The Sharing Economy Needs a Public Option

Photo credit: jonathan mcintosh / Foter / CC BY-SA. Article cross-posted from Al Jazeera America.

So-called sharing-economy companies such as Uber, Airbnb, and Task Rabbit are posing policy headaches for governments around the world. Their argument that they should be exempt from existing regulations because their services are ordered over the Web does not make much sense, but it provides a fig leaf for politicians seeking campaign contributions from these highly capitalized newcomers.

For those who have missed the hype, “sharing economy” refers to a wide variety of companies that use the Web to connect consumers and providers. While there is no reliable data on its size, in part because it is not well defined, Airbnb now boasts far more room listings than Hilton or Marriott, and Uber has quickly grown to be the largest taxi service in the world.

Part of the response to the innovations associated with these companies should be to modernize regulations. It is reasonable to regulate taxi services in ways that ensure that cars are safe and drivers are competent and responsible. It is also reasonable to regulate rented rooms to ensure they are not fire traps. Similarly, both should be regulated in ways that ensure access to the handicapped and prevent discrimination. In addition, employees in these companies should be covered by workers’ compensation and protected by minimum wage and overtime rules.

These efforts will require a rewriting of existing regulations, many of which were put in place to protect the existing companies in the industry rather than serve a legitimate public purpose. This sort of modernization is clearly a doable task from a technical standpoint, although sharing-economy companies will undoubtedly use their money to try to block the imposition of rules that put them on an equal footing with their old-fashioned competitors.

In addition to a level-the-playing-field approach, we can also treat the sharing- economy companies to some new competition: a public option. The idea is that governments can set up public sites that would provide the same services as the sharing economy companies. The difference would be that the public sites would cut out the middleman. They would be set up to benefit customers and service providers, with the government charging only the fees necessary to cover costs.

For example, a taxi service could allow for drivers to register in the same way as they do for Uber and Lyft. Customers could use an app to order their services just as they do with Uber and Lyft. The difference would be that the public service would likely take out a lower share of the fare than its for-profit competitors. If its design were effective, only drivers who felt like being ripped off would work for Uber and Lyft.

Any city with a substantial progressive base should be able to take the initiative to set up its own public sharing-economy system.

In addition, a public service could directly apply standards to providers as a condition of participating. Cab drivers would have to meet licensing standards, and their cars would have to pass inspection. And they would have to arrange insurance for both car and driver. A public version of Airbnb could require that potential renters had their rooms inspected for fire safety and provide copies of leases or condo agreements to ensure that these were not being violated by renting out rooms or whole units.

A nonprofit in England (with the unfortunate name Beyond Jobs) has established an open-source program for many of these purposes. This system may not be fully up to the job, but it should provide a basis from which to work.


Photo credit: cogdogblog / Foter / CC BY-SA.

In addition to cutting out the middleman and ensuring that necessary standards are met, a public service could provide other important benefits. Most notably, it could ensure that customer reviews are the property of the service provider. As it stands, the reviews are typically the property of the company.

This means if an Uber driver has established himself as a safe and reliable driver, he can’t use his recommendations with another service. The same would be the case with someone renting out a room or apartment through Airbnb. This issue is perhaps most important with labor-service providers such as Task Rabbit. If workers have established themselves as reliable electricians, plumbers or child-care providers, they should be able to carry their records with them. While Task Rabbit and comparable services may not allow such transfers, a public system could assure workers of transferrable recommendations.

Another great feature of the public option route is that it can be implemented at the local level. There is no need to worry about an intransigent Congress or even hostile state legislators. Any city with a substantial progressive base should be able to take the initiative to set up its own public sharing-economy system. Such systems could be linked among cities — which could be especially helpful in the case of competing with Airbnb.

Naturally, there will be problems in setting up such systems, as is always the case in establishing something new. But there is no reason that a public system cannot be at least as efficient as the private networks now operating. After all, the administrative costs of the public Social Security system are less than one-tenth as much as the costs of private retirement accounts.

Rather than try to squash sharing-economy companies, which would almost certainly not be possible, in any case, a far better strategy for progressives is to take advantage of the innovations they offer and restructure them in ways that ensure that the public and service providers all benefit. This can be done, if we are prepared to try some new tactics.

 

Dean Baker is co-director of the Center for Economic and Policy Research and author, most recently, of The End of Loser Liberalism: Making Markets Progressive.

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