Winners and losers: does everyone gain from the shared economy?
A term first used in the early 2000s which has since become more common is that of the shared economy or collaborative consumption. Gaining popularity through digital platforms such as Airbnb and Uber this sector of the economy has taken off and is showing no signs of slowing down.
But what exactly is it? The idea behind it lies in utilising underused resources, assets such as cars, homes and consumer goods which were previously gathering dust. This means that by renting out or sharing possessions owners are no longer losing money but making it, made possible through high tech-software companies who are able to facilitate a two-sided market open to buyers and sellers outside of usual corporations. In an ever-increasingly populated world, we are constantly faced with the consequences of resource depletion so collective consumption means that fewer resources are wasted. Simply put the shared economy favours access to goods over ownership.
This could be as simple renting sports equipment off Splintster on your mobile phone or being one of the 500,000 members of Zipcar which allows the sharing of cars part-time. Even by outsourcing errands through TaskRabbit, a website based around finding people to do tasks you don’t want to, the shared economy covers a range of fields. The most profitable of these being peer-to-peer lending, which is expected to grow by a colossal 63% in the next 10 years.
Clearly, sharing scarce resources it is economically sound. People can benefit not just from the greater choice it brings but the resulting lower prices as it is cheaper to share a BlaBla car ride than pay for an entire journey by yourself. In an economic climate where in the UK real incomes have only recently reached pre-recession levels getting things for cheaper prices is still as attractive as ever, the shared economy’s digital technologies have aided this.
So, the benefit for consumers and the ‘winnings’ they derive is evident but what about employees? In the UK there are an estimated 5 million workers involved in collaborative consumption, with JP Morgan stating that working for the shared economy could boost income by up to 15%. Asides from the material gain, the independence associated with the job means the UK’s already flexible workforce is even more so, having seemingly positive effects on those employed.
This new digital world is therefore being seen as the future of employment, but this type of work does not come without its risks. The lure of being ‘your own CEO’ fades when in reality workers are hired for small jobs with no safety net. There is no work-based health insurance for those who fall sick, no rights if employment is withdrawn and no security from employment laws which are harder to enforce. Uber admitted themselves that most taxi drivers work for the company for a mere 6 months, somewhat showing a sinister side to the seemingly all inclusive, collective economy.
And what for the government? Undoubtedly, the shared economy is a welcome addition to economic growth with Airbnb and Uber having market capitalisation in the billions. The problem is though, that governments do not necessarily reap the benefits of higher tax revenues, as the shared economy is hard to track meaning they not only lose out on tax revenue from the shared economy directly but also from potential revenue they could have gained from consumers staying at a hotel for instance, rather than booking through Airbnb.
This means that the success of ‘collaborative consumption’ is heavily reliant on favourable government policy who can impose regulations on the shared assets, limiting the ability for platforms to offer new services, for instance Seoul banned Uber last year. Japan did something similar, following pressure from the hotel industry the government introduced ‘Minpauku’ which, by putting time restrictions on home sharing, renders most of Airbnb’s market illegal.
Indeed, with Airbnb driving up rental prices by removing apartments from long-term rental market – which is not cohesive or ‘collaborative’ at all – we have to question whether the industry really lives up to its name. Shared implies a degree of mutuality so therefore in a truly shared economy can people gain at the expense of others? An estimated extra 10,000 cars are on London roads due to Uber, having a huge impact on congestion and resulting pollution meaning that all the economy is actually doing is ‘sharing’ the burden, meaning it is doubtful as to whether this could be construed as a positive, ‘collaborative’ economy.
Nevertheless, irrespective of the views towards it, this booming sector is already worth £500 million in the UK alone. This is expected to continue to rapidly grow, with PwC expecting the value to rise to a massive £9 billion by 2025; to put this into perspective this larger than Malawi and Niger’s current nominal GDP combined. So its clear, the shared economy is here to stay. Although with significant differences in who gains from it perhaps the name shouldn’t.