What can governments do to boost the sharing economy? What would be their incentive to do so? Where are the commercial opportunities if public policy were to fully embrace sharing transactions?
I have spent 20 years writing, consulting, and overseeing publicly funded projects based on these questions. The answers in brief: governments are potentially the biggest buyers of fragmented labor, its regulators, setters of tax/welfare codes, administrators of databases of record, and ideally will serve as marketing machines for economic initiatives. Aligning all this with a vision for the most efficient sharing economy imaginable could profoundly reshape this emerging sector.
Would policymakers do this? Jobs are diminishing; voters need all the earnings opportunities they can get. Too much “sharecon” activity is untaxed and illegal, needing to be tempted into the mainstream economy. So, yes, they might. What’s in it for the private sector? A chance to leverage official facilities, enable billions in new economic activity, profit from the creation of new platforms, then take a cut of each transaction.
Britain’s government has blazed this trail. Since 2005, administrations of right and left in Whitehall and local authorities have provided sustained funding to build a new generation of marketplaces for all kinds of irregular work in communities. The resulting technology and learning are now embedded in the Beyond Jobs project. Now we are talking with other governments and building partnerships with big technology players who could deliver this kind of system at the enormous scale required.
At Techonomy 2013, Jennifer Bradley of the Brookings Institution outlined a pressing need for sharing to be as accessible, enticing, and rewarding as possible. That’s a huge technological challenge. Hiring a babysitter or a barista to work in your café over the lunchtime rush, or renting a barbecue or a bike for the afternoon are among the most complex transactions in any market anywhere. That’s doubly so if each purchase is to be made compliant with tax and regulations. But these purchases are low value.
In Britain we have been building, testing, and modifying core sharecon technology for years. The idea is to make sharecon transactions as instant, low overhead, and reliable as buying a product on Amazon. One key concept we have pioneered at Beyond Jobs is something we call a “Central Database of Available Hours” (CEDAH). It would be a horizontal, government-sponsored platform that can underpin thousands of verticals trading the spare hours of people or their possessions. Data on local patterns of supply/demand/pricing in any vertical can be aggregated for users and potential users. If required, it can pull together purchases from multiple verticals to assemble a package of requirements for a customer.
This so-called CEDAH platform could handle the hugely complex mechanics of matching, pricing, and ensuring completion in any transaction involving ad hoc local hire of a person or resource. Ideally, it will interface with a range of official databases. CEDAH is designed to sit seamlessly within any website in the way credit card processing modules do now, funding itself through a small transaction charge. It is a government’s way of tempting these fiddly, time-consuming, uncertain transactions into the mainstream economy.
BARRIERS TO UNIVERSAL SHARING
The need is there. The technology works. The business case is solid. Why haven’t we moved to a universal platform to underpin the sharing economy? Two factors stand in the way:
1) Long-term economic opportunity for the public comes from very wide-scale, low-margin, devolved markets. But short-term profitability for operators requires high markups in a tight vertical aggressively aimed at owning both buyer and seller. Witness Airbnb’s valuation for achieving domination of the spare-bed market. Or, TaskRabbit’s recent pivot to a narrower focus. VC money is pouring into these highly focused verticals. The possibility of that model being disrupted can be unthinkable for many people driving the sharing economy forwards.
2) Governments are key to instigating a low-cost, huge-scale universal model. But anything that smacks of workforce “casualization” is a third-rail issue for politicians. To understand why, look at how vested they are in traditional forms of employment. The UK, for example, spends around £5 billion ($8.3 billion) a year on blue-collar job creation. This, despite our flagship program having a reported success rate of only 3.5 percent. Like many countries, we now have an official database of available jobs set up in competition with private job boards. Job creation figures for the U.S. will be many times higher, but harder to quantify because spending is less centralized. The American Job Center system also seeks to aggregate private sector efforts in this vital part of the economy.
It can be hard for outsiders to grasp how unnerving any perceived challenge to job creation can be in corridors of power. Recently a veteran employment minister in a developed country asked me, following detailed discussions on the topic, if we could get back in touch after the next election. Raising the subject of an official boost for ad hoc working before then would be dangerously off-message as rival politicians are assuring the electorate of renewed job creation efforts.
CHANGE IS COMING
But potent forces are undermining political attachment to traditional employment. Recovery from the 2008 crash in Europe and the U.S. is leaving blue-collar households behind. Real wages are falling. Millions are scrabbling for whatever earning possibilities they can get. The sharing economy is growing rapidly. It largely leaves buyers and sellers responsible for tax and regulatory compliance. There seems to be widespread ignorance of the implications by users. Sharing sites with millions of users can be a tempting portal into illegal activity for many citizens.
Expect policymakers to progressively accept that irregular working is the new normal. They are likely to start pulling levers and directing public spending in ways that reward longer-term, wider-scope sharecon ventures. And that’s where the big technology companies come in.
Policymakers may be sensitive about employment issues. But they are typically horror-struck at any hint of an ambitious public sector IT program. (Hello, Obamacare exchanges in the U.S. and Universal Credit systems in Britain.) A system like CEDAH shouldn’t be funded, designed, or run by government. Like national lotteries, it can be initiated through a concession to commercial operators who bear the risks in return for rewards that—with good execution—can be extremely attractive.
Taxpayers can be insulated from the costs of implementation. But there is worry about reputational risk. Is something as sophisticated as CEDAH a recipe for political embarrassment? At Beyond Jobs we are now keen to dialogue with technology majors who have the track record to take our type of systems and all the learning to vast scale. Convincing politicians that implementation is achievable is step one. Then we need to invite major financial institutions to build their business case for this latest public infrastructure investment opportunity. What markup would they charge if given a concession to finance the building and operation of CEDAH?
Like it or not, governments are the sleeping giant of the sharing economy. History suggests they will wake up. Look at fundamental technologies like electricity, rail, water supply, and broadcasting. All started with an uncoordinated pioneering stage of multiple service, regulatory, and business models. All moved to standardization and universality after policy was aligned with a vision for their potential. There is demand in the legitimate economy for irregular local hires that could total an additional 5 percent of GDP, all directed at people who need it most. Helping leaders at city, regional, or national levels see that it can be unleashed by the right platform is a challenge waiting for the tech sector.
Wingham Rowan is the Director of Beyond Jobs.