Issues: Trade-Offs of the Sharing Economy
Emerging issues in the sharing economy are complicated by trade-offs in value for consumers; workers; online and offline communities; the state; the economy, and our environment. In this section we acknowledge the challenges that sharing economy platforms present, but also the opportunities, for these different interests and spheres.
This list is not exhaustive, but rather a starting point for understanding that there are tensions we need to negotiate in the sharing economy if we hope to nurture the sector.
1. FOR CONSUMERS
Consumers are both empowered and disempowered within the sharing economy.
Innovation in the sharing economy has led to greater accessibility of goods and services that previously were prohibitively expensive and/or entailed the costs of private ownership. More choice is possible than ever before and control can be exercised in new ways over supply through simply posting requests for ‘gig’ or ‘on-demand’ workers to fulfil.
However, consumers have little to no agency over the data they generate through and for online platforms. This data is often of a privacy-sensitive nature, based on ratings and reviews and thus related to our reputations. Some organisations are releasing options for people to make better use of their data, such as through creating ‘passports’ that allow us to effectively get what we want or need from an array of online platforms on the basis of an already established reputation. While this sort of experimentation is welcome, we should also recognise that this works best if we have a ‘good’ reputation to capitalise on (similar to credit ratings), whereas others may be at a disadvantage in a system that is highly subjective. The key to personal agency should not be contingent on whether or not we are comfortable with exploiting our own data for greater gains.
2. FOR WORKERS
Our focus here is on workers in traditional industries that are being disrupted and on workers of the ‘gig’ or ‘on-demand’ variety in the sharing economy.
Gig or on-demand are terms which try to capture the trend of jobs fragmenting into smaller, short-term gigs, sometimes completed instantly after requested.
For both traditional and gig workers, the sharing economy is an easy avenue for supplementing income. The barriers to entry are typically much lower than in traditional industries, in part because technology has made required knowledge or skills redundant or because online platforms are not subjected to the same regulations. With more control over technology workers have the freedom and flexibility to determine their own hours.
Some workers in traditional industries, however, feel that their counterparts in the sharing economy are cheating standards and in doing so hurting their ability to make a living. Others may feel that without the power to adapt traditional industry or the support to transition to new ways of working they are being left behind.
Gig workers who have come to rely on platforms for their core, as opposed to supplementary, income, may be deserving of the rights and benefits that come with being a full time employee rather than an independent contractor. If so, being ‘misclassified’ is exploitation, which is why some gig workers are appealing to courts in the US for more clarity. As a judge has pointed out, however, the legal test for classifying workers is outmoded and thus it is not a clear-cut decision for juries to make.
3. FOR COMMUNITIES
In essence, platforms facilitate the forming of communities through hosting a network.
Transactions can feel more personal as direct connections between people are made. Greater solidarity is possible between strangers who share the same sense of belonging. Similar to offline communities, some may feel that the communities are extensions of their own identities, thus strengthening their affinity for certain platforms. It may be possible for platform providers to mobilise these communities for a higher social purpose.
A system of ratings and reviews also enables users to overcome issues of trust and go on to build reputations within these communities. Two-way rating systems in particular, where providers can also rate consumers, may nudge us to be better to one another as companies have now become our peers.
However, as platforms scale, transactions can begin to feel more commercial again as the community expands to include some who do not share in the original ethos. Scaling may also pose a problem for offline communities who may feel adversely impacted by sharing activities in their neighbourhood or in their families, particularly if they include disaffected workers. While these platforms may not be the cause of crises in communities, they may feel like an aggravator, especially if not enough is being done by traditional institutions to address the real roots of anxiety.
Ratings and reviews can also be problematic when livelihoods suddenly depend on it. If scored unfairly by even a handful of consumers in a subjective system a worker’s appeal may diminish significantly and/or warrant dismissal from the provider. In traditional workplaces, there may be an investigation or mediation before a dismissal is ruled on, but there is not always this level of care on platforms. Some users, whether consumers or workers, will also continue to be disadvantaged in this system because of characteristics such as race and ethnicity. There is a risk that social injustices perpetuated offline will be reproduced in communities online.
4. FOR THE STATE
The sharing economy could be a boon for states in terms of jobs and taxes, but also in social and environmental value.
There are new opportunities for workers and new revenues to draw from for the state’s coffers; new communities are being created and new mindsets are being inspired by approaches to make better use of our existing resource.
Realising some of these benefits, such as more tax revenue, has been difficult, however. In addition, governments must negotiate tensions between regulation and innovation; for countries like the UK that strive to be leaders of enterprise regulation could potentially strangle innovation. Yet, governments are being pushed to intervene as traditional industries are disrupted. Governments ultimately have responsibility for ensuring that the interests of both consumers and workers are protected as the market is transformed.
5. FOR THE ECONOMY
Based on their own estimates, PwC predicts that global revenues of the sharing economy could go from £9 billion [in 2014] to £230 billion by 2025.
PwC notes that by 2025 the sharing economy will also have achieved parity with traditional industry in key sectors such as holiday accommodation and ridesharing or car rental. The least developed sectors, such as P2P finance or crowdfunding and online staffing, could grow quickest of all, by 63 percent and 37 percent respectively according to PwC’s 2025 projections.
There is enormous potential here for new business models to emerge. While there will undoubtedly be more online platforms for sharing resources in new, more efficient ways, some corporates will adapt features of these platforms. For example, they will find ways to better connect consumers, as well as to connect to consumers, other than through using social media. Consumers and workers can also conceive of ways in which they might reap more value through building cooperative platforms that redistribute profit differently.
While there is clearly an impetus for change, traditional industries, finance and banking included, are not yet on the brink of collapse. There is thus resistance to reform the old and there are impediments to developing the new. During this transitionary period, there may be shocks to the economy as businesses attempt to adjust and workers as well as shareholders are left vulnerable in the process.
The backdrop to all of this is growing inequality, which means that in the sharing economy some only consume while others only share. Ideally, those who share also consume and vice versa, particularly as the sector grows through maximising both supply and demand in tandem. In situations where exchange is not of a reciprocal nature there is concern that wider wealth and power imbalances are being reinforced between consumers and workers.
6. FOR THE ENVIRONMENT
To cope with a population of over 8 billion by 2025, it is of increasing importance that we make better use of our planet’s finite resource.
The sharing economy tends to promote access to underused assets, which is a way of prolonging the lifecycle of products and materials (an extension of the ‘circular economy’) while also undermining the need for private ownership. As we consume in a more communal fashion, the hope is that our individual carbon footprints can be reduced. There is research from the University of California, Berkeley, for example, that has found that for each car shared between nine and 13 cars are taken off the road.
There are uncertainties here though about easy access driving up overall consumption. There is some evidence, also from Berkeley, to suggest that consumption only increases in the first year and subsequently tails off as consumers become more open to exploring other carbon-light options (such as cycling and walking as opposed to carsharing). This study dates back to 2009, however, so more recent research is needed as these platforms expand in cities globally. In London, for example, concerns have been raised about increased traffic congestion from carsharing and related consequences for air pollution and the health of passersby, such as cyclists.