The Sharing Economy Is Propaganda

Taking an Uber is not sharing, just like buying a footlong meatball sandwich at Subway is not “eating fresh.”

Sharing economies do exist: couch surfing, lending your neighbor a power drill, giving your cousin a lift to the airport. But to pay per-mile for a ride, per-night for a room, or per-hour for a house cleaner is a no different than paying per-loaf at the bakery.  That a smartphone or website mediates the exchange does not make it sharing. And it does not change fundamentally the relationship between consumers, laborers, and management.

The managers in this triad— Uber, HomeJoy, and Taskrabbit—prefer that politicians and commentators call their business “sharing.” At the outset, it’s important to dispense with the Orwellian term, because it promotes misunderstanding and bad policy. It leads many to conclude, as Matthew Feeney does, that the primary function of these businesses is to provide “information via their technology to individual providers and consumers.”

We do not live in an imaginary world of dormant assets, aimless drivers, and idle house cleaners begging for a Yellow Pages 2.0. A sophisticated public policy response to the “sharing economy” must start with an understanding of the markets and human relations that companies like Uber and Airbnb promote—and the social benefit or cost they might entail.

In reporting on Uber, I found many drivers in Los Angeles who drive full time to pay rent and feed their families. Executives called these drivers “partners” who can choose their own hours; “entrepreneurs,” who essentially start their own “business.” The drivers I spoke to found themselves in an entirely different sort of relationship. Uber would cut prices, change work rules, and deactivate drivers at will—leaving many feeling disposable and exploited.

My reporting touched a nerve because coverage of the “sharing economy” up to that point largely ignored the economic realities of these workers, which number in the hundreds of thousands. It makes people uncomfortable to imagine that their happy Uber driver is actually struggling to make ends meet, trading a smile for a 5 star rating.

Feeney doesn’t consider the implications of the sharing economy on workers at all. Public policy should, however, put these workers and their economic predicament at the center. Likewise, an honest appraisal of “asset-sharing” platforms like Airbnb must take into account the effect on affordable housing stock, rental rates, and community cohesion (Rachel Monroe has documented the danger Airbnb poses to affordable housing here).

It’s not a coincidence that the so-called sharing economy exploded in the aftermath of the financial crisis. In the first years of the “economic recovery,” the top 1% slurped up 121% of the income gains. Now six years later, the stock market booms and corporate profits smash records. Yet working people’s wages remain unchanged, and nearly 7 million are stuck in temporary jobs against their will.

Enter Uber.

Evangelists for the sharing economy always talk about how important it is to “disrupt” markets. When I spoke to Uber PR, they told me that introducing GPS hailing technology to the taxi industry solved inefficiencies, benefiting consumers and drivers alike. Many of the practices of the taxi industry are indefensible, and introducing GPS to car services is a welcome, if minor, disruption.

In the long run, however, if the “sharing economy” is disruptive of anything, it is disruptive of hard-fought labor protections. Uber brings on 40,000 new drivers a month. But to avoid minimum wage laws and liability claims, Uber will not admit that it actually employs these drivers—though around 20% work full time.

Uber then extracts millions of dollars from its drivers’ labor and invests in ad campaigns and lobbying efforts to spread to other cities. Right now in New York, if you pull up a map of public transportation on Google, the app offers Uber as an alternative to trains and buses, as if a private car amounts to “public transportation.”

In the short term, Uber is encouraging drivers to take out predatory subprime car loans with the Spanish bank Santander.  But ultimately, Uber wants to replace drivers with robots, as soon as the technology becomes viable.

Matthew Feeney undoubtedly considers these drivers consenting adults in an economic relationship. And that’s true. If you believe in the inherent benevolence of market forces—that desperate workers deserve whatever job appears at the intersection of the labor-supply and labor-demand curve—then the sharing economy should be allowed to run its course.

Thankfully we live in a society that rejects that logic outright. Paid medical leave, workers’ compensation, the 40 hour work week—these are all rights won by working people in the face of strong opposition from corporate interests. The sharing economy is just the latest broadside against these hard-fought labor protections.

Other companies, now smelling the potency of the “sharing” brand, sell themselves as the “Uber for laundry,” or the “Uber for childcare.”  All of these companies prey on a pool of desperate workers left out of the economic recovery.

A world in which everything is available on-demand for the wealthy, courtesy of low-wage workers, is neither desirable nor fair.  It is actually quite similar to the on-demand economies of cities like Cairo or New Delhi. Anyone who spends time in the developing world knows how easy it is to summon a delivery boy, carpenter, or house cleaner at all hours.  This so-called-efficiency is the product of a deplorable wealth gap— it’s no wonder that San Francisco, the birthplace of Uber, now has income inequality that rivals Rwanda.

In the long run, companies like Uber do the opposite of what they promise. Instead of promoting well-paid flexible work, they bring the informal sector under the centralized control of big tech companies. They pit workers against each other, discouraging unionization and collective bargaining—necessary components of a fair labor-management equilibrium. Lured by dishonest claims of high-wages, many drivers sink money into cars they can’t afford and keep driving for Uber even when wages fall.

Policymakers should not be ensorcelled by “sharing-economy” propaganda. While Uber is a great deal for Wall Street—drivers front all the capital and take on all the risk, while investors scrape off profit—it’s a bad deal for workers.

Companies that profit from the labor of hundreds of thousands of people should be forced to behave like responsible employers. Thankfully, U.S. District Judge Edward Chen appears poised to do just that.  Last month, in a hearing for a class-action suit brought against Uber and Lyft, Chen rejected the companies’ claim that drivers are not employees, saying: “If all you were doing is selling an app you could sell it at an app store, but Uber does a little more than that, doesn’t it?”

Technology innovators should, of course, be rewarded for their inventive coding.  But just imagine if Adobe took 20% of the profits from every music producer who used Adobe Premiere to edit sound. That arrangement would never be tolerated by workers in the knowledge economy, and it should not be tolerated by drivers.

If “sharing-economy” corporations don’t want to become employers, they can easily sell their technology to the workers who use it—like everyone else. Government can play a constructive role here by requiring that transportation services be owned by workers’ collectives, or at least employ unionized labor.  To leave the sharing economy space entirely unregulated, as Feeney suggests, would usher in a dystopian future, where the precariously employed hover over their smart phones waiting to be summoned by someone lucky enough to have a full-time job.

Also from This Issue

Lead Essay

  • Level the Playing Field - by Deregulating by Matthew Feeney

    Matthew Feeney argues that the right response to the rise of the sharing economy is often to deregulate legacy industries. Users and service providers alike have tools at their disposal that ease many of the worries that might otherwise come with sharing one’s car, kitchen, or spare bedroom. Meanwhile policymakers should recognize that older regulatory systems often amounted to favoritism. Taxi monopolies are only the most egregious example among many. A level playing field should be the goal of public policy, provided that this playing field does not impose arbitrarily burdensome regulations.

Response Essays

  • The Sharing Economy Must Share a Level Playing Field by Dean Baker

    Dean Baker points out how sharing economy companies have often received special favors, and he suggests what a truly level playing field might look like. While it’s hard to deny that companies like Uber have offered much-needed services, he argues that limiting the number of taxis in a city is still reasonable, that drivers must be guaranteed standard minimum wages, and that accessibility requirements must also be met. Anything less would amount to an implicit subsidy for one industry participant - in other words, exactly the sort of thing that conservatives should recognize as corporate welfare.

  • Today’s Solutions, Tomorrow’s Problems by Christopher Koopman

    Christopher Koopman notes that firms like Uber and Lyft are already writing very comfortable regulations for themselves, rules that lock out competitors and hurt consumers. The results will be higher prices, fewer choices, and poorer service. In the longer term, it may mean that many companies can’t innovate by providing entirely new side businesses or related services - things like moving services, delivering goods on demand, or offering autonomous cars for hire. There is no clear reason why these things mustn’t be on offer, but regulation stands to forbid them before they even exist.

The Conversation