What’s the Next for the Sharing Economy?

If you’re reading this, chances are you’ve participated in the sharing economy. You’ve hitched a ride with Uber or Lyft or earned some extra cash putting a second bedroom on Airbnb. To be sure, there are many benefits to the sharing economy: on-demand services, the ability to make money off unused items, employing the underemployed, flexible schedules, and more. However, there is a controversial side to the sharing economy as well. For one, there is the regulatory aspect. Because of its disruptive nature, most sharing economy companies don’t exactly fit the mold of existing industries, which makes it difficult to figure out which rules they need to follow. For example, questions arise about the level to which UberX drivers need to be insured. As a recent article for VentureBeat points out, “Uber claims that the driver’s personal insurance will cover injury to passengers” and while “Uber provides a $1 million backup policy, […] there is a lot of confusion as to when it kicks in.”1 Similarly, Airbnb has been slammed in some states for allowing hosts to essentially operate as a hotel without paying the applicable taxes.2

One of the biggest questions marks, however, is the classification of workers participating in the sharing economy, those who drive for Uber or Lyft, for example. Generally, these workers are classified as contractors, meaning they don’t have access to benefits like health insurance, unemployment, or worker’s compensation. And there is debate about whether this classification is a good thing or a bad thing for workers. On one hand, contractor status allows drivers to set their own hours, work at other jobs, and drive as much or as little as they want without penalty. On the other hand though, as Senator Mark Warner recently pointed out, this means that the driver’s essentially operate without a safety net.3

It’s possible that a solution may not already exist, that it’s not necessarily as simple as deciding whether a driver is an employee or a contractor. In fact, Senator Warner has some new ideas about how to get the best of both worlds, to balance the positives of a flexible work schedule with the lack of employee benefits. These ideas include “creating exchanges for unemployment benefits or workers’ compensation in the model of Obamacare” as well as create an creating an “‘hour bank’ that would serve as a third-party trusted entity to track workers’ hours to administer benefits, not unlike ones used by trades.”4

And in perhaps the biggest news for the sharing economy in a while, California’s Labor Commission ruled last week in favor of a former Uber driver, Barbara Ann Berwick, saying that she was in fact an employee, not an independent contractor, and ordering the company to pay her “$4,152.20 in expenses and other costs for the roughly eight weeks she worked as an Uber driver last year.”5 While, as pointed out by T4A.org Executive Board Member Charley Moore in an article for TechCrunch, this decision is not binding and does not apply to all Uber drivers, it does make the statement that something needs to change, that regulations need to be rethought to reflect the economy we’re actually living in. As he puts it, “[t]he overaching [sic] point is that the law hasn’t caught up with the economy. In this case, the Labor Commission is really applying a set of antiquated analysis … to the business model at hand.”6 Senator Warner makes a similar argument saying that the “ruling from the California labor regulators demonstrates why federal policy makers need to re-examine the 20th-century definitions and employment classification we’re attempting to apply to a 21st-century work force.”7

Some companies, however, are trying to stay in front of new regulations. For example, just days after the California Labor Commission’s ruling, Instacart, a popular grocery delivery service, announced they would be allowing their workers to decide if they want to be converted to part-time employees . As explained by a recent article for Wired, “[w]orkers who choose to convert from contractor status to part-time will get workers’ compensation, and Instacart will pay for their unemployment, Social Security, and Medicare taxes […] But Instacart says employees will still have flexibility when it comes to picking their own shifts—a key selling point in attracting workers. The company also says it will not impose a minimum number of hours of work for its new part-time employees, though it will cap their number of hours worked per week to keep them below the full-time threshold.”8 In essence, they give employees a choice: receive some employee benefits but limit your driving to 20-30 hours a week or maintain contractor status and the ability to drive as much as you’d like.

It’s these types of ideas that we’re hoping to spur at T4A.org, novel and creative solutions to tricky problems. The sharing economy, in particular, has come up in quite a few of our TechTables. We touched on it in our TechTable with Commerce Secretary Penny Pritzker and it was the primary discussion topic in our recent ‘Table with Congressman Darrell Issa in Washington, D.C. We are continuing to ask how we get the best of both worlds. How do we get consumers the services they need and want while ensuring that the workers providing those services are also getting what they need?

I don’t want to take a stand on this, because it’s a complicated question. I would, however, love to hear your thoughts. How do we classify these workers? Do we even have the proper classifications set up? The on-demand and sharing economies are not going away. The desire and need for these services are continuing to grow. The question is, in essence, how do we accommodate this growing industry while still providing workers with the flexibility, benefits, and a safety net? How do we make a system that works for everyone?

1 Yared, P. (2015, Jun. 14). Regulating the sharing economy: How Uber et al will soon face new rules.VentureBeat. Retrieved from http://venturebeat.com/2015/06/14/regulating-the-sharing-economy-how-uber-et-al-will-soon-face-new-rules/
2 Fung, B. (2014, May 13). Airbnb just beat New York in court, but the state isn’t giving up yet. Washington Post. Retrieved from http://www.washingtonpost.com/blogs/the-switch/wp/2014/05/13/a-judge-just-sided-with-airbnb-in-its-fight-against-new-york-state-but-its-not-out-of-the-woods-yet/
3 Garcia,E. (2015, Jun. 4). Sen. Mark Warner Wants Washington to Catch Up With the Sharing Economy. National Journal. Retrieved from http://www.nationaljournal.com/congress/sen-mark-warner-wants-washington-to-catch-up-with-the-sharing-economy-20150604
4 Garcia.
5 Isaac, M. and Singer, N. (2015, Jun. 17). California Says Uber Driver Is Employee, Not a Contractor. New York Times. Retrieved from http://www.nytimes.com/2015/06/18/business/uber-contests-california-labor-ruling-that-says-drivers-should-be-employees.html
6 Ha, A. (2015, Jun. 18). So, About That Uber Ruling. TechCrunch. Retrieved from http://techcrunch.com/2015/06/17/so-about-that-uber-ruling/#.iyjvge:CIzg
7 Isaac.
8 Alba, D. (2015, Jun. 22). Instacart Shoppers Can Now Choose To Be Real Employees. Retrieved from http://www.wired.com/2015/06/instacart-shoppers-can-now-choose-real-employees/

Photo via http://techcrunch.com/2015/06/17/uber-drivers-deemed-employees-by-california-labor-commission/?ncid=tcdaily#.iyjvge:H0dJ