Uber: With 3000 New Jobs Among Record Holders in Croatia, Announcing 10,000

More than 88 percent of Croatians want more modern laws that will enable them to access safe, efficient, and cheaper services through applications. More than 81 percent of Croatian citizens support the digital transformation of society, and over 88 percent want more modern laws that will allow users to provide everyday services through electronic applications.

A survey conducted by the association Digital Croatia confirmed that users want internet access at all times and wherever they are. They want innovative, digital, secure, always available, and cheaper services. This is also confirmed by the fact that as many as 72 percent of Croatian citizens support the Proposal for the Road Transport Act, which allows for the provision of taxi services through electronic applications.

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Digitalization has entered everyday life, stimulated market competition, and brought unstoppable changes. Uber has become one of the global leaders and symbols of this digital transformation. There are multiple changes it has brought to Croatia.

An analysis of Uber’s operations since it arrived in Croatia, that is, since October 2015, shows two key elements of its impact on the economy. First, with Uber’s arrival, the overall transport market has grown because the app has started to be used by those who previously did not use taxis. The reason is the cheaper and more accessible service.

Rapid Employment Growth

Second, Uber has enabled the opening of more than three thousand jobs in the last two and a half years. This number is extremely important in the context of the overall situation in the Croatian labor market. Two sectors, tourism and ICT, have opened the most new jobs. The ranking of the 500 best Croatian companies published by Lider in collaboration with Bisnode shows that the past decade of Croatian business has literally turned on employment policy, as the top 500 companies in Croatia lost as many as 23,426 jobs from 2007 to 2016.

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The latest Lider list, for 2016, shows that temporary employment agencies, which are merely intermediaries to companies, employed the most. Of the top three positions on the list, two are held by such agencies. The first is Electus DGS with 1189 employees in 2016, the second is Zagreb-Montaža with 723 open jobs, and the third is also a temporary employment agency – Smart Flex, with 687 new jobs.

Uber announces that in the next two years, according to the potential of the Croatian market, they could open another 10,000 jobs. In just the last year, they have already doubled the number of driver partners from 1500 to 3000.

The Numbers Speak for Themselves

Former startup projects are now becoming unicorns (private companies valued at over one billion dollars) outside the conventional capital market or, as Matt Levine summarized, ‘companies used to go public to raise capital, and now they do it to buy back their own shares.’ Uber, like most competitors, is still not on the stock market, but it has earned its leading position with a staggering valuation of approximately 70 billion dollars.

For comparison, this is three times more than the market capitalization (at the end of January) of all shares listed on the Zagreb Stock Exchange, which sufficiently testifies to the enormous potential of this company and the sector as a whole. In all of this, two things are certain: first, it is difficult to foresee an end to the debate between opponents and proponents of this transport model, but over time new facts emerge that either side will turn into more or less convincing arguments; second, the seemingly simple concept is obviously a dramatic turning point in the taxi service market after which nothing will be the same as before.

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That users have received the service they want is evidenced by the number of over five billion rides globally completed through the Uber app. In Croatia, there are currently about 150,000 active users; this many use the services of three thousand Uber partners who have thus found their only or new source of income. Of course, part of the revenue from the three thousand new jobs flows directly into the state treasury, and part goes in the same direction indirectly, through the transfer of higher income into consumption, which is a very important impulse in the economic activity of the country.

The Entire Market is Growing

In a survey conducted by the agency Promocija plus in several Croatian cities, as many as 56 percent of respondents aged between 18 and 30 indicated that they are considering a career as a driver partner, which is why the positive impression from the wider public has not been absent.

Indeed, as many as three-quarters of respondents, likely encouraged by the positive impact of competition on transport service prices, view Uber positively.

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This last point is often used by opponents as an argument to justify their opposition to market liberalization, believing that everyone is actually hunting for the same piece of the pie. However, statistics refute them.

According to data from the Financial Agency, in ten years, from 2007 to today, total revenues in the taxi service sector at the state level have multiplied. More precisely, ten years ago, annual revenues were only around ten million kuna, and in 2011 they first increased to 56 million kuna. Not coincidentally, as that year Cammeo entered the market, seriously challenging the monopolistic position of local taxi associations.

At the end of 2015, Uber also arrived on the Croatian market. By the following year, total revenues of companies engaged in taxi transport reached almost 140 million kuna, and the total number of taxi drivers doubled. The ten-year revenues of the taxi service sector indicate two trends. Contrary to taxi drivers’ claims that Uber is taking their jobs, the entire market has significantly grown, and more than the mentioned revenues because the revenues of Uber’s driver partners who are engaged in vehicle rental with a driver, and not taxi transport, are not included in the Financial Agency’s statistics. The entire transport market in cities is therefore much larger, as confirmed by the claims of 40 percent of Uber users who did not use traditional taxis at all before the app arrived in Croatia.

Creating an Efficient Market

Users are changing habits and are using and buying their own cars less and less. They want easily accessible, efficient, and as cheap as possible transport services without the search for parking spaces. Thus, we have actually had the opportunity to witness an interesting economic phenomenon firsthand, in which, contrary to conventional belief, supply creates demand.

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Lower service prices, which are an inevitable consequence of intensified competition in the market, would certainly not have caused a dramatic increase in revenues under stagnant demand conditions. Thus, by liberalizing the market, the volume of the pie that taxi drivers are winning has also increased.

Brishen Rogers, the author of the study ‘The Social Cost of Uber’, claims that Uber’s success is not based on a more flexible interpretation of outdated regulations, but on impressive vertical and horizontal integration, that is, the creation of a significantly more efficient market in which the component of uncertainty, very important from the consumer’s perspective, is completely eliminated, whether it is about the availability of taxi transport or the price of the service.

He also responds to the thesis that Uber could primarily monopolize its position with low prices, considering this an unlikely solution for a very simple reason – once the existing rules change, it is relatively easy to replicate the model that Uber implements, and there are no serious barriers for users to switch to another platform or application.

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Meanwhile, the side effects of Uber’s model are slowly becoming apparent, which experts warn could lead to lower costs for citizens, but also less traffic congestion (with a noticeable saving of time) and greater safety on the roads.

Experiences from other countries show that things are moving in that direction. For example, Brad Greenwood and Sunil Wattal state that the uberX service in the US reduced the number of deaths caused by drunk driving by between 3.6 and 5.6 percent from 2009 to 2014, which corresponds to about five hundred lives per year and costs of around 1.3 billion dollars.