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In capitalism, the sharing economy is a socio-economic system built around the sharing of resources. It often involves a way of purchasing goods and services that differs from the traditional business model of companies hiring employees to produce products to sell to consumers. It includes the shared creation, production, distribution, trade and consumption of goods and services by different people and organisations. These systems take a variety of forms, often leveraging information technology (particularly digital platforms) to empower individuals, corporations, non-profits and government with information that enables distribution, sharing and reuse of excess capacity in goods and services.
There are two main types of sharing economy initiatives:
The term "sharing economy" began to appear around the time of the Great Recession, enabling social technologies, and an increasing sense of urgency around global population growth and resource depletion. Lawrence Lessig was possibly first to use the term in 2008, though others claim the origin of the term is unknown. Dariusz Jemielniak and Aleksandra Przegalinska credit Marcus Felson and Joe L. Spaeth's academic article "Community Structure and Collaborative Consumption" published in 1978 with coining the term economy of sharing.: 6
There are a wide range of actors who participate in the sharing economy. This includes individual users, for-profit enterprises, social enterprise or cooperatives, digital platform companies, local communities, non-profit enterprises and the public sector or the government. Individual users are the actors engaged in sharing goods and resources through "peer-to-peer (P2P) or business-to-peer (B2P) transactions". The for-profit enterprises are those actors who are profit-seekers who buy, sell, lend, rent or trade with the use of digital platforms as means to collaborate with other actors. The social enterprise or referred to as cooperatives are mainly "motivated by social or ecological reasons" and seek to empower actors as means of genuine sharing. Digital platforms are technology firms that facilitate the relationship between transacting parties and make profits by charging commissions. The local communities are the players at the local level with varied structures and sharing models where most activities are non-monetized and often carried out to further develop the community. The non-profit enterprises have a purpose of "advancing a mission or purpose" for a greater cause and this is their primary motivation which is genuine sharing of resources. In addition, the public sector or the government can participate in the sharing economy by "using public infrastructures to support or forge partnerships with other actors and to promote innovative forms of sharing".
Lizzie Richardson noted that sharing economy "constitutes an apparent paradox, framed as both part of the capitalist economy and as an alternative". A distinction can be made between free sharing, such as genuine sharing, and for-profit sharing, often associated with companies such as Uber, Airbnb, and Taskrabbit.: 22–24 Commercial co-options of the 'sharing economy' encompass a wide range of structures including mostly for-profit, and, to a lesser extent, co-operative structures. The sharing economy provides expanded access to products, services and talent beyond one-to-one or singular ownership, which is sometimes referred to as "disownership". Individuals actively participate as users, providers, lenders or borrowers in varied and evolving peer-to-peer exchange schemes.
The usage of the term sharing by for-profit companies has been described as "abuse" and "misuse" of the term, or more precisely, its commodification.: 21, 24 In commercial applications, the sharing economy can be considered a marketing strategy more than an actual 'sharing economy' ethos;: 8, 24 for example, the company Airbnb has sometimes been described as a platform for individuals to 'share' extra space in their homes, but in reality the space is rented, not shared. Airbnb listings additionally are often owned by property management corporations. This has led to a number of legal challenges, with some jurisdiction ruling, for example, that ride sharing through for-profit services like Uber de facto makes the drivers indistinguishable from regular employees of ride sharing companies.: 9 The escrow-like model practiced by several of the largest sharing economy platforms, which facilitate and handle contracting and payments on behalf of their subscribers, further underlines an emphasis on access and transaction rather than on sharing.
Sharing of resources has been known in business-to-business (B2B) like heavy machinery in agriculture and forestry as well as in business-to-consumer (B2C) like self-service laundry. But three major drivers enable consumer-to-consumer (C2C) sharing of resources for a broad variety of new goods and services as well as new industries. First, customer behavior for many goods and services changes from ownership to sharing. Second, online social networks and electronic markets more easily link consumers. And third, mobile devices and electronic services make the use of shared goods and services more convenient.
In many cases, the sharing economy relies on the will of the users to share, but in order to make an exchange, users have to overcome stranger danger. Access economy organizations say they are committed to building and validating trusted relationships between members of their community, including producers, suppliers, customers or participants. Beyond trusting others, the users of a sharing economy platform also have to trust the platform itself as well as the product at hand.
According to a report by the United States Department of Commerce in June 2016, quantitative research on the size and growth of the sharing economy remains sparse. Growth estimates can be challenging to evaluate due to different and sometimes unspecified definitions about what sort of activity counts as sharing economy transactions. The report noted a 2014 study by PricewaterhouseCoopers, which looked at five components of the sharing economy: travel, car sharing, finance, staffing and streaming. It found that global spending in these sectors totaled about $15 billion in 2014, which was only about 5% of the total spending in those areas. The report also forecasted a possible increase of "sharing economy" spending in these areas to $335 billion by 2025, which would be about 50% of the total spending in these five areas. A 2015 PricewaterhouseCoopers study found that nearly one-fifth of American consumers partake in some type of sharing economy activity. A 2017 report by Diana Farrell and Fiona Greig suggested that at least in the US, sharing economy growth may have peaked.
A February 2018 study ordered by the European Commission and the Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs indicated the level of collaborative economy development between the EU-28 countries across the transport, accommodation, finance and online skills sectors. The size of the collaborative economy relative to the total EU economy was estimated to be €26.5 billion in 2016. Some experts predict that shared economy could add between €160 to €572 billion to the EU economy in the upcoming years.
In China, the sharing economy doubled in 2016, reaching 3.45 trillion yuan ($500 billion) in transaction volume, and was expected to grow by 40% per year on average over the next few years, according to the country's State Information Center. In 2017, an estimated 700 million people used sharing economy platforms.
According to TIARCENTER and the Russian Association of Electronic Communications, eight key verticals of Russia's sharing economy (C2C sales, odd jobs, car sharing, carpooling, accommodation rentals, shared offices, crowdfunding, and goods sharing) grew 30% to 511 billion rubles ($7.8 billion) in 2018.
The impacts of the access economy in terms of costs, wages and employment are not easily measured and appear to be growing. Various estimates indicate that 30-40% of the U.S. workforce is self-employed, part-time, temporary or freelancers. However, the exact percentage of those performing short-term tasks or projects found via technology platforms was not effectively measured as of 2015 by government sources. In the U.S., one private industry survey placed the number of "full-time independent workers" at 17.8 million in 2015, roughly the same as 2014. Another survey estimated the number of workers who do at least some freelance work at 53.7 million in 2015, roughly 34% of the workforce and up slightly from 2014.
Economists Lawrence F. Katz and Alan B. Krueger wrote in March 2016 that there is a trend towards more workers in alternative (part-time or contract) work arrangements rather than full-time; the percentage of workers in such arrangements rose from 10.1% in 2005 to 15.8% in late 2015. Katz and Krueger defined alternative work arrangements as "temporary help agency workers, on-call workers, contract company workers, and independent contractors or free-lancers". They also estimated that approximately 0.5% of all workers identify customers through an online intermediary; this was consistent with two others studies that estimated the amount at 0.4% and 0.6%.
At the individual transaction level, the removal of a higher overhead business intermediary (say a taxi company) with a lower cost technology platform helps reduce the cost of the transaction for the customer while also providing an opportunity for additional suppliers to compete for the business, further reducing costs. Consumers can then spend more on other goods and services, stimulating demand and production in other parts of the economy. Classical economics argues that innovation that lowers the cost of goods and services represents a net economic benefit overall. However, like many new technologies and business innovations, this trend is disruptive to existing business models and presents challenges for governments and regulators.
For example, should the companies providing the technology platform be liable for the actions of the suppliers in their network? Should persons in their network be treated as employees, receiving benefits such as healthcare and retirement plans? If consumers tend to be higher income persons while the suppliers are lower-income persons, will the lower cost of the services (and therefore lower compensation of the suppliers) worsen income inequality? These are among the many questions the on-demand economy presents.
Using a personal car to transport passengers or deliveries requires payment, or sufferance, of costs for fees deducted by the dispatching company, fuel, wear and tear, depreciation, interest, taxes, as well as adequate insurance. The driver is typically not paid for driving to an area where fares might be found in the volume necessary for high earnings, or driving to the location of a pickup or returning from a drop-off point. Mobile apps have been written that help a driver be aware of and manage such costs has been introduced.
Uber, Airbnb, and other companies have had drastic effects on infrastructures such as road congestion and housing. Major cities such as San Francisco and New York City have arguably become more congested due to their use. According to transportation analyst Charles Komanoff, "Uber-caused congestion has reduced traffic speeds in downtown Manhattan by around 8 percent".
The percentage of seniors in the work force has increased from 20.7% in 2009 to 23.1% in 2015, an increase in part attributed to the rise of the access economy.
Suggested benefits of the sharing economy include:
An example of grocery delivery in sharing economy is Instakart. It has the same business model as that of sharing economy based companies like Uber, Airbnb, or CanYa. Instacart uses resources that are readily available, and the shoppers shop at existing grocery shops. The contract workers use their personal vehicles to deliver groceries to customers. Instacart manages to keep its cost low as it does not require any infrastructure to store goods. In addition to having contract workers, Instacart allows signing up to be a "personal shopper" for Instacart through its official web page.
A common premise is that when information about goods is shared (typically via an online marketplace), the value of those goods may increase for the business, for individuals, for the community and for society in general.
Many state, local and federal governments are engaged in open data initiatives and projects such as data.gov. The theory of open or "transparent" access to information enables greater innovation, and makes for more efficient use of products and services, and thus supporting resilient communities.
Unused value refers to the time over which products, services, and talents lay idle. This idle time is wasted value that business models and organizations that are based on sharing can potentially utilize. The classic example is that the average car is unused 95% of the time. This wasted value can be a significant resource, and hence an opportunity, for sharing economy car solutions. There is also significant unused value in "wasted time", as articulated by Clay Shirky in his analysis of the power of crowds connected by information technology. Many people have unused capacity in the course of their day. With social media and information technology, such people can donate small slivers of time to take care of simple tasks that others need doing. Examples of these crowdsourcing solutions include the for-profit Amazon Mechanical Turk and the non-profit Ushahidi.
Encompassing many of the listed benefits of the sharing economy is the idea of the freelance worker. Through monetizing unused assets, such as renting out a spare guest room on Airbnb, or providing personal services to others, such as becoming a driver with Uber, people are in effect becoming freelance workers. Freelance work entails better opportunities for employment, as well as more flexibility for workers, as people have the ability to pick and choose the time and place of their work. As freelance workers, people can plan around their existing schedules and maintain multiple jobs if needed. Evidence of the appeal to this type of work can be seen from a survey conducted by the Freelancers Union, which shows that around 34% of the U.S. population is involved in freelance work.
According to an article by Margarita Hakobyan, freelance work can also be beneficial for small businesses. During their early developmental stages, many small companies can't afford or aren't in need of full-time departments, but rather require specialized work for a certain project or for a short period of time. With freelance workers offering their services in the sharing economy, firms are able to save money on long-term labor costs and increase marginal revenue from their operations.
Christopher Koopman, an author of a[which?] study by George Mason University economists, said the sharing economy "allows people to take idle capital and turn them into revenue sources". He has stated, "People are taking spare bedroom[s], cars, tools they are not using and becoming their own entrepreneurs." Arun Sundararajan, a New York University economist who studies the sharing economy, told a congressional hearing that "this transition will have a positive impact on economic growth and welfare, by stimulating new consumption, by raising productivity, and by catalyzing individual innovation and entrepreneurship".
A study in Intereconomics / The Review of European Economic Policy noted that the sharing economy has the potential to bring many benefits for the economy, while noting that this presupposes that the success of sharing economy services reflects their business models rather than 'regulatory arbitrage' from avoiding the regulation that affects traditional businesses.
An independent data study conducted by Busbud in 2016 compared the average price of hotel rooms with the average price of Airbnb listings in thirteen major cities in the United States. The research concluded that in nine of the thirteen cities, Airbnb rates were lower than hotel rates by an average price of $34.56. A further study conducted by Busbud compared the average hotel rate with the average Airbnb rate in eight major European cities. The research concluded that the Airbnb rates were lower than the hotel rates in six of the eight cities by a factor of $72. Data from a separate study shows that with Airbnb's entry into the market in Austin, Texas hotels were required to lower prices by 6 percent to keep up with Airbnb's lower prices.
Additional benefits include:
Oxford Internet Institute, Economic Geographer, Graham has argued that key parts of the sharing economy impose a new balance of power onto workers. By bringing together workers in low- and high-income countries, gig economy platforms that are not geographically-confined can bring about a 'race to the bottom' for workers.
New York Magazine wrote that the sharing economy has succeeded in large part because the real economy has been struggling. Specifically, in the magazine's view, the sharing economy succeeds because of a depressed labor market, in which "lots of people are trying to fill holes in their income by monetizing their stuff and their labor in creative ways", and in many cases, people join the sharing economy because they've recently lost a full-time job, including a few cases where the pricing structure of the sharing economy may have made their old jobs less profitable (e.g. full-time taxi drivers who may have switched to Lyft or Uber). The magazine writes that "In almost every case, what compels people to open up their homes and cars to complete strangers is money, not trust.... Tools that help people trust in the kindness of strangers might be pushing hesitant sharing-economy participants over the threshold to adoption. But what's getting them to the threshold in the first place is a damaged economy and harmful public policy that has forced millions of people to look to odd jobs for sustenance."
Uber's "audacious plan to replace human drivers" may increase job loss as even freelance driving will be replaced by automation.
However, in a report published in January 2017, Carl Benedikt Frey found that while the introduction of Uber had not led to jobs being lost, but had caused a reduction in the incomes of incumbent taxi drivers of almost 10%. Frey found that the "sharing economy", and Uber, in particular, has had substantial negative impacts on workers wages.
Some people believe the Great Recession led to the expansion of the sharing economy because job losses enhanced the desire for temporary work, which is prevalent in the sharing economy. However, there are disadvantages to the worker; when companies use contract-based employment, the "advantage for a business of using such non-regular workers is obvious: It can lower labor costs dramatically, often by 30 percent, since it is not responsible for health benefits, social security, unemployment or injured workers' compensation, paid sick or vacation leave and more. Contract workers, who are barred from forming unions and have no grievance procedure, can be dismissed without notice".
There is debate over the status of the workers within the sharing economy; whether they should be treated as independent contractors or employees of the companies. This issue seems to be most relevant among sharing economy companies such as Uber. The reason this has become such a major issue is that the two types of workers are treated very differently. Contract workers are not guaranteed any benefits and pay can be below average. However, if they are employees, they are granted access to benefits and pay is generally higher. This has been described as "shifting liabilities and responsibilities" to the workers, while denying them the traditional job security.: 25 It has been argued that this trend is de facto "obliterating the achievements of unions thus far in their struggle to secure basic mutual obligations in worker-employer relations".: 28
In Uberland: How the Algorithms are Rewriting the Rules of Work, technology ethnographer Alex Rosenblat argues that Uber's reluctance to classify its drivers as "employees" strips them of their agency as the company's revenue-generating workforce, resulting in lower compensation and, in some cases, risking their safety. In particular, Rosenblat critiques Uber's ratings system, which she argues elevates passengers to the role of "middle managers" without offering drivers the chance to contest poor ratings. Rosenblat notes that poor ratings, or any other number of unspecified breaches of conduct, can result in an Uber driver's "deactivation", an outcome Rosenblat likens to being fired without notice or stated cause. Prosecutors have used Uber's opaque firing policy as evidence of illegal worker misclassification; Shannon Liss-Riordan, an attorney leading a class action lawsuit against the company, claims that "the ability to fire at will is an important factor in showing a company's workers are employees, not independent contractors."
The California Public Utilities Commission filed a case, later settled out of court, that "addresses the same underlying issue seen in the contract worker controversy—whether the new ways of operating in the sharing economy model should be subject to the same regulations governing traditional businesses". Like Uber, Instakart faced similar lawsuits. In 2015, a lawsuit was filed against Instakart alleging the company misclassified a person who buys and delivers groceries as an independent contractor. Instakart had to eventually make all such people as part-time employees and had to accord benefits such as health insurance to those qualifying. This led to Instakart having thousands of employees overnight from zero.
A 2015 article by economists at George Mason University argued that many of the regulations circumvented by sharing economy businesses are exclusive privileges lobbied for by interest groups. Workers and entrepreneurs not connected to the interest groups engaging in this rent-seeking behavior are thus restricted from entry into the market. For example, taxi unions lobbying a city government to restrict the number of cabs allowed on the road prevents larger numbers of drivers from entering the marketplace.
The same research finds that while access economy workers do lack the protections that exist in the traditional economy, many of them cannot actually find work in the traditional economy. In this sense, they are taking advantage of opportunities that the traditional regulatory framework has not been able to provide for them. As the sharing economy grows, governments at all levels are reevaluating how to adjust their regulatory schemes to accommodate these workers.
Andrew Leonard, Evgeny Morozov, criticized the for-profit sector of the sharing economy, writing that sharing economy businesses "extract" profits from their given sector by "successfully [making] an end run around the existing costs of doing business" – taxes, regulations, and insurance. Similarly, In the context of online freelancing marketplaces, there have been worries that the sharing economy could result in a 'race to the bottom' in terms of wages and benefits: as millions of new workers from low-income countries come online.
Susie Cagle wrote that the benefits big sharing economy players might be making for themselves are "not exactly" trickling down, and that the sharing economy "doesn't build trust" because where it builds new connections, it often "replicates old patterns of privileged access for some, and denial for others". William Alden wrote that "The so-called sharing economy is supposed to offer a new kind of capitalism, one where regular folks, enabled by efficient online platforms, can turn their fallow assets into cash machines ... But the reality is that these markets also tend to attract a class of well-heeled professional operators, who outperform the amateurs—just like the rest of the economy".
The local economic benefit of the sharing economy is offset by its current form, which is that huge tech companies reap a great deal of profit in many cases. For example, Uber, which is estimated to be worth $50B as of mid-2015, takes up to 30% commission from the gross revenue of its drivers, leaving many drivers making less than minimum wage. This is reminiscent of a peak Rentier state "which derives all or a substantial portion of its national revenues from the rent of indigenous resources to external clients".
In order to reap the real benefits of a sharing economy and somehow address some issues that revolve around it, there is a great need for the government and policy-makers to create the “right enabling framework based on a set of guiding principles” proposed by the World Economic Forum. These principles are derived from the analysis of global policymaking and consultation with experts. The following are the seven principles for regulation in the sharing economy.
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