Go-Viet and the gig economy

PHOTO BY RENE DE ANDA (@RENEDEANDA)

All over the world, gig workers are finding that the companies that “employ” them are cutting their pay rates. That’s just the way it works in the life cycle of these startups. A gig service starts, it spends a lot of money finding customers (with lots of discounts, low prices, specials) who order a lot of cars/food/handymen, and the company then needs to spend a lot of money getting workers to sign up.

This goes on for a while with venture capital money funding both the discounts to customers and bonuses for the workers. Hopefully the company becomes a quasi-monopoly, with little competition, and it slowly can start to peel back those customer discounts and employee bonuses, because both sides are committed to the model. As long as it is only a little bit more expensive, or a little worse pay, then people are fine with this. They understand that a business needs to make money.

From a worker’s perspective, ratcheting down pay is annoying, but one can make it up through a bit longer hours. After a few rounds of that, and before the realize it, people are working 12 hours and making much less than minimum wage. Read this article in the New York Times about a guy who tries to be a food delivery man, and ends up making less than $10 an hour (it sounds high, but is actually $5 below New York City’s $15 minimum wage). It also sounds extremely strenuous and dangerous. Even good delivery people make about $15 an hour.

SOURCE: VNEXPRESS

In Vietnam, we are seeing these trends play out with Go-Viet. It has changed its bonus system (which was fairly straightforward and is now more complicated - see to the right). Basically, to get the biggest bonus of 180,000, a driver had to do between 14 and 28 rides a day. That was already hard. Now they have to do between 20 and 40 rides a day to get a bit more (VND240k). If a driver got 5 rides during rush hour, it would still have do to 30 more rides during the rest of the time, which is probably impossible and definitely impossible in a regular 8 hour workday.

The drivers are protesting, which is unsurprising and fits in with this larger discussion about worker’s rights that we talked about last week (see post below from July 17). Go-Viet says that it offering surge pricing for drivers, which should offset somewhat the lower bonuses, but the workers aren’t buying it. The strike continued into the second day at least (see this article from Nguoi Lao Dong). I don’t know if it is still going on.

Unfortunately, Go-Viet has around 100,000 drivers in Vietnam (according to the company), and 300 protesters are just not going to make a big enough ruckus to make management change its mind, For exampe, we saw a much bigger protest in in the US, with LA drivers for Uber striking after a big pay cut (see here), but the strike was unsuccessful. It’s my view that these gig economy jobs depend on these new drivers not really understanding unit economics. Hopefully as they get smarter, they can put pressure on companies, or if that doesn’t work, regulators. In New York City, pressure led to a minimum wage for drivers of a bit over $17 after expenses.

I doubt that we will see that in Vietnam. But with low unemployment, and a big search for workers by all of this foreign investment coming in, the gig economy companies may have to raise pay at some point, to retain drivers/workers. We can only hope.