Is it Sustainable?
The Shared Economy: Is it sustainable?
January 4, 2016
Patrick Coluhoun – Primary Article Contributor
Piercon Knezic, Karli Kurzuk – Team Leaders Following Shared Economy
Keywords: Shared Economy, Fon, Uber, AirBnB, regulation, taxation, economy, industry, traditional companies, partners
The shared economy is an economic model in which individuals rent or borrow goods from another individual for a price. This tends to happen when the good isn’t being used, hasn’t been used, or to garner secondary income. Homes, cars, parking spots, even internet connections can all be shared amongst individuals.
The growth of the shared economy has, arguably, stemmed from recent changes in consumerism. Rather than being perceived as a concern, its growth should be viewed as an opportunity for North American markets to flourish. As a result of the 2008 global recession, rising levels of urbanization and increasing ecological consciousness, consumers are now less likely to purchase goods and are increasingly prone to borrowing/reusing goods. By playing on recent social trends, shared economy companies, such as Uber, AirBnB and Fon, have significant potential for growth within the Canadian and the American markets. Not only will these new methods increase convenience for users, but they will, “raise productivity, catalyze entrepreneurship, stimulate new consumption and generate new tax revenue.” By cutting out more costly and time-consuming options, services are becoming increasingly streamlined and this will only make economies more efficient in the future.
Sharing services is simply cost-effective; in a recent poll by Leger, 63% of Ontarians using shared-economy services stated that they did so because it was more affordable than traditional services. Furthermore, almost 50% claimed that peer-to-peer services were more convenient for users than other methods. The success of Fon should be used as an example for the positives of sharing; its massive networks will reduce the cost, and expand the availability, of wireless internet on an international scale. Where people struggle to afford/locate public internet before, Fon users will no longer.
Despite the many positives of sharing goods and services, there are some obvious negatives that will need to be addressed. There are legal problems that have affected many shared-economy companies, like Airbnb and Uber. In these cases, there have been legal disputes about housing laws and insurance policies, respectively. As the field continues to grow, there will undoubtedly be an assortment of legal issues, which will restrict many companies during the startup phase. Shared economy corporations also have a high-liability risk, which is exacerbated by their ‘subcontractor structure’” Because this legal vulnerability, the government will, and should be, eager to implement regulations and requirements for these companies to comply with. Despite these impending legal issues, shared-economy companies will continue to flourish with stringent but fair government regulation.
The growth of the shared-economy sector has been rapid and its further expansion is inevitable. Because of its on-going growth, the Canadian and American governments (both provincial/state and federal) should be prepared to adopt strict regulation over the field. Ottawa and Washington are well equipped to participate in the shared economy’s expansion and extraordinary economic potential. Furthermore, if they regulate the field properly, they could avoid many of the negative effects pointed out by critics. It is crucial that North American governments stay with the times and endorse the shared economy. As the Ontario Chamber of Commerce pointed out in their report, “By adopting smart adaptive regulatory responses to the growth of the sharing economy, Ontario and Canada have the ability to act as first movers in the sharing economy space, and in doing so, be well positioned to harness its economic potential.”
Due to recent trends in the labour market, there is a massive, underemployed workforce looking to support themselves by experimenting in non-traditional methods of employment. With consumers endlessly searching for cheaper alternatives to traditional methods, combined with a newly formed workforce eager to provide these services, the rise of the sharing economy has proven unavoidable.
Shared-economy companies are pushing elasticity in employment, in comparison with the steady life of traditional labour. One analysis notes that its rise has allowed the growth of a “freelance labour force,” comprised of significantly younger and older employees. Since these demographics value flexibility in hours and task, part-time opportunities have proven extremely lucrative. The study also notes that people between the ages of 25 and 54 are the least likely to be employed by shared-economy companies because they are typically employed full-time or are focused on raising families. These extended labour opportunities are a positive thing; if one is under-employed or is struggling to find job opportunities, they can at least earn some supplementary income. Furthermore, the success of companies like Airbnb and Uber prove how the profits of sharing services go back into the economy. Employees declare all of their income, pay tax on it, and typically spend the proceeds locally. The users of these services spend money which is sent directly back into the economy.
