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How The Sharing Economy Helps Lower-income Residents

Wednesday, March 18, 2015

 

The sharing economy, built on companies such as Airbnb and Uber, has the biggest economic impact on lower-income consumers, according to a new study from New York University. 

Research of the peer-to-peer rental industry indicates consumers who fall below the medium-income bracket benefit the most from the sharing economy, both as renters and owners. 

NYU professor Arun Sundararajan and research scientist Samuel Fraiberger studied two years of data from Getaround, a car-share company. They found that lower-income consumers were more likely to rent out their possessions through peer sharing, as well as rent from others. 

“Peer-to-peer rental marketplaces have a disproportionately positive effect on lower-income consumers across almost every measure,” Sundararajan and Franiberger wrote. 

The trend extends to home sharing, according to Portland Airbnb host Lisa Myers Warmington. Most of her renters tend to come from lower income groups. 

“I get a lot of renters pinching pennies, who wouldn’t stay in an overpriced hotel room,” Warmington said. “These are regular folks, not the high rollers.” 

Warmington said the industry provides opportunities those who may not travel otherwise, and for home-owners to take part in a lucrative business. 

“I keep my rates relatively affordable, but I still make $2,400 without getting out of bed in the morning,” Warmington said. 

However, critics of peer-to-peer sharing companies question how much the industry really helps the poorest community members. Portland taxi driver Wynde Dyer said the industry’s reliance on technology creates barriers for some. For instance, riding with ride-sharing company Uber requires a smartphone and credit card. 

“If you’re low income, you can’t afford a smart phone, and you can’t get credit for a credit card, so how are you going to use Uber?”  Dyer said. “Of the people I drive around, 30 to 40 percent do not have a cellphone, and have to use the computers at the library for Internet.” 

Changing The Economy

The sharing economy is changing the way lower-income consumers buy and sell assets, the study also found. Many are selling their cars and rely solely on sharing resources. Meanwhile, others are buying assets, knowing sharing will help support the purchase. 

Padden Murphy, head of public affairs and business development for Getaround, said the company has seen many examples of both circumstances. 

“We have plenty of stories of folks saying if it weren’t for Getaround they’d have to buy a car,” Murphy said. “For those looking to buy a vehicle, all of a sudden they can afford a better quality vehicle.” 

Murphy said both owners and renters have more options for getting past barriers of cost, something important for the middle and lower-income consumers.  With more affordable access to cars, Murphy said residents have the opportunity to travel out of food deserts to better shop at better grocery stores or to job interviews, raising their standard of living. 

The rise of peer-to-peer sharing companies is concerning low-income workers in some industries, however. A 2015 University of Boston study found a rise in Airbnb properties caused a slight decrease in business for lower-priced hotels. Dyer said taxi drivers could face consequences of a growing Uber presence. 

“If Uber creates monopoly, a lot of good drivers might be unemployed who don’t have the luxury of collecting unemployment,” Dyer said. It’s discouraging to have part time, untrained labor force take our rides away.”

Cities across the United States are looking for the best ways to incorporate the peer sharing companies into their local economies. Portland has changed city ordinances in attempts to regulate both Uber and Airbnb

Sundararajan and Franiberger said they hope their research and similar studies will help make fair policies.

“Our hope is that our economic findings will inform policy makers as they formulate appropriate regulatory policy for this increasingly important part of the economy,” Sundararajan and Franiberger said. 

 

Related Slideshow: What 20 Cities Around the World Did when Uber Came to Town

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Louisville, KY

Uber launched in Louisville just in time for the Kentucky Derby last Summer.

Late last month, however, the Louisville Regional Airport Authority barred Uber from operating at its taxi pick-up and drop-off stations.

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New Orleans, LA

After seven months of wrangling, the New Orleans City Council ultimately voted in favor of legalizing ride-sharing services like UberX.

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New Delhi, India

The city's transportation authority banned Uber after accusations surfaced that an Uber driver took a young woman to a secluded area and raped her.

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Boston, MA

The City of Boston began working with a task force to work toward establishing ridesharing regulations.

This is after the city’s taxi cab union organized a rally where cab drivers drove around the block where Uber’s officers are and honked their horns for an hour.

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Amsterdam, Nederland

The Netherlands banned Uber services outright.

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Las Vegas, NV

Nevada issued a statewide ban against Uber after a court argued that the company operates just like a taxi business.

Uber temporarily halted its operations in the state later that week.

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Chicago, IL

The city government of Chicago chose to not take action when Uber came to town so its taxis did.

The Illinois Transportation Administration and the city’s taxi union sued the city in district court for allowing the company to operate in the city without becoming licensed operators.

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Taiwan

The government of Taiwan issued approximately $30,000 in fines to Uber before serving the company with a cease and desist letter.

Government suspended the licenses of a number of Uber drivers, according to reports.

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London, UK

London Mayor Boris Johnson stated it would be difficult to ban Uber without legal review.

In response, the city’s cab drivers staged protests similar to the one in Boston.

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Toronto, Canada

The City of Toronto issued a court injunction against the Uber last month.

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Seattle, WA

The Seattle City Council ruled 8-1 to allow Uber to operate in its city.

In the past, citizens have often been critical about the taxi system in Seattle.

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Montreal, Canada

Uber began operating in Montreal last month, and was quickly deemed illegal by the city government.

The company entered an agreement with the Royal Mounted Canadian Police to conduct background checks on its drivers and other safety regulations.

Meanwhile, the battle between the city and company is carrying on.

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Baltimore, MD

The Maryland Public Service Commission ruled that Uber is subject to the same rules and regulations imposed on other for-hire vehicles in the state.

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Bangkok, Thailand

The Thai government deemed Uber illegal last month. Drivers face maximum fines of up to $121 (฿4,000).

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Hoboken, New Jersey

Police in the City of Hoboken began ticketing Uber drivers for violating the city code on taxis. Fines can be as high as $1,000.

The mayor of Hoboken, on the other hand, has called Uber a valuable transportation option and said he wants to make it available to residents and visitors.

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Fort Lauderdale, FL

Broward County issued stern warnings against Uber, saying it would impound its drivers’ cars.

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San Antonio, TX

The San Antonio City Council is considering a vote that could increase restrictions on rideshare companies like Uber.

Uber responded with a letter stating that if the and amended ordinance is passed, Uber may have to abandon operations in the city.

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Salem, OR

The City of Salem issued a letter seven days after Uber began operating in its city.

The letter demanded that the company register its drivers and apply for taxi licenses.

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Munich, Germany

Germany also banned Uber from operating in its country this year.

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Denver, CO

Colorado became the first state successfully to pass a law regulating ride sharing by requiring background checks, vehicle inspections, and mandatory insurance for the drivers once they are logged into the app.

 
 

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