The Pitfalls of the Sharing economy

Many people applaud the collaborative sharing economy as being one of the most revolutionary concepts that have recently come about. After all, if one did not need to buy a power tool that they will only use one time, but can instead rent it from neighbors, valuable resources such as raw materials and physical labor can be saved from not needing to manufacture. Furthermore, the sharing economy has allowed the free market to bypass government regulation and obtain substantially identical goods or services at a fraction of the cost—which advocates claim is good for the entire society. However, this assertion is very myopic. There is never anything that is without fault regardless of its benefits, including services that employ the concept of collaborative economy.

            The proliferation of the sharing economy has actually been the subject of much debate. Like all new technology, its widespread adaption causes the disruption and eventual elimination of an entire industry. A great example of this phenomena is farming tools. When tractors and automated tools were created society suddenly needed fewer farmers. This resulted in a multitude of families losing not only their jobs, but their entire way of life. Another example is Uber whose entry into the marketplace has also caused the taxi industry to be disrupted. Many people will assert however, that this disruption is a good thing because it lowers prices in the given market. However, for those who paid an investment of hundreds of thousands in order to obtain a license to operate a taxi, their way of life is heavily impacted in a very negative way.  This example even applies to borrowing power tools, if there is suddenly less demand for the purchase of these tools then there will be less workers that need to be employed and less materials which need to be bought—which will also impact workers who supply the raw materials.

            There is an argument that when a new disruptive technology eliminates an industry it also simultaneously creates  a new one. Examing Uber through this perspective, one can see that while Uber eliminated many jobs from the transportation industry, it also created a great deal of new jobs for flex-drivers. Nevertheless, it would be too soon to say that this is a good thing. Uber is currently battling regulation across multiple states to be able to operate. They have also been in the spotlight for their workers being contracted—meaning that these workers have no benefits and the amount of money that a driver will make can at times be even below minimum wage. All of these things leave the sharing economy open to much debate. What do you all think?

http://journalistsresource.org/studies/economics/business/airbnb-lyft-uber-bike-share-sharing-economy-research-roundup