As the Pandemic Subsides in the U.S., Companies Subsidized by Venture Capital Are Raising Prices

Kevin Roose, New York Times:

Profits are good for investors, of course. And while it’s painful to pay subsidy-free prices for our extravagances, there’s also a certain justice to it. Hiring a private driver to shuttle you across Los Angeles during rush hour should cost more than $16, if everyone in that transaction is being fairly compensated. Getting someone to clean your house, do your laundry or deliver your dinner should be a luxury, if there’s no exploitation involved. The fact that some high-end services are no longer easily affordable by the merely semi-affluent may seem like a worrying development, but maybe it’s a sign of progress.

It is hard to see the gig economy as anything other than exploitative, but Roose is right: these services are made somewhat more affordable than concierge services for the rich by more distributed labour, but they are not the middle class perks they have positioned themselves to be. Unfortunately, while investors for Uber and Lyft have long been content to subsidize the pirate taxi industry, actual taxi drivers have found themselves struggling to make ends meet. This gambling has so distorted the market that, until pandemic restrictions began taking effect early last year, there were so many drivers for Uber and Lyft that they, too, often earned below minimum wage.

You can see similar effects across the board. Airbnb is one reason why it has become harder to find apartments for people who live in bigger cities, and its popularity is underwritten by investment money that has kept prices lower than a typical hotel room. Food delivery companies bleed small restaurants of their profit margin, take huge venture capital investments, and still manage to lose money.

All of these companies, according to Roose, have been raising their prices to match or exceed those of similar non-subsidized services, as I wrote two years ago. But that does not undo the disruption to jobs and livelihoods by venture capital subsidies that created these predatory pricing models to begin with.