Do the downsides of the ‘sharing economy’ outweigh the benefits?

A Lyft customer gets into a car in San Francisco, California. The cars are identified by their pink mustaches. Justin Sullivan/Getty Images

“It’s true that, in many ways, sharing-economy jobs can offer more autonomy than traditional employer-employee relationships. But there’s a dark side to these work arrangements that gets considerably less press: the shifting of risk off corporate balance sheets and onto the shoulders of individual Americans, who may not even realize what kinds of liabilities they’re taking on,” writes Washington Post reporter Catherine Rampell.

The risks involve everything from income instability (the worker, rather than the firm, has to absorb the brunt of demand shocks or price cuts); to irreversible capital investments (Uber and Lyft have infamously pushed drivers to buy new cars by promising big returns that never materialized); to unforeseen criminal liabilities (what happens if an Airbnb guest turns your home into a brothel?); to fewer protections in the event of catastrophe (no access to programs such as workers’ comp). Sure, sharing-economy “entrepreneurs” can get a lot of upside, but there are a lot of hidden downsides, too.

Today’s Question: Do the downsides of the sharing economy outweigh the benefits?

  • Gary F

    Isn’t the real beef about this the government is losing power to control this stuff?

    Governments in power never like to lose any of their power.

  • PaulJ

    Isn’t there a “going concern” issue displayed when an entity starts to sell capital assets?

  • James

    The downsides don’t seem to exceed the upsides, but there are some issues. Many of which can and probably will be resolved by market forces.
    Whether or not ride-share drivers and passengers are insured seems to be a little ambiguous currently, so people are taking some risk. I’m surprised that some insurance company hasn’t come up with a product specifically for ride share drivers which takes the ambiguity away. Once the product exists, then passengers can ask to see proof of insurance. If they don’t see it, they can ride or move on.
    Whether or not “renters” pay enough to justify providing the service surely will be resolved by market forces. It is my understanding that ride-share drivers typically earn less than 50 cents per mile. My experience tells me that cars cost at least 50 cents a mile to operate (not every day, but if you properly account for depreciation, maintenance, tires, gas, etc.) I’m guessing that lots of drivers who think they are earning a decent living but then find out they are really just wearing out their cars fast, will stop offering the service.
    Same with renting a bedroom. Odds are that the revenue exceeds the wear and tear and out-of-pocket costs. But it may not be adequate compensation for the time spent cleaning, waiting, checking in, checking out, stressing out, etc. Again, if the value proposition is wrong, people will stop offering their rooms for rent.
    You know that old expression. “Things that seem too good to be true, probably are.” That’s where we are in this economy now. But market forces will deal with it.

  • JQP

    I think the biggest concern is that , IF , we do find a serious problem with them… WHAT is that ” free-rider” company doing now to save money to pay down ( correct or otherwise amelirate) future discovery of serious damage.

    I like the idea of new evolution in services, economy and growth… but.. looking back at any number of industries… there is some serious dang waste left behind by them that needed cleaning up and… the ENTIRE public , through TAXES , winds up paying the clean-up cost while rarely gaining the UPSIDE profits.

    or can we pass a law that says the Banks, Investors and Fianacial system has to cover 100% of the costs of damages for failed businesses. … and REALLY leave government out it…..

    • John Dilligaf

      Which banks? Which investors? “The Financial System” isn’t an entity that can be pinned down.

      All I really heard from your comment was – somebody besides me should pay in case anything goes wrong. I’m sure we all feel that way.