Thursday, February 5, 2015

The Share Economy

Former Secretary of Labor Robert Reich on the Share Economy

"The euphemism is the “share” economy. A more accurate term would be the “share-the-scraps” economy."
Robert Reich

     This morning I had a conversation with a friend, a student pursuing a master's in environmental engineering, about how he was about to start working as a freelance driver for a tech company in order to make some money around his schedule. With no minimum number of weekly hours necessary to maintain his partnership with the firm, he can prioritize his education over work when he needs to, and ramp up his workload when he has more time or needs more money.
      For someone like my friend, the benefits of this type of work are pretty obvious--even opposed to traditional part-time employment, he has more control over his labor hours. Perhaps a few years ago he would've had essentially the options to seek full-time employment, (extremely difficult to balance with graduate school), part-time employment (lower pay, more compatible with pursuing higher education), or going unemployed, supporting himself either through loans or the beneficence of family. Freelance type work, especially of the sort that can be neatly divided into discrete, hour-long tasks, fills in the gaps between unemployment/part-time/full-time, and since hours do not need to be agreed upon in advance, shifting preferences can actually turn into shifting hours of work.
      So what's the problem? If technology has provided a way to do away with restrictive labor traditions which prevent people from maximizing utility while simultaneously improving consumer experience, isn't that a win-win?
       Although the rise of the share economy, or other types of free lance work can be advantageous for some kinds of workers, especially young workers who don't even have expectations of acquiring full-time employment, it does a lot to erode the ability of these workers to bargain for a fair share of the productivity gains of these technologies. Freelance work pays ok, often worse than a comparable full-time position in the past, but those who own companies like Uber or Amazon are raking in profits hand over fist.
        The evidence that productivity gains turn into benefits for the laborer who's productivity has increased are slim--only a fraction of increased worker productivity over the last several decades in the United States has turned into increased wages for those very workers who have become more productive. Factory workers, aided by advanced technology, are several times more productive per hour than in the past, yet the returns have gone more to the owners of that technology (returns to capital) or the employer of the worker. The growth of a freelance economy only makes it easier for business owners to capture a larger share of those productivity gains.
      Freelance workers have proven pretty easy for large tech companies to shut out of unionization. The results of that reduced bargaining power project pretty easily into the future--corporations, excluding rare outliers, do not give out concessions to labor without hard-earned reason.
      Moving to a policy perspective, what should we do about the rise of this type of work? Legislating away companies like Uber would destroy a business that serves consumers better than what came before, and it's hard for me to justify taking away the right of people to sell their labor however they please. Creating processes to facilitate unionization or other bargaining collectives seems better--certainly in the United States we've seen a weakening of laws around unions that has been demonstrated to cause an increase in inequality between management and labor, so it stands to reason that reversing the legal trend would have some effect on the economic trend.
     But the entire idea of using a "guild" or an industry union to address these issues is difficult, as the barriers to entry are puny, and the definitions of industries increasingly fluid (I doubt there will be any Uber drivers at all in 10 years once automated cars price out human drivers). Basic income and other national redistribution schemes would circumvent these issues--tax corporate profit (which has gone through the roof since 2008) and use that money to buy things like single-payer healthcare or wage supplements, and suddenly life as a freelancer becomes distinctly more like its ideal, worker-empowered form. It's not necessarily the students of the worlds who freelance around their schedules who are losing out from the rise of the employee-less economy, it's those people who need to freelance full-time to make ends meet because traditional full-time employment has been systematically dismantled. Implement a basic income, and at least in this aspect, we get the best of both worlds.