The “Sharing Economy” Is the Problem

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The “sharing economy” sure has a nice ring to it, doesn’t it? As the saying goes, “sharing is caring.”

Through Uber, the sharing economy’s poster-child, thousands of drivers have turned their personal cars into money-making vehicles. Homeowners internationally have earned extra cash by using another popular sharing service, AirBnB. These companies’ ads are filled with smiling people, caring about each other and just wanting to do good. The idea of the sharing economy also comes at the perfect time. Since the Great Recession, more and more people have been looking for economic alternatives, ones that build off of mutual aid, rather than greed and the “it’s everyone for themselves” philosophy. Likewise, the recession pushed significantly more segments of the American workforce into positions where they must string together part-time gigs and find alternative ways to bring in revenue. So a sharing economy, where people can use what they already have to help others, while making some bonus money for themselves, sounds like a perfect solution.

It’s unfortunate then that these companies and the misnamed “sharing economy” are really just fronts for millionaires and billionaires to opportunistically ride off the backs of everyday people, while also exacerbating many economic inequalities. Avi Asher-Schapiro explains the truth in Jacobin:

The premise is seductive in its simplicity: people have skills, and customers want services. Silicon Valley plays matchmaker, churning out apps that pair workers with work. Now, anyone can rent out an apartment with AirBnB, become a cabbie through Uber, or clean houses using Homejoy.

But under the guise of innovation and progress, companies are stripping away worker protections, pushing down wages, and flouting government regulations. At its core, the sharing economy is a scheme to shift risk from companies to workers, discourage labor organizing, and ensure that capitalists can reap huge profits with low fixed costs.

There’s nothing innovative or new about this business model. Uber is just capitalism, in its most naked form.

It’s Anything but Sharing

Since when has paying for something ever been the definition of sharing? In The Nation, Mike Konczal and Bryce Covert make the case that selling a service through an app comes nowhere close to qualifying:

Cutting through the marketing BS of Silicon Valley is a good goal for everyone, but the left in particular should debunk its definition of a “sharing economy.” Sharing, in this case, doesn’t mean “lending someone the use of something for free.” It also doesn’t match the Silicon Valley description of creating a large number of small-scale entrepreneurs or independent business owners.

Instead, what we see is the creation of a low-wage workforce under the ownership of tech companies. At Uber, this arrangement means that drivers have to pay for their own cars, maintenance and gas, while management sets the rates and terms of their labor, taking a hefty cut in the process. A crucial first step for reform is to get these drivers recognized as actual workers, with proper rights and proper insurance.

Uber has actually become so dominant that it is valued as a more than $40 billion company. And you don’t become worth $40 billion by sharing and caring. You become worth $40 billion by ripping off the people who work for you.

To extrapolate, in return for putting their own vehicles to work, Uber’s drivers can receive as little as $1.21 per mile. As the IRS figures, operating a car is a 56¢ per mile expense, on top of which Uber collects 20% of the fare. By the time all these expenses are accounted for, Uber drivers can be making much less than minimum wage. Uber drivers often complain that they have to be on the road constantly in order to make anything resembling a reasonable income. If it sounds unfair, it’s because it is – but drivers can’t do anything about it. And as Mary Hansen explains in YES! Magazine, “Taxi and Uber drivers are independent contractors, not employees. As such, they are not guaranteed a minimum wage or other labor protections, nor can they unionize.”

This isn’t just a problem for drivers, though. By being a multi-billion dollar industry, these sharing economy corporations are pushing our already exploitative economy in a worse direction. Jeff Spross explains it in The Weekly:

Another complaint is more subtle, but more frightening: that these technologies are exacerbating inequality and driving us towards a “servant” economy, where large pools of poorly paid and economically insecure workers will spend their lives providing all manner of petty services for the well-heeled elite.

Pascal-Emmanuel Gobry laid out the grim logic succinctly: The efficiency gains of connecting workers to customers via the internet applications will drive down prices and thus incomes, while the new profits created will all get sucked up by the small group of Silicon Valley companies that created the platforms, along with their shareholders.

There’s a simple phrase for this: extracting wealth. And that’s exactly what these sharing economy corporations are so good at doing. They belong with the old, extractive economy but they’re trying to pass as part of the new, generative economy

It’s no wonder, then, that Uber drivers in LA, San Francisco, Seattle, New York, and elsewhere have protested. Their complaints join a chorus of voices already upset about their industry being disrupted (a term the tech world loves) by a company offering low wages, stripping away worker protections, and bypassing regulations – all while stuffing the wallets of Silicon Valley executives.

It’s Only Getting Worse

It’s important to note that this article’s authors have used Uber and AirBnB – on more than one occasion, in fact. And we will probably use them again.

We admit our hypocrisy to bring up this point: articles criticizing Uber, AirBnB, and the sharing economy at large often seem to regularly miss that the traditional companies they compete against can be quite awful in their own right. Cab companies can be one of the most exploitative industries out there. Hotels and motels are also extremely abusive to their workers. You can’t just take a cab instead of an Uber and feel good about your decision, or vice versa.

Yet almost every time we’ve taken an Uber, we have asked the drivers how they like driving for the service. Over time, we’ve noticed that the pendulum has swung increasingly in the direction of people expressing that they are simply not happy. One driver in particular that we spoke to was incredibly open about the reasons for his dissatisfaction. Let’s call him George. George explained that he had been driving for Uber for around a year. But throughout that year, Uber had cut how much it cost for passengers to ride with the service. The company framed this as a pro for the drivers: it would get more people to use the service, which would result in more rides, which would result in more money. Lower costs equals higher volume, that sort of thing. Which sounds nice, but George said Uber also started taking a higher cut of the drivers’ pay while simultaneously no longer waiving fees they’d originally waived to entice new drivers into their service. Worst of all, Uber did this with absolutely no warning – one day drivers were making a certain amount, the next day they were making way less. So Uber was cutting the costs of their service but placing the entire burden of that cut entirely on the drivers.

This one example points towards a larger trend: as these sharing economy companies become greater juggernauts, they care less about the people who are actually doing the work and who actually own the assets that their businesses depend on.

What we need to do is stop the shift towards a world where more and more people must rent out their own resources simply to make a living, and we must work towards a system where it’s not about choosing one type of exploitation over the other.

The good news is that this paradigm shift is already underway.

The Alternative: The Cooperative Economy

Let’s take a minute to clarify that we do not put any blame or ill-will at the feet of most of the people who drive for Uber, do odd jobs off of TaskRabbit, rent out their homes on AirBnB, and so on. People largely are doing this because they need to make more money, and these services help them do just that. The problem is that the users are the people creating all of the wealth, have all of the assets and resources, are taking on most of the burden, and do pretty much all of the actual work. Yet a significant portion of the capital that they create is flowing out of their hands and their communities and to investors, stockholders, and Silicon Valley executives. At the same time, these executives have inordinate power over everyone who uses their “sharing economy” services, making it easy to exploit the laborers and the producers, who in turn have almost no recourse of their own.

These extractive and unfair practices are a far cry from the actual kinds of sharing that generates community and connection. Sharing itself, of course, is a good thing. In fact, even flexible labor arrangements can have a place in a vision for a new economy. As sharing activist Mira Luna puts it, “If greed was a major characteristic of the dying economy, sharing is a key element of the blueprint or DNA for the new economy.”

So people should be able to use a service like AirBnB or Uber. But they should also own them cooperatively.

A cooperative is a business or organization that is democratically owned and governed by its membership. This membership can be comprised of workers, consumers, producers, and a combination thereof. (For a greater in-depth explanation and stories of people who have started cooperatives, watch this short, free, online documentary that the authors of this article helped create.)

Cooperatives exist all around world, as well as in almost every sector. In the bad times, members of cooperatives collectively share the burden. In the good times, members of cooperatives collectively share the benefits. They also democratically govern the organization – one member, one share, one vote. In short, cooperatives are means to voluntarily redistribute the wealth amongst the laborers and the producers. Every dollar possible isn’t squeezed out for the benefit of outside investors; instead the profit produced is viewed as a way to benefit the overall membership and their communities. Cooperative ownership also allows people to pool together their money and resources, to help them collectively start businesses they may not otherwise be able to on their own.

Already, cooperatives are breaking into the domain of the sharing economy – in theory and in practice – and many of the people leading the charge are those dissatisfied with what both the traditional economy and the sharing economy had to offer them. Here’s Hansen again, telling the story of Wolde Gebremariam in YES! Magazine:

After [Gebremariam] moved to Denver from Ethiopia in 2006, he worked minimum-wage jobs at the baggage claim in the Denver International Airport, and then at a nursing home. Though he enjoyed working with seniors, he wanted to go back to school and study pharmacy. The flexibility of driving a cab seemed like the right way to go. “I could work Friday, Saturday, and Sunday driving,” he says. “Then, I [could] go to school full time.”

That’s how he thought it would work, anyway. But the reality turned out to be more difficult. In 2012, he spent six months driving for a company called Metro Taxi, with a lease that required him to pay $800 per week for the use of the vehicle, dispatch, and other services. The need to earn that much every week, in addition to what he needed to live, pushed him to drive 10- or 12-hour days, seven days a week.

Gebremariam wasn’t finding the flexibility he was looking for, and turned to Uber instead. But, after driving for the company for a few months, Gebremariam says it was more of the same. “They are taking like 20 percent of our income,” he says. “We have to be on the road all the time.”

Gebremariam isn’t just complaining about it. Instead, he and 644 other drivers are on a mission to form a new taxi company that will be both worker-owned and unionized. The new co-op, Green Taxi, will have a fleet of hybrid or high-efficiency vehicles, and will offer a ride-hailing app.

As Jay Cassano makes clear in Co.Exist, this is part of a larger movement. Green Taxi was actually inspired by another cab co-op in Denver.

Rather than pay for expensive leases from traditional taxi companies or give up a portion of their earnings to startups like Uber and Lyft, many taxi drivers are banding together to form their own taxi cooperatives.

In these co-ops, each driver is an equal owner of the business, with a share of the profits and a voice in how the business is run. Denver, Colorado has one taxi co-op, Union Taxi, founded in 2009 with about 250 driver-owners. Now cab drivers in the city are already talking about setting up a second taxi co-op.

“We’re actually seeing a mini-explosion of interest in taxicab co-ops,” says Melissa Hoover, executive director of the Democracy at Work Institute. “These groups are responding to the same weaknesses in the industry that Uber is, but from a perspective centered around bettering workplace conditions, worker control, and compensation rather than ‘disrupting’ the model to benefit investors at the expense of workers.”

Drivers in a cooperative get to collaboratively establish their pay, the hours they work, and their working conditions – no small matters in an industry that employs many recent immigrants.

Of course, while the explosion of worker-owned cab companies are new, their existence is not. The Union Cab of Madison Cooperative, a worker-owned co-op of more than two-hundred members, has been around since 1979 – proving that these co-ops can be in it for the long haul while also revolutionizing traditionally exploitative industries. Union Cab was actually born out of a strike, when cabbies decided to fight for better pay and working conditions. But rather than negotiate with the aggrieved drivers, their employer chose to simply shut down the business. Shortly thereafter, several of the now out of work drivers decided that they could run the business better together – and also for the benefit of all the workers (dispatchers included!).

The cab industry has actually regressed in some ways since 1979; drivers are often no longer considered employees but rather independent contractors (like with Uber). Generally speaking, at a normal cab agency, the company earns their income by renting the car out to the drivers. But what this means is that if a cab driver has a bad day, they may not earn enough fare to pay back their lease and so they may end up owing the company money.

For the worker-owners at Union Cab, the differences couldn’t be more significant. The co-op owns all of the assets and drivers earn a commission off their fares – so if they give a ride, they make money. Also, because the drivers own the company, they split a share of its profit at the end of every year. What’s more is that Union Cab provides health insurance to all of its drivers, which is virtually unheard of in the industry. Finally, no one worker is allowed to make more than 2.5 times the amount of any other worker. (You can read more about the Union Cab difference, here.) Why is this the case? Well, it’s because the workers, who are also the owners, voted to make it happen.

This is a complete contrast to the way typical cab companies and the executives of ride-sharing services run their businesses.

In addition, the argument has been made that Uber itself can and should be turned into a worker-owned cooperative. Again, Konczal and Covert in The Nation:

But… what exactly are the capitalists at Uber contributing to the company? Almost all of the actual capital is already owned by the workers, in the form of cars that they pay for and maintain themselves. And these workers labor individually, doing the same tasks, so there’s no need for a management class to control their daily operations. The capital owners maintain the phone app, but app technology isn’t the major cost, and it’s getting cheaper and easier by the day. […]

But a transition to workers’ owning their firms is necessary, economically smart, and one way for workers to gain power in the digital age. Because you know what worker-run firms do? Share.

The transition of an online company into a cooperative isn’t unfounded, either. As Janelle Orsi argues in Three Ways to Put Tech Platforms into the Commons, it’s happened before. Here she imagines how AirBnB could function as a cooperative while also explaining how another tech company already made the transition:

Co-bnb, as I’m calling it, could be an online marketplace owned and democratically controlled by the people who rent space to travelers. You can call it a “freelancer-owned cooperative,” a term possibly coined by Josh Danielson, founder of Loconomics.com. Loconomics just bought out its shareholders and became a cooperative corporation to be controlled by the freelancers who use the platform to offer services such as babysitting, home cleaning, and dog walking. The mission of Loconomics is to enhance the viability of freelance work, a task most reliably led by freelancers, themselves.

Soon, 40 percent of the US workforce will consist of freelancers, many of whom will cobble together income from multiple sources. We can’t allow companies like Airbnb, Uber, and TaskRabbit to take 5 percent to 20 percent of freelancer earnings. If those companies remain the gatekeepers of critical work opportunities, they’ll continually adjust search algorithms, fee structures, and terms of service to extract more out of workers.

So we don’t need to shut down platforms like Uber and AirBnB. We just need to either out-cooperate them, or, better yet, turn them into cooperatives. Because in the sharing economy, people rent out their labor and resources for the overall benefit of billionaires. But in the cooperative economy, people pool their labor and resources for the overall benefit of each other.

It’s time to forget the sharing economy. The cooperative economy is the one challenging the tech industry and changing people’s lives for the better.