July 01, 2015

Sharing Economy

Numerous articles, publications, and interviews are talking about the sharing economy. A testament to the popularity of the trend is the fact that the term “sharing economy” was just recently introduced into the Oxford English Dictionary.

In general, the sharing economy, also known as the on-demand economy, refers to companies that let users summon workers via smartphone apps to handle a wide range of services including rides, cleaning, chores, deliveries, car parking, and more. It includes many of the hottest companies today including Uber, Lyft, Postmates, and TaskRabbit. Almost uniformly, the workers for these companies are independent contractors rather than salaried employees.

On-Demand Workers

The status of workers as independent contractors is a main point of contention in a recent surge of lawsuits in which workers are filing for employee status. A recent survey conducted by Stanford students found that many on-demand workers want to have paid health insurance, retirement benefits, paid time off, and other perks normally reserved for full-time workers. Respondents also expressed interest in chances for advancement, education sponsorship, and human resources support. 

The survey found that on-demand workers earn a median of $18 per hour before expenses, and the most lucrative jobs are those of chauffeuring passengers through Uber or Lyft and passive income through Airbnb, followed by deliveries and manual labor. These wages top minimum wage laws in many cities.

Average Hourly Wages for On-Demand Workers

Average Hourly Wages for On-Demand Workers

Source: Stanford

The survey found that flexibility is a key attraction for people to begin work as an on-demand worker, with three-quarters of respondents citing it as the reason they started.

Attrition is common, with half of the respondents planning to stop doing contractor work within a year. Only 29 percent of respondents said that they planned to continue for three or more years, and many said they would only continue if their earnings increased.

Longevity in Industry

Longevity in Industry

Source: Stanford

Workers say their top pain points are finding enough work, optimizing schedules to maximize earnings, and understanding tax or legal obligations.

Top Pain Points for On-Demand Workers

Top Pain Points for On-Demand Workers

Source: Stanford

The Growing Sharing Economy

Both crowdsourcing and the sharing economy are driving huge change and disruption in business today. Uber and Airbnb are just two of the most obvious examples, having grown into billion dollar companies through harnessing the power of the crowd.

According to a new PriceWaterhouseCoopers (PwC) survey, nearly 60 percent of adults say that “access is the new ownership.” And 72 percent said they expect to become part of the sharing ecosystem in the next two years. Almost half of the 1,000 respondents surveyed said they were familiar with the sharing economy and cited top attractions of it as affordability (86 percent), community building (78 percent), and convenience (43 percent).

Another finding from the PwC report was that social responsibility is a bonus byproduct, with 76 percent of respondents saying that the sharing economy is better for the environment. Additionally, 63 percent consider the sharing economy to be more fun than traditional interactions with brands, as it allows consumers the ability to make purchases based on recommendations from trusted sources.

Defining the Sharing Economy

The terms “sharing economy”, “peer economy”, “on-demand economy”, “collaborative economy”, and “collaborative consumption” are used interchangeably, but the definitions actually differ slightly.

Collaborative Economy: An economic system of decentralized networks and marketplaces that unlocks the value of underused assets by matching needs and supply, in ways that bypass the traditional middleman. Examples of this include Etsy, TaskRabbit, and Kickstarter.

Sharing Economy: An economic system based on sharing underused assets or services, for free or for a fee, directly from individuals. Examples include Airbnb and Skillshare.

Collaborative Consumption: The reinvention of traditional market behaviors through technology that take place in ways and on a scale not possible before the Internet. Examples include Zipcar, eBay, and ThredUp.

On-Demand Economy: Platforms that directly match customer needs with providers to immediately deliver goods or services. Examples of this include Uber and Instacart.