California’s battle between rideshare companies and unions has finally come to an end. The state’s Supreme Court unanimously ruled that these companies can continue to classify drivers as independent contractors instead of as employees.
In 2020, California voters approved Proposition 22, which “exempted the companies from complying with a new state law that would have classified their workers as employees, and instead gave the workers the right to limited healthcare benefits and a minimum earnings guarantee.” That law was upheld.
From their inception, Uber and Lyft have faced significant efforts from market participants—notably taxis in various states and localities—to use government to regulate the new entrants out of existence. Uber did most of the work of beating back the attempts to limit their flexibility, responsiveness, and employment scheme. Around 55 percent of Uber’s workforce identifies as non-whiteand these minority entrepreneurs have used the flexibility of their employment at Uber to supplement their income.
Unfortunately, in battles like these, consumers and employees don’t always win. The story of jitneys is one cautionary tale.
The men and women who operated personal cars to transport their fellow Americans were known as “jitneys,” a slang term for a nickel or the normal fare. Like modern Uber and Lyft drivers, many jitney operators offered their services part-time to supplement their existing salaries.
When the jitneys began to spread in 1915, the New York Times reported that anyone with an automobile, “new or old, aristocratic or plebian, big or little, or anybody with the wherewithal to acquire a car, could at once enter the jitney business if they were so minded.” Our research confirms this reporting by the Times: In particular, black southerners jumped at the opportunity to provide customers with an alternative to segregated streetcars.
By 1915, streetcars were one of the primary places where black southerners experienced the harsh realities of Jim Crow. While the streetcars served African Americans, they were forced to sit in the back and often faced verbal and physical abuse from white patrons. The streetcars had many other deficiencies that frustrated customers, white and black alike. They traveled slowly, had fixed routes, and it only took one streetcar to break down to halt all streetcar traffic.
Many black southerners viewed the jitney as a way to escape the streetcar, and some became jitney drivers themselves. One northern paper noted that “[a] number of enterprising Colored men in the South, knowing that the race opposes the separate cars of that part of the country and only uses them when the necessity arises, have started jitney lines for their race.” Both black southerners and women exhibited an entrepreneurial impetus and operated jitneys.
Sadly, excited customers received superior service for only a short time. To address this threat to their profits, the streetcar companies did exactly what taxi companies and unions attempted to do to Uber and Lyft—they used their political connections to get policymakers to pass legislation that would restrict competition.
In almost every instance, they were successful. Localities passed laws that restricted jitneys from picking up passengers on popular streets, staying fixed to specific routes, or operating on a set schedule. Most harmful, however, was legislation that required jitney operators to purchase a bond of $5,000 to $10,000 (the equivalent of $155,000 to $311,000 today) prior to beginning their business.
Each of these regulations was designed to take away an aspect of the jitney’s competitive advantage. The streetcars wanted to make the jitney’s less responsive to consumer demand by imposing stringent regulations. If all else failed, the streetcars lobbied for outright bans or increased startup costs so much that part-time jitney operators could no longer afford to drive.
Ultimately the streetcars won in eight short months. By 1916, the streetcar’s major publication, the Electric Railway Journal, celebrated that “jitneys have been legislated out of existence in many cities and that the general trend of events is toward their suppression.” Some jitneys operated as late as 1925, but excessive regulations were mostly too much.
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The major losers were all entrepreneurs, who supplemented their income by driving, as well as consumers who wanted a better transportation experience. The banning of the jitneys set back America’s transportation system by nearly 100 years.
Let it be a lesson learned. When new technologies enter the marketplace, they often provide opportunities for the previously disadvantaged. We should strive to create a legal framework that encourages new entrants into the market and limit anti-competitive regulations.
Now that the legal battle over the status of Uber and Lyft drivers is decided, perhaps they can focus even more of their energy on finding innovative and flexible solutions to their customers’ transportation needs. The future of transportation services looks bright for consumers and drivers alike.
Marcus Witcher is a research fellow and Tanner Corley is a student fellow with the Knee Regulatory Research Center at West Virginia University.
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