Friday, March 13, 2015

The Sharing Economy and Jobs – II

Now, back to the phenomenon I wrote about two weeks ago.  Why is it not as great as its believers claim, why is it so controversial, and what should and shouldn’t we do about it?

Its main weakness is that once proper expense accounting is applied, sharing economy engagements, compared with conventional employment, simply don’t pay very much.  Last month, Joann Weiner wrote in The Washington Post that while Uber claimed taxi-like drivers averaged over $74,000 per year in San Francisco, making it one of the most lucrative sharing-economy propositions, the real net number was more like $40,000, with no paid vacation or other benefits, and mandatory health insurance and matching Social Security contributions pushing that even lower.  (The Internal Revenue Service, not known for its generosity, allows 57.5 cents per business mile – if a driver averages 120 miles per day, as I did for Yellow Cab in the 1970s, he or she would have annual car expenses alone of over $18,000.)  If they drive, as true taxi drivers often do, 55 hours per week, $40,000 net, even if that high, pays even a lower cash rate than an $11.00 per hour job with time-and-a-half overtime.  

Second, the income achieved by Uber, similar Lyft, and room-renting facilitator Airbnb service providers is inflated by a temporary lack of regulation.  It is almost certain that major cities will develop legal limitations either banning or charging high license fees for what they are selling.  It is unthinkable that with New York City taxi medallions, or permits, costing over a million dollars that amateur cabdrivers will be allowed to proliferate, or even operate, forever.  Once zoning laws, and legally sound complaints by neighbors, catch up with the extent of Airbnb rentals, the time when anyone can run a de facto hotel or even a bed and breakfast in residential-zoned neighborhoods will be over.  Good money for now, but not by decade’s end at the latest. 

Third, once such regulation catches up, the bulk of other sharing-economy opportunities will be what established businesses don’t want to pursue for lack of profitability.  In Salon last month, Robert Reich said a more proper name for it would be the “share-the-scraps economy.”  Whatever you think of Reich, that phrase, sadly, fits too well. 

Fourth, while being paid for personal resources provides useful money, being able to sell them means you already have them.  If you have an apartment in Manhattan, you can do well renting it out, but most people don’t.  Not everyone meets the driving-record, car-condition, and other standards Uber and Lyft require.  If you don’t have the right kind of aptitude, you will not do well at doing tasks requiring it.  That does not mean these propositions are invalid, but it does mean that many are effectively available to only a minority.

Overall, once the laws and their enforcement get in place, once more participation and therefore competition brings prices lower, once the drivers and house hosts have commercial insurance, and so on, there won’t be enough left of the sharing economy to constitute a broad-based alternative to even minimum-wage employment.  What will remain will be the selling of possessions and other finite resources, ventures with appeal dependent on incomplete expense accounting, and, as the best of the lot, small business propositions, requiring as for more established ones the right kind of attitude, drive, stamina, wide-range skills, and often willingness to put in hours unheard of when working for others – a set of attributes few people have. 

How can we best deal with the sharing economy, as it is and will be?  There is no need for special regulation, as existing laws will do just fine.  With vastly differing personal completion times, efforts to establish a minimum wage of sorts for less remunerative and more unusual tasks would be misguided, not to mention bureaucratically difficult or impossible, and anyway more opportunities for people to earn money should not be discouraged.  Yet we are best off resisting being enamored of the sharing economy, as it is hardly a jobs-crisis solution.  We need more for what we face in America. 

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