Foundation

The Sharing Economy Benefits Lower Income Workers

by Spencer Woody / /

Advances in technology have allowed individuals to access information, goods, and services that were once only available to a select few. The free market's propensity for spurring technological innovation is one of greatest socioeconomic equalizers. For example, just a decade ago the idea of easily calling a black car service to pick you up was the daydream of many, and the reality of only relatively wealthy city dwellers. Now, thanks to the sharing economy, more people have access to services and goods that were considered luxurious or exclusive just ten years ago.

The peer-to-peer sharing economy empowers individuals to easily access or offer transportation, lodging, grocery shopping, dog walking, and other services. Companies like Uber, Lyft, AirBnB, Rover, and Instacart filled a gap in the market that traditional industries left vacant. More importantly, these sharing economy companies not only provide needed services, they are also significantly beneficial to lower income individuals.  

A deeper look at the sharing economy reveals that it produces both economic and cultural benefits. By removing the prerequisite of ownership, the sharing economy vastly expands the number of people able to participate in the market. If a good or service can only be enjoyed if the consumer owns the item, then those without the means to purchase ownership are obviously excluded from engaging with that market. The sharing economy fosters opportunities for goods and services to be enjoyed without ownership and generally at a cheaper cost. Sharing rather than selling ownership enables those on the lower end of the economic ladder to have access to once elusive goods and services.

For example, thanks to the sharing economy and the competition it creates in certain markets, vacation and travel options become more plentiful and cheaper than ever, thus making trips to different places accessible to individuals who could not afford the more traditional market options for transportation and lodging.

Moreover, the sharing economy has helped to reduce transaction costs by easily connecting peers with peers without the presence of a middleman. As Jared Meyer, a senior research fellow at the Foundation for Government Accountability, notes in his book, How Progressive Cities Fight Innovation, the platform created by sharing economy companies and applications (apps) is significantly more effective and cheaper than walking door-to-door looking for hedge trimmers to borrow or hitchhiking for a ride.

Despite the attempts of more liberal policymakers and politicians to paint the sharing economy as something that benefits the rich at the expense of the poor, the research and the data does not support such claims. According to research by Samuel Fraiberger and Arun Sundararajan, “[The study’s] results also suggest that these below-median income consumers will enjoy a disproportionate fraction of eventual welfare gains from this kind of ‘sharing economy’ through broader inclusion, higher quality rental-based consumption, and new ownership facilitated by rental supply revenues.” Fraiberger and Sundararajan’s research goes farther and suggests that even with different variables, those below-median income are positively impacted by the sharing economy across almost every measure, including when they function as a consumer or a seller in the market.

Regulating the sharing economy does little to protect consumers. It results in increased costs, while also excluding people from engaging with the market. Just as the sharing economy disproportionately benefits below-median income individuals, over-regulating the sharing economy disproportionately hurts below-median income individuals. In other words, the poor benefit the most from the sharing economy and would be hurt most by undue regulations.

It can also be noted that there is a social and cultural benefit that develops from the sharing economy, especially house-sharing applications. By expanding the amount of available housing via the sharing economy, travelers can lodge in areas that may have a lot of culture and history, but may not be considered “tourist destinations.” Rather than staying in the District of Columbia, travelers can stay in cheaper options in historic neighborhoods and cities in the surrounding area, and learn from locals what life is like in the DC Metro area.

Policymakers should applaud the economic and social benefit that the sharing economy has produced. When the market fills in gaps and better reaches economic and social goals than government programs, governments should not seek to punish them. Congress and states should not begin to legislate and regulate the sharing economy in search of a problem. If government does try to regulate the sharing economy, taxpayers should fight efforts that prevent individuals from using their private property, whether it is their spare bedroom or a seat in their vehicle, to create value for consumers, especially when those consumers are the most in need.


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