Are the regulators coming?
Unless you’ve been living under a rock, you’ve heard about how startups like Uber and Airbnb are using technology and a new labor model to upend traditional industries like hotels and taxi companies.
Now, the federal government wants everyone to know they’ve heard about these companies too. On Friday, the Commerce Department published a paper on the size and significance about these new arrivals to the American economy and how they are affecting workers, consumers, and regulation.
Titled “Digital Matching Firms: A New Definition in the ‘Sharing Economy’ Space,” the report offers a cautious but sophisticated look at a topic that keeps creating both hype and controversy. I gave it a read, and here are five points that jumped out.
1. It’s not sharing, stupid
The report doesn’t phrase it quite like that. But it does take pains to note that “sharing economy” is a misnomer for companies like Uber and TaskRabbit, which involve the exchange of money for services, and where no one is sharing anything.
Alas, the Commerce Department disregards well-known alternative phrases like “on-demand economy” or “gig economy” and proposes a new term “digital matching firms” instead. It’s hard to imagine that catching on with anyone beside government gnomes.
Despite the infelicitous phrasing, the report makes an important point: If we’re going to measure the size and influence of this new part of the economy, it’s critical to classify who is a part of it. On page six, the report explains a variety of firms that don’t count, including Amazon, couchsurfing.com, and certain car-sharing firms. Meanwhile, the end of the report lists over a hundred firms that do count, and classifies them with labels like “errands,” “delivery,” “dining,” and so on.
2. This economy is still small
“Even using a broader definition than the one we propose, all of these studies suggest that the “sharing” economy comprises a relatively small portion of the overall economy,” says the Commerce report.
How small? It cites various consultant reports to offer some hard numbers: 2.7 million Americans provide services for on-demand platforms; key “sharing” services had global revenues of $15 billion in 2014; by 2025, Airbnb-style rentals could amount to 10% of all accommodation bookings. But take these with a grain of salt, says the report, because many figures are distorted by the inclusion of companies that don’t belong in this category at all.
Finally, the report notes the sector is dominated by a few giants. It states that “roughly 500,000 of the estimated 2.7 million U.S. on-demand independent workers are estimated to provide services for Uber, Lyft, and Airbnb, suggesting that service providers in the digital matching economy are concentrated in a small number of firms.”
- Lower prices for consumers
- Flexible employment and extra income for workers
- Better use of idle assets and new forms of business
- Better consumer experience
Further, the “benefits” section of the report makes clear the Commerce Department understands how peer-to-peer user reviews are able to create trust, and create new types of economic interaction that weren’t possible before.
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4. But there are some real problems
This is the part of the report that will get the well-oiled PR teams at Uber and Airbnb in a tizzy. The Commerce Department lists “challenges” that could provide ammunition to those who are complaining about the companies before courts and community boards. Those “challenges” include:
- On-demand work means income instability and fewer benefits compared to traditional jobs
- Lack of company oversight means untrained workers can pose a danger to consumers
- Privacy dangers arising from the companies collecting a huge amount of personal information
- A failure to get services to poorer consumers who lack smartphones or internet access
The report also talks of “integrating…firms into the regulatory framework,” which could makes the likes of Uber uneasy. Specifically, it refers to taxes, disability rules, worker classification, and consumer safety.
5. Where’s the data for decisions?
Those at venture capital firm Andreessen Horowitz, who like to preach the virtues of “regulatory humility,” will be encouraged by the Commerce Department’s acknowledgement that it still lacks important information to make decisions.
“The lack of data makes it difficult for researchers and policymakers to study trends in this area,” says the report, which also describes the “relative infancy” of firms like Uber and Airbnb.
It concludes by adding that the feds are expanding data collection efforts. In particular, it notes the Department of Labor and the U.S. Census Bureau will reintroduce tools to gather information about part-time and contingent workers.