TOPIC GUIDE: The sharing economy

"There should be tougher regulation on the sharing economy"

PUBLISHED: 27 Jan 2017

AUTHOR: Nadia Butt

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INTRODUCTION

In 2016, a London employment tribunal ruled that drivers of transportation company Uber had the right to be considered as employees rather than self-employed contractors [Ref: BBC News], meaning that they are now entitled to a whole host of benefits including sick leave, the national minimum wage and holiday pay [Ref: BBC News]. The controversy surrounding the sharing economy has led to Uber being banned, or subject to serious restrictions in many European countries, including Hungary, Belgium, France, Germany, Italy and Spain [Ref: Financial Times], as the company and its technology, is said by critics to impinge on and undercut existing and established taxi services, without being subject to the same regulations and restrictions. Companies such as Airbnb have begun to face legislation too, with the German city of Berlin restricting rentals in an attempt to stop rents from rising in the city [Ref: Guardian], and Deliveroo forced to pay the minimum wage in the UK, after protests from drivers and government intervention last summer [Ref: Independent]. Some suggest that these moves to restrict, ban or legislate against these companies, marks the beginning of a trend of greater regulation of the so called ‘sharing economy’, which can be described as allowing people to “rent beds, cars, boats and other assets directly from each other, co-ordinated via the internet” [Ref: Economist]. For some, the sharing economy “extends the free market into areas of our lives where it previously couldn’t go” and exist as part of daily lives, for instance Deliveroo, Yodel, as well as Airbnb and Uber [Ref: Spectator]. But this shift from more traditional market exchanges has led to many questions about how the sharing economy could and should be regulated. The concerns range from the safety of consumers, the rights of the workers themselves and the impact on the wider market. However, those embracing the sharing economy argue that attempts to regulate it could have negative consequences on consumers who benefit from the choice, convenience and affordability the sharing economy offers. In light of the competing arguments, should the sharing economy be left to innovate, free from extra regulation and red tape? Or is it right that companies like Uber and Deliveroo are taken to task over their business models?

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The sharing economy DEBATE IN CONTEXT

This section provides a summary of the key issues in the debate, set in the context of recent discussions and the competing positions that have been adopted.

A changing economy, for the better?
Through the rapid development and growth of internet technology, it is argued that the sharing economy has been able to thrive in converting “every commodity that has been bought and removed from the market… into a rentable object that never leaves the market at all” [Ref: Guardian]. It means that it is now possible to, “make money in your spare time or from assets that would otherwise be unused” [Ref: Telegraph], whilst those who own homes and cars significantly benefit from the sharing economy, consumers also benefit from its affordability and choice [Ref: Spectator]. Some say that this expands the capitalist arena further than previously imaginable, making a more efficient use of underutilised goods and services. Moreover, greater competition in the market is also good for efficiency, and subsequently the wider economy, by forcing industries “to innovate and adopt new technologies to improve their services and survive” [Ref: Bruegel]. That said, opponents assert that the sudden growth of the sharing economy has led to undesirable results. For example, Airbnb has been accused of “contributing to London’s housing crisis by removing homes from the market for long-term rental” [Ref: Huffington Post], and Uber has been blamed for adding to London’s carbon footprint and congested roads, where it is estimated that an additional 10,000 cars are now on London’s streets plying for taxi business [Ref: New Economics]. There has also been a lot of criticism of the use of the term ‘sharing’, with commentator Steven Poole noting that genuine peer-to-peer sharing is not really happening, and instead, giant corporations are monopolising an industry for their own gain [Ref: Guardian].

Competitive advantage
Those critical of the sharing economy often point to the fact that “the sharing economy companies create bumps on what is otherwise a level playing field” [Ref: Bloomberg]. For instance, “taxi regulations and license fees force taxi fares to be higher than Uber’s” [Ref: Guardian], and Airbnb hosts can “avoid paying the higher taxes imposed on hotels, such as expensive property taxes and value added tax” [Ref: Vice]. As a result, applying tougher regulation to the sharing economy would allow all companies to compete equally, and be subject to the same rules. Tom Kibasi, director of the Institute for Public Policy Research argues that, “the rules of the market are set by society, not by private corporations, no matter their own assessment of the social value of their mission, and despite many of their founders’ Silicon Valley libertarian instincts” [Ref: Huffington Post]. But it is suggested that the down side to tougher regulation, is that it can have negative impacts on consumers, as closing tax and employment loopholes could mean the likes of Uber and Airbnb may pass on higher costs meaning that, “consumers will feel the pain. If people are put off becoming drivers with Uber, its infamous surge pricing will become more common. It’s a toxic mix for those who prize Uber’s flexibility, affordability and convenience” [Ref: Telegraph]. One commentator suggests that “authorities should make sure that the market remains open to competitors of Uber… as market dominance and monopolies are translated to high prices for passengers.” [Ref: Bruegel] Others however, claim that governments should not impose tougher regulations, but that sharing economy companies should take voluntary steps to abide by government rules: “Airbnb’s intention to require London hosts to abide by the city’s rules is a step in the right direction… voluntary steps are needed from Uber and others. More litigation and public indignation, on the other hand, would be unhelpful” [Ref: Bloomberg].

Protecting consumers and workers
Many justify greater regulation on the sharing economy in order to protect consumers and workers. The sharing economy requires a lot of trust between seller and purchaser when making transactions that are not externally regulated. As a result, there have been numerous accusations and incidents of unsafe Uber drivers [Ref: CNET] and Airbnb horror stories [Ref: Huffington Post]. This has led to calls for greater regulation to improve standards, with suggestions that Uber drivers should pass “criminal history and driving history check(s), a need to have zero blood-alcohol concentration, and for their cars to undergo an initial roadworthy inspection and appropriate follow-up inspections” to protect customers and drivers [Ref: Guardian]. Other critics of the sharing economy point to the ‘exploitation’ of workers [Ref: TUC], and maintain that to prevent this exploitation, we need regulation to ensure “sharing economy workers get a fair deal while also protecting wages and conditions across the sectors these services operate in.” [Ref: SHM] Moreover, according to some opponents, self-employment status in the sharing economy “has allowed unscrupulous employers to avoid employment rights, sick pay and minimum wage for their staff” [Ref: Daily Mail]. However, polls indicate that despite the downsides, Uber drivers are happy with their employment status as: “76 per cent of (drivers) prefer the current arrangements… self-employed people, even on low incomes, have higher job satisfaction than full-time employees…preferring the flexibility that comes with working for themselves” [Ref: Telegraph]. And others go as far to say that “self-employment has become a bogeyman for the Left… [they] think that without a paternalistic employer, we are bereft children” [Ref: Telegraph], and argue that the sharing economy is beneficial to us all, with “workers and customers (having) more power and choice than previous generations could imagine” [Ref: The Times]. So, should we expect the sharing economy to fall into line with traditional ways of providing services, thus improving working conditions and safety? Or would regulation of the sharing economy dilute the innovation that it has brought to both workers and consumers, because: “The game is changing, and the rules we write should welcome this, not obstruct it” [Ref: Telegraph]?

ESSENTIAL READING

It is crucial for debaters to have read the articles in this section, which provide essential information and arguments for and against the debate motion. Students will be expected to have additional evidence and examples derived from independent research, but they can expect to be criticised if they lack a basic familiarity with the issues raised in the essential reading.

FOR

Be partners in regulation, or be prepared to be forced out

Tom Kibasi Huffington Post 5 December 2016

Uber and the economic impact of sharing economy platforms

Georgios Petropoulous Bruegel 22 February 2016

Sharing economy services like Uber, Airbnb need federal regulations

Andrew Leigh Sydney Morning Herald 9 February 2016

AGAINST

In London, Airbnb surprises by being humble

Leonid Bershidsky Bloomberg 2 December 2016

Uber is good for everyone. Unions must leave it alone

Mark Littlewood The Times 21 July 2016

IN DEPTH

Unlocking the sharing economy. An independent review

Debbie Wosskow Gov.UK November 2014

KEY TERMS

Definitions of key concepts that are crucial for understanding the topic. Students should be familiar with these terms and the different ways in which they are used and interpreted and should be prepared to explain their significance.

BACKGROUNDERS

Useful websites and materials that provide a good starting point for research.

A shorter stay

David Gilbert Vice 4 January 2017

The current and future state of the sharing economy

Niam Yaraghi and Shamika Ravi Brookings Institute 29 December 2016

Regulating the sharing economy

Erica de la Harpe World Finance 7 December 2016

The unforeseen dangers of Uber and Airbnb

Robert E. Levine Spectator 5 March 2016

The sharing economy: the good, the bad and the real

Duncan McCann New Economics 10 December 2015

The rise of the sharing economy

Economist 9 March 2013

ORGANISATIONS

Links to organisations, campaign groups and official bodies who are referenced within the Topic Guide or which will be of use in providing additional research information.

AUDIO/VISUAL

The morality of business

Moral Maze BBC Radio 4 11 June 2016

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