How The Sharing Economy Helps Lower-income Residents

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Wednesday, March 18, 2015

Joanna Evoniuk, GoLocalPDX Contributor

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. 

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

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