Sharing Economy — creating value or causing problems?
The sharing economy revolves around the concept of not having to “own” assets but “share” under-utilized assets instead, through peer-to-peer (p2p) markets. People can offer temporary usage to gain maximum exploitation of the personal resources they already have, while others benefit from convenient access to the resources for a much lower cost than owning them. Airbnb for example, allows people to profit from empty rooms and apartments while offering cheaper prices than hotels for accommodation.
In theory, it facilitates people to share and help each other while making some extra money for themselves. For many, the sharing economy provides great opportunities for additional sources of income by offering the ability to make quick profits from renting out their assets or providing services in their free time. It also gives people the freedom to work flexible hours that suits them. Uber for example, allows drivers to offer rides as much or as little as they want and the timings they prefer, without commitment to standard shifts, while offering lower prices to consumers than taxis.
P2p companies that contribute to the sharing economy are often commended for their idea of efficient utilization of resources leading to environmental benefits by reducing carbon footprints. Other advantages such as increase in social connections and convenience of mobile or web platforms and payment systems are also noted in regards to the sharing economy.
However, there are many concerns associated as well with the rise of the sharing economy as it has drastically changed the dynamics with p2p services. Eliminating the middlemen to offer lower costs and convenience to consumers with p2p services also means that consumers are exposed to more risks. P2p companies hold minimal responsibility over the services as the sharing model decentralizes the liabilities to the end users of the transactions.
Uber refers to its drivers as contractors instead of employees, which has liberated Uber from responsibilities and costs associated with insurance, labor force and expenses of providing the service. The drivers are currently responsible for costs related to their own car such as insurance, maintenance and fuel, and Uber sets the fare prices and terms of their labor and takes a cut in the profit. With drivers not being treated as typical employees, they cannot unionize and are not guaranteed minimum wage and other labor protections. Uber’s drivers have protested for its decision to reduce prices to stay competitive which has led to thinner profit margins for drivers that now have to drive for longer duration to earn a decent amount.
Although sharing economy provides opportunities to make extra money for people with stable jobs, it raises concerns for those that depend on these jobs as their primary income. People working under the sharing model are faced with challenges regarding job insecurity, unpredictable incomes and earn low wages. It becomes difficult to plan to pay for regular bills, such as rent, car payments, and groceries, with such irregular income. Furthermore, businesses in the sharing economy don’t offer the benefits of steady, traditional, full-time employment such as sick leave, pensions, health insurances etc. This leads to people working harder for less income without any medical or retirement benefits.
In traditional businesses hotels are regularly inspected to ensure that they don’t pose risks for visitors and taxis are obligated to safety and insurance requirements to protect the people involved. However, p2p businesses such as Uber and Airbnb do not offer these protections to its workers, which were previously established by Taxi companies and Hotels. It not only poses risks to workers or “contractors” but also to consumers. Airbnb guests for example are not insured adequately in an event of renting a place that is unsafe or dangerous from a misleading advert. Uber passengers also face similar risks when riding with strangers that might not be competent for the job.
The major downside of the sharing economy is the loss of the safety nets that were previously provided to the people by the firms. For this reason, it has been constantly criticized for sidestepping regulations and policies that protect the consumers. Challengers of the sharing economy point out that, under the facade of innovation and advancement, p2p businesses are evading worker protections, lowering wages and ignoring government regulations. This subjects consumers to a substandard and possibly unsafe product or service.
Other criticisms towards the sharing economy debate that it is not about “sharing” or community-building — that it is just another way for capitalists to make more money. Sharing economy is often appreciated for offering a path towards equality; however, some studies have even revealed the dark side of the sharing economy where racial biases are identified. African American Airbnb hosts charged 12% less and baseball cards held by a dark-skinned hand in the photo sold for 20% less on ebay. Another concern is that these technologies are worsening inequality and leading towards a “servant economy”, where a large number of low waged and economically insecure workers are providing petty services for the wealthy elite.
These downsides of the sharing economy have not gotten as much attention and they need to be addressed for maximum gains for everyone involved in the p2p services. Services over the Internet should not be exempt from the much needed safety regulations and taxation requirements. Therefore existing regulations should be modified to suit the new sharing business models to provide mutually beneficial outcomes. It should allow for the success of innovative businesses as well as keeping the best interest of consumers and workers while protecting them.
