Work In A Sharing Economy
This article was written in the Spring of 2015 and looked at how "just" a sharing economy is and whether it contributes to communities. The rapidly changing nature of this economy may have dated certain parts of this article. The contents of this post are copyrighted and may not be reproduced without permission.
Work In A Sharing Economy
By Silas Cutler
In the last decade, millions of opportunities have emerged for people to work in industries they may have never considered, or been able, to work in. This is a result of what is called a “sharing economy”, a decentralized peer-to-peer marketplace in which an individual is able to buy or rent items and services from someone else. With the advent of the internet, it has become extremely easy for asset owners and those seeking those assets to find each other. As a result, the sharing economy has exploded, forever changing the ways in which people are able to work.
Sharing economies have existed for decades, but they never existed on a large scale mainly because the reach of communication was limited. Recently, however, internet connected applications and services have made sharing economy services commonplace. The internet plays a huge role in making a sharing economy work because it provides the means for users of the economy to communicate. Most people have heard of, or even used, a service that would be part of a sharing economy. Popular examples include ridesharing apps, such as Uber, Lyft and Sidecar, in which users request rides from drivers who use their personal vehicles to generate income. Other examples of sharing economy services are sites such as AirBnB, which allow property owners to directly rent their spaces to other individuals when not in use. Sharing economy services even extend to task completion with websites such as Odesk and Fiverr which allow users to offer up their personal skills, such as web design or copy editing, for a nominal fee. Although these platforms are well known in the sharing economy, this type of activity can exist from person to person, without a platform. Because of a sharing economy’s convenience and often affordable prices, these services have seen increased attention and use.
One of the most attractive components of sharing economy services for users is that they can be used in somewhat of an ‘on-demand’ way. Every individual that is a part of the economy, whether it’s a provider or a customer, is considered a user of the economy. This is also due in part to the somewhat fluid nature of the economy. A customer can be a provider and vice versa very easily. This creates a very ‘on demand’ type of market, both for consumers and for providers. For example, drivers for Uber, the largest and one of the most popular ridesharing players globally, can create their own schedule and work, or not work, whenever they want. According to Uber’s website, becoming an Uber driver is relatively easy process compared to obtaining most other jobs. Uber requires a late-model vehicle and a good driving record, among other things. Because of this, many of the drivers have other ‘day jobs’ and can drive on the side when they have free time. Another example is property owners who own a unutilized or under-utilized space. With services such as Airbnb, a property owner can list that space online and other users can book the space for period of time, much like a hotel. They can do this in an on-demand way, so they can choose exactly when to rent the space. Most people are seeking to supplement their income in some way and with these platforms, they are able to make additional income in a more streamlined manner.
“A sharing economy represents a larger shift in consumer and worker attitude. ”
A sharing economy represents a larger shift in consumer and worker attitude. With numerous ways to ‘get it now’ in today’s global economy, consumers have come to expect instant gratification. What is unique about a sharing economy is that those consumers can now also be service providers and those service providers expect the same thing, to have work now. A sharing economy allows for that to happen. Individuals can work when they want to work and at the same time consumers can expect their services to be available faster. A sharing economy creates these opportunities for work where they previously did not exist thus increasing individual productivity and overall economic output.
As previously mentioned, Uber drivers can work whenever they would like, creating new opportunities for employment. There’s also benefit for consumers, too. Instead of being in contact with a central a taxi dispatch, providers can instantly find riders through a smartphone application and know right away where the rider is going and where to expect them. This near- real time experience addresses the ‘get it now’ attitude of today’s markets. A recent New York Times article explores how platforms like Uber and Lyft are inspiring companies to extend the app-based services to “other fields, from daily chores like grocery shopping and laundry to more upmarket products like legal services and even medicine” (Manjoo). This makes it clear that consumers are looking for more choices and that workers are looking for more ways to work to maximize their downtime.
This is causing a huge change in the generally accepted rules of how people work. Traditional roles or careers, such as driving a taxi, or running a hotel, are being eschewed for driving for Uber or renting a room whenever it is convenient. This could have major implications for traditional industries. For example, the cost of being licensed to operate a traditional ‘Yellow Cab’ in New York City is astronomical with the average price being $805,000, down 23 percent from 2013’s peak of $1.05 million (Barro). That price doesn’t even include the cost of a vehicle or regular maintenance costs. This is clearly a huge barrier to entry in that market and if one chooses to invest that amount, they have effectively made that his/her career. The same thing can be seen with the hospitality industry. Instead of having to run a full time business, a property owner can simply use a platform like Airbnb to rent a space that wouldn’t otherwise be used. The operator wouldn’t have to purchase property solely for that purpose or manage complex business functions; they also don’t have to have insurance for the space as the platform, Airbnb, insures the space for the time it is in use up to one million dollars ("Trust at Airbnb"). These are just two examples of the massive opportunity that exists for individuals within the sharing economy. Traditional ideas about work in these spaces are being competed away by newer, younger, and easier alternatives.
The caveat in all of this is that providers aren’t willing to sacrifice the quality of their experience for the sharing economy. Even though the sharing economy provides a plethora of new opportunity, there are still some issues. One of them is consumer wariness about ridesharing services. Traditional cab and livery companies are generally accepted as being a safe means of transportation. This is often attributed to the extensive background checks and licensing processes that drivers go through. Additionally, most traditional companies hold those vehicles as part of a fleet so they receive regular maintenance and safety checks. Ridesharing services, however, circumvent many of these regulations and requirements. Uber, for example, completes background checks on all of their ‘driver partners’ and has vehicle standards for maintenance and cleanliness ("Uber.com"). They also have an ongoing ratings system in which passengers rate drivers and vice versa to ensure quality. However, Uber, and all ridesharing services, are in a grey area in terms of government regulation. Uber claims that it is “not a transportation company” and is instead just a “technology platform” (“Uber.com”). Because of this, they are basically exempt from all taxi and livery regulations. This saves them the costly process of government licensing and background checks, but some say it may put rider safety at risk. Governments are wholly unprepared to regulate the ridesharing industry and this has caused numerous localities banning ridesharing services until regulations can be put in place; it comes down to the fact that private industries and young startups move exponentially faster than regulating bodies (Kerr).
Another issue for both consumers and providers are some of the safety concerns coming about. Recent stories have emerged from around the globe with allegations of rape and violence involving ridesharing drivers from multiple platforms (Kerr). There is also a threat to drivers, some of whom have been attacked while operating for Uber. Uber, for its part, responded by saying their technology makes rides safer and they would be including an ‘emergency’ button within the Uber application to summon help if necessary. They also instituted numerous other programs and features to “keep riders and drivers safe” (Risberg). Ridesharing services aren’t the only ones having issues, however. A recent story in New York City told of how an Airbnb apartment was rented and used for a “plus-size orgy”. There were thousands of dollars in damage and cleaning costs. Airbnb responded by taking care of all the costs for that particular owner and they made sure he had a new place to stay (Staff). It must be noted that these are a few extreme cases and most consumers have better experiences with these services; however, these examples do highlight some of the trepidations providers, and consumers, may have about participating in the sharing economy. If consumers are afraid to use services in a sharing economy, then there is less opportunity for providers in the economy.
That being said, the sharing economy is doing quite well. In the United States, the sector is already said to be a $15 billion-a-year industry. Alex Stephany, the chief executive of shared parking website JustPark lists 68 sharing economy companies in “sectors ranging from home, car and ride-sharing to clothes, books, food and from London to Singapore, Sydney, Barcelona, Paris, Switzerland, The Netherlands and Germany in his new book “The Business of Sharing: Making It In The New Sharing Economy”” (Cave). With industries this size, it’s hard to deny that they are playing a big role in society, and they don’t show signs of stopping. After a new round of funding in December of 2014, Uber was valued at over $41 billion (Macmillan, Schechner, and Fleisher). While this may represent a challenge for incumbent taxi and livery companies, it is clear that more consumers and drivers are making their preferences known and they are making the switch.
With these platforms raking in the money, one would hope this money is also making its way down to the actual providers themselves. A recent Time article by Jacob Davidson broke down the statistics Uber provided and compared them to the statistics provided by the Bureau of Labor Statistics. In New York City, Uber says its drivers make, on average, $30.35 per hour; however, they acknowledge that their driver-partners “are not reimbursed for driving expenses, such as gasoline, depreciation, or insurance,” things that may be covered by a taxi, chauffeur, or limo driver’s company. Uber estimates these fuel, gas, maintenance, depreciation, and insurance costs to be about $15,000 a year in New York City. However, Davidson concludes that, once those costs are included, Uber drivers are still coming out ahead of a traditional taxi driver who makes about $15.71 per hour, on average, according to the BLS. Outcomes for Airbnb users are pretty similar. A website called Afford Anything that offers alternative investment advice recounts the ongoing experience of an Airbnb property owner, Paula Pant. In essence, this owner had to decide between being a traditional landlord, or using Airbnb to rent the space she had; she went with Airbnb and the results were quite beneficial. In the end, the owner says she didn’t have to do much work and ended up making over $500 more per month than if she had traditionally rented the space (Pant). Of course not every user in a sharing economy will succeed, but neither will every user in a traditional economy.
The success of the sharing economy has lead to some friction between taxi companies and ridesharing services, but it didn’t have to be this way. In a scholarly journal written by Donald N. Anderson, a PhD candidate in the School of Anthropology at the University of Arizona, he lays out some of the beginnings of ridesharing services. In 2009, such services were being researched by the Taxicab Commission in San Francisco and were backed by Silicon Valley venture capital. Their idea was to create what they called an “e-hailing” service for San Francisco's taxi fleets. The project was derailed in 2011 when even larger traditional taxi companies “saw it as a threat to the investments they had already made in new dispatch technology” (Anderson). In essence, the taxi companies did it to themselves. Instead of embracing the technology, they decided to fall back on traditional dispatch methods and left a gaping hole in the marketplace; a hole private startups were willing to fill.
Within any community it is important to look at whether it is a good, just and sustainable community. There are inherently parts of every community that are good, just and sustainable; there are also parts of every community that are not good, just, or sustainable. It is clear that the sharing economy as a whole is generally good, just, and sustainable, but it is still susceptible to problems. Because the economy has so many factors and each individual and platform is a different part of the community, there are times where some aspects may not be good, just or sustainable. Nonetheless, overall the sharing economy could be considered a better system than traditional economies and is for the most part good, just, and sustainable.
Goodness is difficult to define because each individual has his or her own ideas about what goodness is. This makes defining goodness in the sharing economy particularly difficult because each individual is technically an integral part of the economy. Even within a dictionary, goodness is hard to define. The definition of ‘goodness’ refers to ‘good’, and ‘good’ refers to ‘proper’ and ‘proper’ refers to “correct according to social or moral rules” which is not very helpful because each person has their own social and moral rules. In the case of the sharing economy, good could be defined as beneficial and it is clear that the sharing economy is beneficial for many reasons.
Some of the reasons, for example, ridesharing is beneficial is because these services reduce waste, save people money, and generate job opportunities. If more people use ridesharing services, fewer people need to own a car; this in turn lowers emissions, keeps material out of landfills, and reduces traffic. Ridesharing is also a better use of underused assets, such as a personal vehicle that is often parked. This also saves people money. A car is an expensive asset to obtain and maintain. For the price of a new $40,000 SUV, one could take a $10 ride every day for almost 11 years, and that doesn’t even include the thousands that would be spent on vehicle maintenance. For the people that do have underused assets, such as an often-parked car, they can now generate income from a previously underutilized asset. This is also a great opportunity for those in less advantageous financial situations to make money without expensive investments. Recall the example of a New York City taxi driver; that individual has to spend close to $1 million just to operate a Yellow Cab. With ridesharing, an individual doesn’t have to be in debt for years paying off what amounts to a piece of metal on their vehicle.
Not everyone agrees, however, that a sharing economy is good. Michel Bauwens, the founder of the P2P Foundation, a foundation dedicated to studying the impact of peer-to-peer transactions on society, recently said, "they should call it ‘selling economy’, instead, since what is being done by Uber and AirBnb, has nothing to do with mutualizing resources, but only with selling and renting. Actually it’s anti-sharing, because they are commodifying resources that before would have been shared for free. Like, if you had a spare room in your house you would invite some friends and now you say, why should I share it for free, if I can make some money out of that?" (Guerrini).
This, however, doesn’t appear to really hold true as there are countless great examples of how a sharing economy, and the ridesharing industry in particular, is a good community.
Another integral part of a community is justice. Defining a ‘just’ community is equally as tricky as defining a ‘good’ community. A dictionary defines ‘just’ as “reasonable or proper” and as previously stated with goodness, ‘proper’ refers to “correct according to social or moral rules” which is, again, not very helpful because each person has their own social and moral rules. Adam Smith, a well known economic thinker defined justice as “the virtue that is violated when an injury is committed” (Verburg). Regardless of the definition used, however, looking at a sharing economy as whole, most individuals would say it is just, or at least there is no reason for it to be unjust.
A sharing economy is just for many reasons. One of the best parts of sharing economies is that almost anyone that wants to participate in them, can. Anyone of any race, gender, and culture can enter the economy relatively easily. Whether that is simply using Uber to get to a destination or providing website support through Fiverr. The platforms in a sharing economy can also play a big role in making sure things are just. Most providers have money back guarantees and for companies with physical services, such as Uber and Airbnb, they carry millions in insurance coverage to protect every transaction. With these systems in place and the many opportunities available to everyone, it would appear that a sharing economy is a just place.
The final component of a community is sustainability. Sustainability is generally defined as being able to last or continue for a long time. A sharing economy is a great example of a sustainable community. As previously mentioned, a sharing economy reduces waste and helps the environment, and eventually a sharing economy can become a ‘circular economy’. Andrew Cave, a writer for Forbes, defines this as “the end goal of what used to be called closed loop recycling – genuinely enabling the renewal of existing resources, rather than continuing to need to mine for new ones.” In a ridesharing example, this could look like people buying fewer cars and continually using existing resources. Airbnb enables an otherwise empty and useless room to benefit the economy. However, a truly circular economy may be a ways off. In the interim, a sharing economy is still a great example of sustainability. Another sustainable part of a sharing economy is that people can create their own jobs. Sharing economy jobs, such as ridesharing and task completion, are more insulated from economic swings as there isn’t significant overhead for these services. When an individual can control their own fate in terms of employment, that is sustainable.
Ultimately, the sharing economy represents an amazing economic opportunity for providers. The services that have come from this type of economy will forever change how individuals approach work. The communities created by sharing economies are generally good, just, and sustainable and will continue to serve and benefit the participants in them.
Sources
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