Free Enterprise Staff  | July 11, 2016

The Sharing Economy: The Good, The Bad & The Ugly

More and more people are opting out of 9-to-5 workdays, either by choice or because their hands are forced by circumstance, and finding new jobs through the sharing economy.

Although people describe the sharing economy in many different ways, it’s most easily explained as a business built on an individual sharing resources (whether it be services or products) with their community on demand for a fee.

To be fair, the idea itself isn’t new. People have offered and advertised their services for everything from handyman work to babysitting for decades now. However, the Internet – and more specifically, the proliferation in smartphones – have only recently enabled a growing number of startups to gather and formalize sharing opportunities into thriving businesses. Want to rent a room (or even an entire castle) at the last minute? Click through listings that meet your exact criteria from home-rental business startup Airbnb. Need to borrow a few power tools for that ever-expanding renovation project? Streetbank will connect you with people in your area who have what you want for a small fee.

For some, the employment opportunities offered through sharing economy companies, most notably through popular ride-hailing apps Uber and Lyft, are too great to pass up. On-demand jobs offer the potential for part-time work to earn a little extra cash without committing to a full-time career – an attractive option for everyone from new parents to students to people who simply want to supplement the income from their full-time gigs.

An employee of Navette-Tezman Holding uses a smartphone to access the app used by the UberBOAT taxi service, a unit of Uber Technologies Inc., on the Bosporus strait in Istanbul, Turkey, on Friday, Aug. 28, 2015. The service will appear on the smartphone app when a user stands near the coastline of the city's central waterway. Photographer: Kerem Uzel/Bloomberg

“It’s a job you can get more quickly, and it’s very trendy,” says Uber X driver Bill F., who asked to be identified only by his first name and last initial, about the ride-hailing company. The driver, who graduated with a master’s degree in education from Antioch University, never saw himself working on the side as chauffeur, but believes it’s a great way to make money in his sluggish industry until he finds the perfect teaching position.

The sharing boom has had its detractors who complain that workers toil in a grey market where adequate regulation has yet to be worked out. Additionally, some worry that the growing population of on-demand workers might depress wages for full-time delivery drivers, cabbies, and others who make a profession out of a job these workers may choose to do for just a few hours a week.

In 2015, New York City Mayor Bill de Blasio tried to curtail Uber’s activity, in part due to licensed cab drivers’ arguments that allowing an unrestricted number of new drivers into the market would lower the considerable value of their medallions. Last month, presidential candidate Hillary Clinton acknowledged that many Americans are earning extra pocket money in the sharing economy, but promised she would crack down on companies that categorize workers as contractors instead of full-time employees, a practice that allows them to avoid paying certain taxes and benefits. The controversy over how to classify workers has been an active discussion in the sharing economy, and has even resulted in lawsuits against Uber and Lyft in California.

However, it’s undeniable that the many people who have started successful sharing companies and found jobs in the sharing economy see the industry’s advancement as a positive. Correll Lashbrook is co-founder of a real estate startup called Tulip that matches individuals who are looking for short-term accommodation with property owners willing to rent out their homes. For him, the business is not a supplement to his income – he hopes to build it into a thriving, sustainable business.

Since the company relies on Airbnb to connect potential renters and owners, Lashbrook is entirely dependent on the broader survival of the sharing economy. “I’m thinking about (the sharing economy) in a different way than some people who are just augmenting their personal income,” he said.

He also sees it as a great way to bring communities together and stimulate local economies, and wonders why cities like New York have at times tried to limit the spread of businesses like Airbnb.

“I really see the limiting factor as being the cities, or counties or municipalities that really need to catch up to the present,” he explains. “Cities need to start looking at this as a way to stimulate their economy and stimulate growth.”

There is evidence to support his opinion. Airbnb recently released a company report that claimed the 50 biggest cities in the United States could earn up to $2 billion in additional tax revenues over the next 10 years by embracing Airbnb. The company currently collects fees such as occupancy and tourist taxes from some bookings, depending on local laws. More friendly local rules and regulations, it argues, would boost revenue for participating cities.

Ullika Pankratz, an Airbnb host, says there are more intangible benefits to sharing, too – namely, filling a void many people feel in their personal lives in a rush-rush, always-online world.

Pankratz, who signed up to Airbnb in 2011, has welcomed dozens of people into her home off and on throughout the years. She has even used the service herself while vacationing, saying it helped her find affordable accommodations and meet new people she now considers friends. The income she receives from sharing her home with tourists, she says, provides her with the financial independence she craves and taps into a very human need to meet and connect with new people.

Whether it’s about flexibility, connection, or pooling resources, governments and sharing companies are still figuring out how to work with and around each other. Where exactly the rules and regulations will shake out is unclear, but one thing that seems undeniable is that customers and employees alike have flocked to the sharing model. The genie may be difficult to put back in the bottle.