Sharing and fighting

The Long + Short and Nesta (which publishes the magazine) hosted a discussion this week with some invited guests on the sharing economy and inequality. The questions we covered are now very hot politics in many cities and countries around the world. Some are banning Uber and Airbnb, or imposing new rules and taxes. Others are welcoming them with open arms.

As these companies grow, the language of the sharing economy is becoming ever more confusing. I prefer to think of the sector as internet platform resource aggregators (less catchy but more accurate) – which can be used for sharing, but also for selling everything from cars to clothes, rooms to equipment. Uber is no more a tool for sharing than my old local minicab service.

There's no doubt that these platforms can deliver far more efficient services, and mobilise assets better than the old alternatives. But there is also little doubt that on their own they can bring new problems.

These platforms use a distributed, self-employed workforce. That keeps their costs low. But the individuals working in these ways have uncertain and insecure incomes, and no contributions to pensions and training (or healthcare in countries like the US). So in one scenario they contribute to worsening inequality, and poorer, more miserable and stressful lives for a large minority, even as they provide helpful services to the affluent. In the long run they may dump costs on everyone else, when their workers end up needing care when sick or old.

For many years there has been a live argument about to create better protection and support for workers in more fragmented sectors – such as care, cleaning, or driving. Twenty years ago I suggested the idea of an employee mutual as one answer, and more recently I floated a few ideas on how digital technologies could reinvent trade unions, which were themselves a response to a previous period of economic disruption that had generated huge profits but distributed their benefits very unevenly.

These arguments are now moving to the top of the political agenda across the world. In Europe governments are wondering how to redefine the regulations for the sharing economy (Nesta has contributed various ideas on this including a framework for regulation in our report on the sharing economy). In California, Uber drivers have launched a class action claiming that they are employees of Uber and therefore should be given the same rights as employees. Here in the UK, the GMB has launched a similar case. As Gavin Kelly writes in his recent blog post, they have a good chance of winning, mainly because of the ways in which Uber exercises control over its drivers (though the case could rumble on for years – one reason why investors are less worried than they might be).

Alan Krueger, formerly Chair of Obama's Council of Economic Advisers, has just completed a study of the issues raised. He showed how some types of protection are difficult – for example, it's not easy to apply minimum wage legislation to Uber drivers or Airbnb providers. But other types of protection are quite easy, including treating platforms as employers, or setting rules on provision and protection at different levels of earning.

Clearly part of the problem is that the laws we have now are becoming less relevant to the way many people work. Different jurisdictions will address this in different ways but we should certainly be learning from innovation and collaboration happening around the world. The Estonian government, for example, is working with Uber to create an automatic system that reports drivers' earnings to the tax office. One of the paradoxes of the platform economy is that although it appears to bypass regulation, in the longer run these tools make it much easier for governments to tax and regulate – and indeed to design quite detailed algorithmic tools for regulation – than was ever possible in the old informal economy.

There are other interesting pointers to a new settlement. The move by David Rolf, head of the Service Employees International Union to pen an open letter on gig regulation signed by CEOs of some major gig companies including Lyft and Handy is a promising development. The letter sets out some principles for independent workers, giving them universal portable benefits and rights (Uber is noticeably missing from the signatories).

The idea of portable assets has long been part of the creative response to more fragmented labour markets, and perhaps in the future it will be data on transactions, or reputational records, that will become the most important asset to carry.

The end result of these battles will vary in different countries. Two groups risk getting this most wrong. One is the group who sees all of these new platforms as nothing more than vehicles for predatory capitalists. This view wholly misses the extent to which they have massively enhanced user experiences, as well as managing resources much more efficiently. The other group likely to judge this wrong are the venture capital investors in many of the big companies, partly a reflection of interests and philosophy, but also of their rather narrow social background (they're not literally all rich white men from privileged backgrounds, but the great majority are).

I would bet that new rights and rules will, in time, come in (part of a broader reinvention of welfare and supports that I covered in this recent blog). The share prices of the current platforms may well take a big hit as new rights come in (alongside the potential impact of competition from blockchain alternatives). After all, none of the big new platform companies yet makes any profit, and some would argue that their underlying models aren't anything like as efficient as many assume.

But the aim should not be to crush this new family of methods. Instead our aim should be to get the greatest benefit from them – both for consumers and producers – and, as with every major technological change in history, that will require a creative interaction of new business models on the one hand and new laws and regulations on the other.

Homepage illustration by Mike Stout