i3 | March 27, 2017

Welcome to the New Economy

Gary Arlen
Graphic image of people

Sharing, peering and gigging: digital technologies are reshaping the world of work.

After Barbara retrieved her luggage at Las Vegas' McCarran Airport, she hustled up an elevator to the “Rideshare” level of the garage, where an expansive fleet of Uber and Lyft drivers were being matched with their CES-bound riders. For Barbara, the first destination was an Airbnb home that she had reserved for the duration.

In other words, even before CES 2017 began, Barbara was relying on the app-driven “sharing economy” for her travel experience. It’s part of the “gig economy,” “crowdbased capitalism,” “peer-to-peer markets,” “collaborative consumption” or even the “gig-on-demand” (GOD) resources. Whatever you call the massive overhaul in the services industry, app- and platform-driven services are rearranging the way we travel, work, eat and conduct daily activities. By some reckonings, the boom in sharing economy options is a natural offshoot of the thriving e-commerce system.

Soon, Barbara and her peers may not even need street-based transit. A week after CES, Europe’s Airbus Group (known for its big jets) confirmed plans to begin testing by year-end a prototype “Vahana” self-flying vehicle (drone). The autonomous flying machines for individual passenger and cargo transport were unveiled in 2016 by Airbus’s A3 (“A-cubed”) Silicon Valley advanced technology unit. Airbus envisions consumers will eventually book the “Urban Air Mobility” vehicles through an app, just as they now do for automotive ride-hailing services. There are reports that Airbnb wants to expand its role in the travel business by developing a flight-booking system to compete with Priceline or Expedia. The value: one-stop shopping for an entire trip, but without the traditional travel agency.

These technology leaps come as the regulatory roadblocks and financial uncertainties melt away, albeit with some resistance. Collectively, recent developments put the sharing economy on its way to fulfilling the upbeat predictions of its supporters. PricewaterhouseCoopers says that by 2025, shared services will generate $335 billion worldwide revenues in five major sectors (lodging, transportation, staffing, music and lending), up from about $15 billion in 2013. That future figure would make “sharing” about equivalent to the “traditional rental sector” in those categories.

A new Federal Reserve Board report on “peer-to-peer markets” identifies the benefits shared services offer, adding home care, shopping and other activities to the initial lodging and transportation sharing offerings.

“Online P2P platforms have the potential to increase quality of life by reducing transaction costs for many daily activities,” according to the Fed report. “This could be particularly valued by time-constrained households and women, who traditionally undertake many of these activities for their families.”

Other studies reinforce the rapid adoption of shared economy services. CTA’s report Consumer Perceptions and Expectations for the Shared Economy found that 91 percent of adults in major U.S. markets are aware of ridesharing and/or homesharing – an extraordinarily high awareness for relatively young services. CTA’s report identified that consumers recognize major benefits as greater competition, income-earning opportunities and the options to weigh ownership versus access.

Most significantly, 43 percent of respondents who used sharing services perceive them as “a good value for the money” compared to nine percent who believe that “traditional” methods are a good value (32 percent said that “good value” applies equally to both approaches).

The Pew Research Center has identified a “small but active group of ‘super users’” who are plugged into six to 12 of the evolving on-demand online offerings, including clothing rentals, short-term shared office space, grocery delivery and online purchases of handmade or artisanal products in addition to ride- and homesharing. About seven percent of Americans fall into this “super user” cluster, Pew says.

“Most notably,” the Pew study says, “they run counter to the common assumption that men are always the first to use new technologies.”

“Our survey found that 62 percent of these super users are female,” Pew says. Moreover, Pew found that among the super users, “technological advances of the shared and on-demand economy seem to supplement – rather than replace – sharing behaviors in the traditional, informal sense of the word.”

Beyond Travel: Mom Tech

Increasingly, the sharing economy involves app- and platform-based services that offer digital alternatives to traditional methods for finding a plumber, a wedding planner or a personal health provider. Since so many apps include functions such as cleaning, meal preparation and home handiwork that millennials expected when they lived at home, the category is sometimes called “mom tech.” Other ventures often lumped into the “sharing” category look more like digital versions of established local services but without needing a friend or neighbor’s recommendation.

For example, Care.com, which calls itself “the world’s largest online marketplace for finding and managing family care,” matches families with caregivers who can handle child care, senior care, pet care, short- and long-term home health assistance and other services. The 10-year-old company operates in 18 countries, supplying 9.1 million caregivers on a short-term basis to nearly 12 million families.

Thumbtack lists 1,100 services its craftsmen can provide, from furniture assembly, carpet installation and TV mounting to Yoga instruction, strength training, massage therapy, meditation instruction and wedding planning. It allows potential customers to use an app to describe the service needed then receive up to five custom quotes. Then even payment arrangements are completed through the app.

Similarly, TaskRabbit, which uses the slogan “Revolutionizing Everyday Work,” lists among its achievements “10,000 hours waiting in line so you don’t have to” and “350,000 hours running local errands.” Hello Alfred, founded in 2013, sends a “personal butler” to members’ homes each week to perform on-demand and local errands.

Blue Apvron delivers five million meals per month on a subscription basis. The company’s meal kits of precisely portioned ingredients include instructions needed to cook exactly three dinners a week for couples or families of four.

Economy Services: Finding What Works

Like many disruptive technologies, sharing economy services have faced growing pains. Nearly a decade ago, neighborhood sharing ventures based on apps rather than a note pinned to a community bulletin board began popping up. Backed by rhetoric such as “Everyone owns a power drill but uses it only about 15 minutes in its entire lifetime,” startups looked for ways to spread out usage. As the names “Share Some Sugar,” “Neighborhood Goods” and “Thingloop” suggest, the high-minded concepts attempted to maximize ultra-local sharing.

Several services found that the number of residents who were willing to lend out their tools far exceeded the number of neighbors who were willing to pay to use them. Analysts concluded that the most successful ventures (so far, at least) were ones that matched bigger needs and didn’t require follow-on efforts, such a bringing back a power tool after you’re done using it.

In his report Labor Law and the Gig Economy, Kennedy asks, “Why stick with an antiquated system?” and points out that “independent contractor status is fundamental to the profitability” of gig-working operators.

Kennedy concludes that Congress and other policy makers should “amend each of the labor laws to make them more relevant to the growing and constantly shifting labor markets.”

His viewpoint underscores the efforts to revamp the “agency model,” in which jobs ranging from carpe try to accounting to home health care are based on some form of middleman assignment process. By various measures, this set-up has meant that the agency took up to 75 percent of users payments, often barely leaving the worker with minimum wage levels. New online marketplaces or registries are stimulating an increase in the number of workers, higher wages and a reduction of turnover in some contracting categories, according to a study by the National Employment Law Project.

Pew calculates that eight percent of Americans earned money from the online “platform economy” last year (plus another 18 percent who used the internet to sell personal property online.) The latest Freelancers Union survey tallied that 55 million Americans did project work last year, representing 35 percent of the total U.S. workforce.

“The freelance workforce is the fastest-growing component of the economy,” explains Louis Hyman of the Cornell University School of Industrial and Labor Relations. “Figuring out where it is going is the most pressing question of our digital age.”

According to the study, technology is fueling the growth of freelance work. “Seventy-three percent of freelancers said that technology has made it easier to find freelance work – up four points since 2014,” according to the Freelancers Union analysis. “Sixty-six percent of freelancers said the amount of work they have obtained online has increased in the past year.”

In a report on the “gig economy,” the McKinsey Global Institute concludes that evolving digital platforms are creating “large-scale, efficient marketplaces that facilitate direct and even real-time connections between the customers who need a service performed and the workers willing to provide that service.”

The McKinsey report says the “tangible economic benefits” of the gig economy, including greater availability of services and improved matching better fulfills consumer and worker needs. “Digital platforms can amplify all these benefits through their larger scale, faster matches, seamless coordination, and richer information signals, enabling trust,” they conclude.

Their final point: “digital technologies will continue to reshape the world of work.”

These local services are generating a vast array of full- and part-time employment. “This whole phenomenon is best viewed as part of a long historical process that adds capital to labor,” explains Joe Kennedy, a senior fellow at the Information Technology and Innovation Foundation. Acknowledging criticism about some labor practices, including insurance and other benefits in the gig economy, Kennedy points out that such contracting work “has been growing for two to three decades” and that the new platform-based approaches are creating “a more efficient matching system than relying on word-of-mouth or advertising.”

Encouraging Government Transit Sharing

On day two of the 115th Congress, U.S. Representatives Will Hurd (R-TX) and Seth Moulton (D-MA) re-introduced the “Modernizing Government Travel Act,” which encourages government employees to use ridesharing apps, bikeshare programs “and other innovative transportation options” for official business. On day six, the House unanimously adopted the bipartisan bill, which went to the Senate for approval. The House adopted similar legislation last year.

“The option to summon a ride via smartphone gives millions of federal employees greater flexibility, saves taxpayer dollars, and allows federal agencies to catch up with the private sector,” said Hurd, who chairs the House Subcommittee on Information Technology. Moulton characterized the bill as one that “ensures innovative and cost-effective modes of transportation are available to the millions of federal employees.”

CTA President and CEO Gary Shapiro hailed the legislation as an endorsement of sharing economy platforms that “boost the U.S. economy, create new job opportunities, save money for consumers and provide safe transportation options.”

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