Do you have a car sitting in the garage, doing little but draining money in the form of car payments and insurance? Do you have some time to kill? Why not earn some cash hauling people around? What of that remodeled basement-turned-living space your teen once occupied? Why not have it earn some side cash by renting it out to travellers? Perhaps you just have some free time, and wish to expand your portfolio? Perhaps take a design gig on the side. There is no harm here.
When dealing with a lie, something is being hidden
Over the past several years, innovative individuals began tapping into unused assets and free time via the power of smart phones and apps. The founding ideas make sense - if you drive across the bridge every day, why not use an app to find folks who would like to carpool with you? At the very least, you can use the carpool lane and save on the toll! The expanding market of these apps now reaches into more than one could have imagined, from simply parking your car for you, to doing your laundry, to making your wrench available to those needing one. There seems no limit of how far this will go.
In spite of the seeming good, there are problems. The first is with the name of this economy. The name is a lie, for it is called the sharing economy. This is fitting, because the business models underpinning it are also lies. When dealing with a lie, something is being hidden. I feel it is worth exploring this.
The Sharing Economy
Given the business model of this new economy, for it to be sharing, one has to redefine what the word "share" means. I know I do not really need to explain this, for all learn what sharing means while toddlers. Unfortunately, I feel I must anyway, given the name has somehow stuck (Merriam-Webster definition: "to let someone else have or use a part of something that belongs to you"). If I buy a pizza, and offer to give some of it to you, that is obviously me sharing my pizza. If I buy a pizza, and then sell slices to you - that is not sharing. Similarly, if I am already planning to drive across the bridge, and I offer to take you with me and drop you off on the other side, I am sharing my car with you. If I do the same, but charge you a fee - that is not sharing. If I let you crash on my futon, I am sharing my home. If I charge you a fee for crashing on my futon - I am not sharing it. Do you charge your partner a fee when you share your feelings? We can go on and on, but you get the idea. There is no sharing going on in the sharing economy. Unless and until we redefine what the term means, the name is a lie.
The business model, at this time, is apps that connect you to others, and mediate a service and the financial transaction between you and your client. You are a free, self-employed individual actor, in effect, a business. The app is connecting your business to your customers and providing a payment system. The apps charge a fee for the service they provide, often charging both the self-employed provider of the requested service, and the person seeking the service. Though called the sharing economy, it seems more akin to franchising. This is where an individual starts a business and licenses rights to, say, McDonald's products. McDonald's provides a business model, branding, name recognition, a customer base, and perhaps most importantly, advertising and marketing. The franchisee does not work for McDonald's - they are a self-employed independent business. A key difference, of course, is that the franchisee goes all-in with the branded, brick-and-mortar relationship, whereas in this sharing economy, the self-employed "partners" come and go.
As a means to earn some cash on the side, this is all very appealing. Yet those using a facilitator app like Uber only on occasion are not the norm. The business models of the facilitator apps rely heavily on those who commit to them as their principal means of earning income (like a franchisee). Some may drive for Uber, while renting out a room on AirBNB, and performing other jobs via TaskRabbit. Regardless, what they lack is a traditional, steady, regular job and career. They may drive for Uber while seeking and hoping to land a traditional job, but between now and then, they, essentially, work for Uber, or AirBNB, or TaskRabbit, et al.
What Minimum Wage?
Much political fighting has occurred on the topic of the minimum wage. However, the sharing economy does not include one. Part of the business model sells the idea of independence, which is attractive. Thus, those using the apps to provide whatever the service is are self-employed. They earn what is in most cases classified as miscellaneous income, a classification not taxed as earned wages in the United States. They are not subject to myriad of tax and labour laws, and thus can work for less than minimum wage. This is a hidden problem. If you drive for Uber (though, technically, you do not drive for Uber, you drive for yourself), and go a whole hour without a fare, or perhaps only one at $7 (before fees), you are working for less than minimum wage. Sure, you may have a busy hour later, and it might even balance out to minimum wage over the course of a twelve-hour day, but that is not how wages work. Salary and wages are a guarantee. An employer would love this benefit - having employees on duty, but paying zero during the slow part of the day. Furthermore, as self-employed, unincorporated "businesses", the costs of labour are borne by them. If earning only miscellaneous income over the course of an entire year, they may find themselves facing sticker shock come tax time, even if they did what most don not, making quarterly payments over the year. The current design of the tax code does not support an economy where millions of workers are individual unincorporated businesses. Part of the reason many do not incorporate, aside from the costs, is simply not expecting to actually do these sharing economy jobs full time all year long. It happily begins as a convenient short-term solution before manifesting into a long-term problem.
Another issue is that concerning jobs where the worker does not physically have to be in the country of their work contract. Systems such as TaskRabbit and Upwork (formally Odesk) connect you to workers worldwide. It may, for example, prove challenging for an American to compete with someone in Bangladesh, at least without significant compromises to their requested rates. Graphic designers, trying to secure side work or worse, their primary work, from numerous short-term miscellaneous contracts, could easily find themselves working for considerably less than any local minimum wage, especially when factoring in their tax liability. Certainly some do well, but most do not.
Shifting the Costs of Labour
All of this is extremely attractive to traditional employers. Why maintain a benefits package or hire full time, even at minimum wage, when you can contract labour - even domestic labour - without benefits, and at less than minimum wage, because they are all self-employed, independent businesses? The technology industry has been at this for years. If you can find a person, er, a business on Upwork to agree to a task at $1,000.00 a month, so be it! Even if the person business puts in 60 hours a week (about $4.17 an hour), that itself is not illegal. As a business, you have no costs of labour beyond that $1,000.00 each month. There is no need to maintain a Human Resources Department. This model found in the technology sector is, via the sharing economy, finding audiences outside it. Companies like FedEx, in some markets, no longer have employees delivering packages. Rather, those delivery drivers are independent contractors - self-employed - who wear the FedEx garb and drive their trucks - they are neither employees of FedEx, nor any other firm. Simply put, many companies are moving toward this model. They might use TaskRabbit exclusively to fill roles. It is simply too attractive. Perhaps a day will come where even places like McDonald's cease hiring employees, but rather, only contract other "businesses" - those self-employed. From there, they may simply refer to them as "staff-partners" rather than employees. This would render the whole debate over minimum wage moot.
The Good, the Bad, and the Ugly
It is attractive to have options to earn extra cash on the side, or make some cash while between jobs. These apps have provided a fine service in that regard. Rather than extra cash, it has grown to become what can only be described as a principal employer for millions. Worse, the model is showing traditional employers a new way to get around labour law, and avoid committing to employees. The tax code, already too complicated, simply has not caught up, and likely is not going to any time soon. It is moving the economy toward one made up mostly of, for lack of a better word, hustlers - humans doing this and that just to get by, but few having actual, traditional and conventional jobs and promising careers. All of this under the guise of sharing.
The hustler economy. That is better.
I feel that changing the name away from the sharing economy may help spur some policy changes. Sharing is a nice word that humans like, while hustling is not. Regardless, it is likely to stay with us, and praise be the hustling economy when in need! However, changing the tax code to account for a hustling economy may prove most helpful. Perhaps actually recognising that most of those working via these apps are essentially employees and forcing a conversion for any who average, perhaps, more than twenty-five or so hours a week through them, may help too. I do not really have any clear solutions in mind. My intent is just getting a conversation started.