab management in this period. A number of scientific papers have been published on the unethical practices of rideshare services; two examples: The Economics of Ride-Hailing: Driver Revenue, Expenses and Taxes, MIT (2018)[1] and Worker Unrest and Contentious Labor Practice of Ride-Hailing Services in Indonesia, Indonesian Scholarship and Research Support Foundation (2017)[2]. Both of these studies were not conducted in Malaysia, but as rideshare systems share a common business model the findings are comparable to the Malaysian experience.
The most critical issue with Grab is driver exploitation. The root cause of this is multi-dimensional and it is accepted that the main challenge for Grab is to balance ride affordability and driver earnings. However, if the driver is unable to make ends meet and earning barely enough to cover costs, there is systemic failure in Grab’s model. I have personally met a few drivers who told me directly that they were driving 6 days a week, throughout the day and night, sleeping and washing up a few minutes in between at rest-stops and petrol stations, going home on Sundays to see their kids, just to earn enough for their families.
The standard answer from rideshare companies is that the service is voluntary and drivers are free to exit the service at any time. This ignores the fact that the companies are well-aware that most drivers are in a vulnerable situation – typical rideshare drivers are commonly unemployed, facing personal financial crises including personal debt, medical expenses, or having family issues including the loss of a breadwinner, having to support disabled family members and other sad circumstances. In most cases, rideshare is the only option as they are unable to find full-time jobs.
Most of Grab’s drivers are in this situation, with a smaller portion driving part-time. The rideshare business model is centred on driving as an additional side income instead of as a full-time source of income. As a part-time driver, I do not rely on rideshare income as a livelihood therefore I continue to drive as it makes sense to supplement the cost of my commute to and from work. Unfortunately, it is a much more dire situation with full-time drivers who have families to support.
Prior to the merger, Uber and Grab clearly communicated that they recognized net fares were too low to provide decent earnings for drivers and supplemented these with bonuses and incentives.
However, after the merger, Grab has failed to recognize any of these, does not take responsibility over its drivers’ earnings and wellbeing as it does not consider them employees, and in blatant greed takes 25% as a commission from drivers’ earnings. The latter makes a mockery of todays’ low-cost computing and cloud systems as Grab merely provides a platform that matches drivers and passengers. In comparison, Visa and Mastercard run worldwide card payment systems and charge less than 3% transaction costs with the EU mandating a 0.3% service fee since 2015. In 99% of rides, there is no cost to Grab; it is only in the rare occasion where there is a dispute between the driver and passenger does Grab need to assign a human to intervene. The 25% service charge is blatant gouging of driver earnings.
Today, with the monopoly power that Grab has, there are few incentives, and these are only made available to drivers who work more than 10 hours a day – a clearly exploitative practice. Recently Grab held a contest for its drivers with a 4-day trip to Lombok as the main prize – the contest winner would be the one with the most rides over a number of weeks. There were no limits set on driving duration, showing that Grab has zero concern for its passenger and drivers’ safety and health when it is a critical risk if drivers are working without enough rest and possibly on stimulants to keep awake.
Costs to drivers are often misconstrued as purely fuel costs. This could not be farther from the truth. The overall costs include car loan repayments, insurance, tax, maintenance costs, i.e. tyres, lubricants, parts, ad-hoc repairs, and other incidentals including car cleaning, unexpected summons, interior care, etc. Depreciation and maintenance costs are much higher than normal when a car is used for extended periods for rideshare services. A major cost is idle driving in between rides, as drivers are not compensated for the time and distance taken to pick up passengers. To make a living, drivers need to also consider rainy day and retirement savings, which are factors when determining a permanent employee’s salary. In many cases, drivers neglect basic maintenance and repairs as any offline time threatens their meagre earnings.
Grab also places constant pressure on drivers with irrational terms of service, including threats to terminate drivers with low acceptance rates and high cancellation rates. This is irrational as common sense would show that drivers would accept all the rides they can as each ride earns them money. The only reason why a driver would not accept or cancel a ride is when they know that the ride is going to lose them money – the pick-up distance is too far, or the passenger takes too long to show up. Every minute and km driven needs to be monetized for a driver to earn a decent living.
There are a number of further issues with Grab including its pricing mechanism and driver rating system, but I will elaborate on these in future. As a result of the issues cited here alone, one can imagine why it is increasingly common to meet drivers in a negative mood when riding in Grab.
In view that driver welfare and management responsibility are critical issues and Grab is now an essential service, regulations must be imposed on Grab. I suggest the following to the Transport Ministry:
- Reduce commissions to 10% on drivers’ earnings and introduce a maximum cap of RM 5 per ride.
- Stop all threats by Grab on suspending and terminating drivers for not accepting rides or cancelling rides.
- Establish a grievance mechanism with third-party oversight to prevent Grab from unilaterally terminating drivers without proper reason. The third-party may be an agency under the Transport/Labour Ministry to investigate terminations.
- The Transport Ministry to commission a study on drivers’ earnings to ensure they can make a decent living within normal daily working hours in consideration of the cost factors listed above and raise rideshare rates accordingly.
- Establish clear controls and guidelines on drivers’ working hours in consideration of health and safety of drivers and passengers.
[1] https://techcrunch.com/2018/03/02/mit-study...-or-lyft-sucks/
[2] https://theconversation.com/drivers-stories...-and-uber-82689
Grab exploitation, ethics, driver welfare, Part 1 of a series
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