By: Boston College
February 10, 2017
Abstract:
The sharing economy has generated controversy for its effects on labor conditions, wages and the distributions of income and wealth. In this paper we present evidence for a previously unrecognized effect: increased income inequality among the bottom 80% of the distribution. On the basis of interviews with U.S. providers on three for-profit platforms (Airbnb, RelayRides and TaskRabbit) we find that providers are highly educated and many have well-paying full-time jobs. They use the platforms to augment their incomes. Furthermore, many are engaging in manual labor, including cleaning, moving and other tasks that are traditionally done by workers with low educational attainment, suggesting a crowding-out effect.
Introduction:
The sharing economy comprises a diverse set of platforms and organizations, including non-profits such as time banks, food swaps and makerspaces, as well as for-profit platforms that offer income-earning opportunities, such as home and car rental and the sale of goods and labor (Schor & Fitzmaurice 2015). The for-profits, which are often quite large, have attracted a great deal of popular attention, in part because they have the potential to yield economic benefits by replacing conventional economic activity with new technologies and innovative business models. Proponents argue that technologicallybased disruptions will enhance economic efficiency, flexibility and autonomy for providers. Sharing platforms reduce transactions costs for person-to-person exchange, in part by crowdsourcing information from users but also via their sophisticated logistics software (Sundarajan 2016). Some observers have gone so far to predict a “zero marginal cost society,” (Rifkin 2014) in which highly productive technologies combine with users to remake economic relations. Investors are also optimistic about the sector, as recent valuations of for-profit companies in this sector have been high. The ride-sourcing platform Uber, which is the largest of all sharing economy companies, was valued at $50 billion in 2015, which at the time made it more valuable than 80% of all companies on the Standard and Poors index (Myers, 2015). Rapid growth in the two largest companies—Uber and Airbnb—also reveals the attractions of these services to consumers, who, we find, appreciate the low costs, convenience and branding of many of the platforms.