Who protects the workers powering the new sharing economy?
The more we share together the happier we’ll be.
That is what companies that make up the sharing economy promise. Feastly lets you share a homemade meal. Vayable lets you share your local knowledge of the best things to experience in your city. With Lyft, you can share a ride, and on Airbnb you can share your home. These are all well-engineered technology platforms that have facilitated peer-to-peer marketplaces. The promise is that these platforms will revolutionize the way we consume, and bring together communities that don’t just share products, but experiences.
“These models are facilitating a more effective use of existing capital and assets,” said Arun Sundararajan of NYU’s Stern School of Business. “It’s allowing us to tap into underutilized assets and labor. Sources of labor that were not being used efficiently.”
For the average user of the sharing economy, there are now lots of ways to access products and services that were once too expensive. Advocates of the sharing economy argue that having a variety of choices at your fingertips ignites more economic activity. Apps have made access to transportation, dry cleaning, or even someone to put together your Ikea furniture, easy and almost immediate.
But as these platforms grow, they compete with existing markets in cities across America. While innovation is good for consumers, do the suppliers of the sharing economy get the same great bargain?
Denise Kuenzel is an avid supplier in the sharing economy. After losing her job as a management analyst at the postal service headquarters in March of 2013, she has employed herself primarily through TaskRabbit, Lyft and Airbnb. She is what Silicon Valley considers a micropreneur. The companies who pay her do not consider her an employee but rather an independent contractor.
“TaskRabbit and Lyft have literally saved my life,” she said. “For me, right now, this is generating the kind of income that I need, and there’s the flexibility and I like helping people.”
Kuenzel used to rent out her home on Airbnb, earning roughly $1100 per month, before her condo issued her a cease and desist order. After she was forced to stop hosting, she took on a roommate and joined Lyft and TaskRabbit. To make ends meet, she has to complete no fewer than five tasks a week, and 15 hours of driving with Lyft. She charges $30 an hour for basic tasks like installing shelves or delivering cupcakes to someone’s hotel room. For more labor intensive tasks, she charges $55 an hour.
There are others like Kuenzel, who have struggled to find full employment or are looking for a way to supplement their income after their hours were cut. For them, the creation of peer-to-peer marketplaces have been a godsend.
“Without Uber I would be unemployed right now. I’d have to foreclose on my house and sell my car,” said William Parker, an UberX driver in Washington, D.C., who was laid off from his job at a printing press. He thinks that Uber is “the best thing to ever hit the economy.”
The ability to monetize one’s skills or rent out one’s assets has put extra cash into the pockets of millions of struggling Americans. Not to mention that people can work when they want and set their own rates. While there are no statistics that show how many people participate in the sharing economy, in the U.S. alone there are an estimated 17.7 million independent workers, or people who work at least half-time as contractors, freelancers and micropreneurs. According to a 2013 MBO Partners Study on independent workers, nearly $1.2 trillion in total income was generated by these Americans.
Professor Sundararajan believes there is some early causal evidence to suggest that moving away from traditional forms of employment could have a positive impact on average income for suppliers. He explained that the median 2013 wage for maids and housekeeping cleaners, according to the Bureau of Labor Statistics, was $9.51 an hour. But the rates that people charge for the same services on peer-to-peer sites like Homejoy or Handybook, which let you book a cleaner or handyman, are on average much higher. “So the fears that this will exacerbate inequality,” Sundararajan said, “may be short sighted.”
To clean a two-bedroom apartment in the popular Shaw neighborhood of D.C., for example, cleaners on TaskRabbit charge anywhere from $25 to $55 an hour. On Homejoy, cleaners charge $25 per hour plus a $5 cleaning supply charge. Handybook charges $35 per hour. On the surface, this would suggest that the suppliers — the people who actually do the work on these platforms — could potentially earn more per hour than they would if they were employed by a traditional cleaning agency or hotel.
But other economists predict that these new “microgig” jobs will have negative consequences for worker wages over the long term. Dean Baker, the co-director of the Center for Economic and Policy Research, argues that suppliers of these platforms have no guarantee that they will make a minimal standard of living. “We want to make sure that if you’re hiring people through Uber or TaskRabbit or Lyft — whatever it might be — that they could expect to get at least the minimum wage,” Baker said.
For people working on these platforms it can often be difficult to break even. Because most peer-to-peer companies take a percentage of the supplier’s gross income, workers end up with less money per hour than the price advertised and paid by consumers. Suppliers end up having to work more hours in order to make a decent living. “There is certainly a risk that workers will exploit themselves,” Baker explains.
In addition, there are extra miscellaneous costs that suppliers accrue. Insurance, self-employment taxes, gas, the cost of cleaning supplies — these are just a few of the deductions they have to consider. How long a supplier has been on the platform also factors into their gross pay. Typically the longer the supplier has been using a platform, the more they stand to make because they have established a trusted reputation within the online community.
There’s been much speculation, but not as much analysis on how the sharing economy affects workers’ wages. One reason for that, suggests Denise Cheng, a former researcher at MIT’s Center for Civic Media who wrote her thesis on the peer economy’s effect on labor, is that companies aren’t willing to share the relevant data on wages that would be needed for such studies. That’s because, she said, “There are such few companies in each [sharing economy category] that by revealing that information they are really revealing that information to their competitors.”
In other words, if Uber released worker wage data, that information would become public to other transportation network companies and direct competitors like Lyft, or Sidecar might change their business strategies.
One Sunday, Denise Kuenzel completed two tasks — one for $30 an hour, and one for $37 an hour, of which TaskRabbit took 20 percent of her earnings. She estimates that she made $110 after her TaskRabbit fee, but before she deducted expenses like gas and lunch.
For some people the costs outweigh the benefits.
Sandy, who asked that her name be changed out of fear of retaliation from the ridesharing company, recently quit her job at a tourism agency to drive full time for UberX.
“We can average $15 to $25 per hour. But then there is my insurance, my car maintenance, my gas — none of that is covered.” Sandy initially took up driving for Uber when the tour company she worked for cut back her hours. She left her day job expecting she could make more driving full time, but then Uber cut their rates 20 percent in D.C. “Everything I was paying for before I am still paying the same or more for. It’s a mess what they are doing here.”
Suppliers have to have a strategy to optimize their time and resources, said Cheng, if they actually want to make a decent living. She argues that a number of factors like marketing techniques and peer trust ratings affect how much a person makes on these platforms. “You know, we say micro entrepreneurship, but that doesn’t mean just plop people into a platform and they can start making money.”
Whether driving for Lyft or crafting for Etsy, sharing economy suppliers are essentially freelancers and thus face uncertain and changing demand for their goods and services. They also do not reap the benefits that come with gainful employment. Sick days, workers’ compensation and retirement plans are just some perks that a sharing economy supplier cannot count on.
In some cases, the platform companies have made it harder for their suppliers to make a living wage. Sandy isn’t the only Uber driver making less than ever. The company’s recent rate cuts sparked nationwide protests. TaskRabbit reorganized its website, eliminating the bidding system and replacing it with an on-demand fixed hourly rate. Now users are incentivized to compare and contrast taskers’ rates, often choosing the cheapest option. Suppliers have no say in these business changes, even though they have a direct effect on their net income.
Indeed, as these sharing companies evolve, one of the biggest challenges the peer economy will face is how to support the suppliers of the system. One idea is to form worker guilds for suppliers that would facilitate collective bargaining with the platforms they work for. Another idea is for these companies to transition into partial cooperatives in which the suppliers have a stake. How this would work is yet to be figured out.