“Uberization” and “New” Economy Pose Old Dilemmas

From New York City Mayor Bill de Blasio to presidential candidates—policy makers and analysts have been talking about the “uberization” of the economy as if it were a new phenomenon. Uber, TaskRabbit, Instacart, AirBnB, and RelayRides are just a few of the companies that make up what is increasingly being called the “sharing economy” (or, relatedly, the “gig economy”), in which technology facilitates and monetizes the sharing of particular tasks (“gigs”), services, and goods. This emerging sector has become popular and controversial, with critics and proponents debating the trade-offs between the regulation of the formal economy, on the one hand, and the flexibility and innovation of these emerging sectors within the informal, less regulated economy, on the other.

While New York City Mayor de Blasio tried (unsuccessfully) to reign in Uber’s expansion in the Big Apple this summer, the sharing economy has drawn comments more broadly from both democratic and republican presidential contenders. As a pioneer in what has been touted as a “new” economy, Uber itself has become iconic, as it has entered more than 60 markets (ranging from San Francisco to Berlin to Tokyo). According to Reuters in 2014, leaked financials indicated that the company was generating $200 million a year in revenue beyond what it pays to drivers. Meanwhile, Uber is in court fighting against drivers who want to be classified as “employees” – rather than contractors – and who want greater benefits that go along with being considered a regularly employee.

Democratic presidential candidate Hillary Clinton recently criticized Uber for not giving workers benefits, commenting: “Many Americans are making extra money renting out a spare room, designing a website ... even driving their own car. This on-demand or so called ‘gig’ economy is creating exciting opportunities and unleashing innovation, but it’s also raising hard questions about workplace protections and what a good job will look like in the future.” Republican presidential candidate Jeb Bush, on the other hand, made a point of hailing an Uber in San Francisco this summer to demonstrate his support for the ride-sharing firm and the on-demand economy, in which app-driven services are seen as an example of unfettered market activity that is free of the intrusive, cumbersome hand of government regulation.

The sharing economy began to grow in popularity during the financial crisis—a time when people were looking for new ways to both save and make money. Obtaining goods and services via the sharing economy has become cheaper and easier than traditional options. It has allowed renters and sellers to monetize sharing activities, like renting out a room, sharing a car ride, or selling personal shopping services, and created opportunities for people to supplement their income or stitch together a full-time income through part-time work. Yet, this emerging economy is essentially rooted in the informal sector and lacks government oversight and labor protections found in the formal economy.

What is missed in the broader debate is that the conundrums posed by these trade-offs are not new. In fact, these dilemmas demonstrate what has been an old quandary experienced disproportionately by women. Around the world, women have long been a dominant force in the informal economy, and the sharing activities that are a part of the informal sector. Women run day care out of their homes, provide cleaning services to neighbors, and car pool to soccer and other after-school events. From nannies to domestic workers to soccer moms, women in the informal sector hold a range of paid and unpaid “jobs.” These jobs, like those in the growing sharing economy, are often unregulated and leave workers vulnerable. Women are easily exploited and can be as quickly fired as they are hired, lack formal work contracts, and do not have access to employee protections like health insurance. They are also often paid well below a livable wage–some are not even paid at all.

What is new is that with new communication technologies and social media, entrepreneurs in the sharing and gig sectors can reach more customers – and more rapidly – than ever before, with a simple swipe of a smart phone. In the “new” sharing and gig economies, which are dominated by Silicon Valley start-ups, companies have resisted providing workers with many of the protections found in the formal economy including health insurance, retirement benefits, or a guaranteed wage.

What lessons can we learn from the experiences of women around the world? Women working in the “informal economy” provide services and goods at a lower cost. This means that making a livable wage depends on how many jobs they can complete or how many clients they receive. Income and availability of work is less predictable, even as work schedules are more flexible. The risk is that clients and jobs can disappear quickly, leaving workers unemployed with none of the protections or stability of the formal economy. The informal economy – and the women who work in this sector – is an important but neglected part of the global economy. Economic activity from the informal sector is not included in common economic indicators like gross domestic product (GDP).

The United Nation’s proposed post-2015 sustainable development goals #8 calls for a number of “practical and measurable targets” concerning labor protections as a way of achieving its aim to “promote sustained, inclusive, and sustainable economic growth, full, and productive employment and decent work for all.” As the debate over the “uberization” of the economy continues in New York City and nationally in the U.S. presidential race, policy makers might look to the global debate – and the long experience of women in the informal sector – to determine how all workers can benefit from basic, humane labor protections, while consumers can continue to enjoy the advantages of greater cost-sharing, flexibility, and innovation which the informal, sharing, and gig economies provide.