The Amorality of the Sharing Economy

Wednesday 16 December 2015

By Christina J. Colclough, Head of EU Affairs, UNI Europa

Recently, I have held quite a few speeches on the sharing economy, or rather on the amorality of the sharing economy and the new forms of employment we see are on the rise: bogus self-employment, zero-hour contracts to name just two.

The sharing economy, marketed as something social and/or sustainable, opens up for an individualisation of work and financial responsibility. You drive your car, rent out your home or sell your labour power in competition with others. You take the risk of losing income if demands drop or your ratings fall. No state system will cover you in low income times, as you are regarded as self-employed. Citizens in troika hit countries have even been asked to rent out their home, car, bicycle or whatever to make up for the lack of state money to cover unemployment benefits.

At the same time, the sharing economy does not, contrary to a common claim, put everybody equal. It is just as open to economies of scale as the “ordinary economy”. For example, professional AirBNB’ers have entered the stage, buying up property in large numbers, not with the aim of renting out to tenants on the long-term, but to AirBNB clients only. The number of beginner’s flats, or affordable housing is thus falling in many urban areas, forcing locals to move further away and prices to go up. In some areas, public transport is getting more expensive as more and more people drop the public system and buy into car-sharing. In one example I have heard of, the price of public transport had risen so much, that the citizens have been forced to turn to car-sharing. But since car prices have also risen, few could afford to buy a car. Hence the market was open for monopolisation. One car matador set the car-sharing price at a not so cheap rate. Everyone but the matador lost out.

Furthermore, the online platforms that enable clients to meet with service providers can be based in tax-free, or tax-low countries. They often take up to 20% of the income earned in payment for use of the platform. The real income for people participating in the sharing economy is thus far less than what you as a user might pay.

As if this wasn’t enough, we can see that corporations are making increasing use of new forms of employment too. They are laying off employees on permanent contracts and instead turning to the use of people on bogus self-employment contracts or zero-hour contracts. Crowdsourcing is also on the rise, where either manual tasks or high-skilled ones are sent out into online world for solving. Bidders can be situated anywhere in the world. Sometimes they even have to submit ideas as to how they would solve the problem at hand often with no payment unless they win the bid.

What all of this means is that people on these contracts bear the risk of demand fluctuation and not the companies. Since workers are not employed they have no right to unemployment benefits, sick care, holiday pay or leave. Their working hours differ from day to day, leaving those with children in impossible and stressful situations. Many will be left in grave risk of poverty.

Just as bad, since companies move away from employing people, corporate contributions to healthcare and social security benefits are naturally declining. How, then, are we going to finance our welfare states: healthcare, education, social security and unemployment benefits?

It is estimated that in five years more than 40% of Americans will be bogus self-employed. In Europe the figure is rising too.

It is time we all engage in thinking about the long term consequences of this, and stop being blinded by the smart marketing of the sharing economy as something social and/or sustainable.

This form for economy might well be here to stay, but then we need to rethink our social security systems as well as corporate responsibility.