The Current Generation Wants It All
The current generation wants it all: money, flexibility, a work-life balance, plus a diverse, successful and varied career. The nine to five is fast becoming irrelevant. The answer? The new gig economy, or shared economy as it is also known: being able to be a taxi driver as and when with Uber; being able to rent your house out when you want to via Airbnb; being able to offer skills and services on a whim via TaskRabbit. We want to work how and when we want, but we also need a reputable platform to provide us with access to the market, a known brand and the credibility to help us when things go wrong. The shared economy is expanding into many sectors, it has even hit the corporate end of the legal market: the legal interim market is now part of the shared economy, providing lawyers with all of the above.
In the UK, to take one example, the shared economy is currently valued at around £500m and engages approximately five million people. A recent report by PwC estimated the UK shared economy market might increase to £9bn by 2025. Interestingly, the report estimated that, in 2013, the five main shared economy markets – peer-to-peer lending and crowdfunding, online staffing, peer-to-peer accommodation, car-sharing, and music and video streaming – generated $15bn in global revenue. This is a massive market that has expanded by 1,700 percent in the UK and 2,133 percent globally in just 12 years.
However, it is not without its challenges and is already facing a significant regulatory hurdle. The regulators have failed to keep up with this new economy and, given the reaction from traditional providers, and regulatory and governmental bodies, it seems highly likely regulatory issues will either make or break this market. If we look at two of the best known shared economy companies, Uber and Airbnb, both are under regulatory (and therefore public) scrutiny; Uber has come under attack from many bodies, while New York City has been aggressively taking on Airbnb and the short-term rental market. The sharing economy is under increasing attack; rather than being a model for people to make money on their own terms, the growing concern is that this new economy is a precarious one for the workers and that, while the corporations are profiting from this new piecework economy, those working for them are doing so without a safety net.
A recent report by PwC estimated the UK shared economy market might increase to £9bn by 2025
Brave new world
Yet, while the regulators are shining their light on the shared economy, this new economic model has no precedent. As yet, they have not provided an answer as to how to deal with it and have been caught between trying to protect workers and consumers while at the same time trying not to stifle this increasingly important market.
Historically, there have been two categories of workers: those who are employed and those who are self-employed. The law was created to reflect this and, up until this point, has proven adequate. Now the lines are becoming increasingly blurred; although Uber drivers are technically self-employed, in reality they probably fall somewhere inbetween self-employed and employed. The most controversial issue facing employers in the new gig economy is how they are potentially exploiting workers who receive no benefits or safeguards and do not know how much they will be paid or what they will be doing next. These people fall through the welfare net and, arguably, a number of companies who make use of the shared economy have capitalised on those already outside the employed workforce. This has taken place within the legal profession as much as the taxi market.
It would be interesting to know where these individuals would have been without the shared/flexible economy. Did these individuals leave jobs or were they already outside the employed workforce? Workers seem to include individuals outside mainstream employment who are looking for a way back in: working parents who were shut out of the market due to childcare costs and logistics; students; and part-time or shift workers trying to make ends meet.
For all the criticism levelled at shared economy employers, it is important to note that, fundamentally, the shared economy gives the demand and supply sides some, if not absolute, access to, and control of, each other. We hail a taxi and the drivers can choose to accept or not while the platform provides its drivers and customers with a market and quality control. The shared economy is about access to the market and the platforms facilitate this; this is the new resourcing model. It is also not as simple as defining all shared economy workers as either employees or even zero-hour contractors, as this will mean the ‘employers’ will limit flexibility and want greater control – all reasons many of the individuals using their platforms may have left mainstream employment in the first place.
A third way
So what is the answer to the emergence of this new form of working? It might appear the best answer would be to create a new working relationship in the shared economy. In order not to drown the market in red tape and regulation, I believe we need to create a third category of worker. We need to look at what the market wants from the demand and supply sides and work on creating a sensible solution, while at the same time ensuring any measures do not kill the shared economy.
One possible suggestion is to look at how the rest of the economy is structured to provide the flexibility and support required to create a marketplace conducive to the growth of the shared economy. This might mean lower personal tax rates if you work for a shared economy business. The reduced taxes for the individual would take into account the fact they have to pay for benefits and extra insurance. The companies themselves could be required to pay to register as a shared economy business, and also be required to negotiate bulk benefit and insurance rates for the individuals who work with them. That would still give both sides flexibility, it would not stifle the market, and would help the individuals with any shortfall in income and protect them when they cannot earn any income. Ultimately, it would provide independent workers with a financial safety net currently only in place for salaried workers.
One of the challenges facing employers with regards to Millennials and, more recently still, Generation Z is that these generations do not necessarily want to be defined. For many, they are actively choosing to work ‘gigs’ and it is less about taxes or benefits or rights and more about freedom. Historically, if you wanted career freedom, you either opted to be self-employed or a contractor. The significant difference here is the individuals want to have the freedom within a structure, but at the same time want some level of protection as well.
In my view, I do not think it is accurate to say the shared economy has simply grown out of companies exploiting loopholes. Yes, it is borne out of a need for less structure and more flexibility, which does mean less regulation but does not mean no regulation. Over-regulation will cause the shared economy to collapse, cutting off a healthy source of remuneration for many individuals. At the same time, we cannot have millions of workers without social protection.
This market has been created by the innovators and, to fully take advantage, we as a society have to innovate – and quickly – to catch up with this new reality.
This article first appeared in The New Economy in June 2016: http://www.theneweconomy.com/business/the-sharing-economy-is-creating-a-third-way-between-employment-and-unemployment
Follow Janvi Patel on Twitter on @janvi25
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