Theguardian, Greg Jericho
A report released last week by the Grattan Institute on services like Uber and Airbnb finds that such peer-to-peer services can provide large benefits to the economy, but that governments need to ensure that both consumers and providers are protected. Hoping the services will just go away is not an option governments can afford to take.
It’s amazing how quickly peer-to-peer services have become part of our lives. The phrase “It’s Uber, but for …” has become so ubiquitous it has almost reached a dad-joke level of humour. We’re now not so much worrying about whether or not to use Uber, but instead obsessing over our Uber rating.
But with this “new” economy comes challenges – will it improve productivity at the expense of safety and wages? How should governments react, given the biggest resistance from established players such as the taxi companies and owners?
The Grattan Institute’s latest report, “Peer-to-peer pressure: policy for the sharing economy” examines the policy issues involved. The report notes that there certainly are clear economic benefits from the sharing economy.
The report estimates Uber can cut more than $500m from Australian taxi bills – close to 10% of the $5.5bn spent each year by Australians catching a taxi.
The report’s author Jim Minifie argues that other sharing platforms are “boosting employment and incomes for those on the fringe of the labour market, and putting thousands of underused homes and other assets to work”.
This last point is one that certainly has import in light of continued concerns about productivity. A person’s spare room or granny flat that is unused is essentially an economic asset going to waste – renting it out via Airbnb puts that asset to work.
But a major concern for those for who compete with these new sharing operators – especially the 68,000 taxi drivers around the nation – is that the playing field is not level. Taxi regulations and licence fees force taxi fares to be higher than Uber’s, and certainly the evidence in the Grattan Institute report backs this up.
A short trip from Canberra Civic to Parliament House costs more in a taxi, even when including a 1.5x Uber surge charge:
Amid all the issues regarding unfair competition, the reality is that many taxi drivers provide good service in a dangerous occupation – the report suggest driving a taxi is possibly 15 times as dangerous as the average job (in 2013-14 in Victoria for example, there were 51 assaults in taxis).
But there has also long been a very real sense of customer dissatisfaction with the service. When a survey in Western Australia finds that “only 41% of women feel safe catching a taxi alone at night” you know the industry has an image problem – justified or not.
Uber however gives customers some power. Customers can “estimate fares and car arrival times, view the approach of a driver, monitor actual versus advised routes, streamline payments, and review each trip’s route, time, driver, and fare.”
But the ability to rate someone on an app is the very lightest form of consumer protection, and the report argues that while some taxi regulation should be reduced, mostly these relate to licensing and pricing. Instead it argues that not only should the safety regulations remain in place, Uber drivers should also be required to meet certain standards – such as passing a criminal history and driving history check, a need to have zero blood-alcohol concentration, and for their cars to undergo an initial roadworthy inspection and appropriate follow-up inspections.
The introduction of Uber certainly does lead to a drop in taxi driver income and the value of taxi licences.
The report notes that even in states where Uber is not legal the value of taxi licences has fallen:
But the report argues that while the new entrant will reduce taxi drivers’ and licence owners’ income, they should not for the most part be compensated – instead only those suffering economic hardship should be assisted.
Similarly the Grattan Institute recommends only light regulation of accommodation services like Airbnb.
The service, which has grown exponentially in recent years, allows people to rent out rooms in their own house or other properties for short-term periods:
The Grattan Institute report finds that a majority of Aribnb activity is not in people’s primary residence – thus investment properties that would have been used for long-term renters are now being used as de facto serviced apartments.
Two concerns which arise from this are that it may increase rents in these areas due to a shortage and that short-term stayers are more likely to cause disruption to neighbours.
The report suggests the impact of Aribnb on rents would at worst be very localised – inner city and more touristy suburbs – and that mostly it would be minimal given Airbnb residents only account for about 2% of Sydney’s current rental capacity.
However concerns about the disruption to neighbours appears to be well founded – especially within apartment complexes. Within the Melbourne CBD and inner-city, short-term residents are more than three times more likely to be subject to complaints about behaviour than long-term ones:
Unfortunately in many states – such as New South Wales – the legal remedies to neighbourhood disruptions are more geared for complaints against long-term residents.
One better example perhaps is that of Queensland where “party house” legislation enables local governments to require some or all “party house” owners to obtain permits, which can include conditions such as occupancy limits and noise controls.”
Certainly it is clear that both state and local governments need to adapt to the Airbnb growth by ensuring the ability to “quickly identify the property that is the subject of a complaint and to contact the operator, and to impose escalating penalties, up to bans, on landlords if they breach conditions repeatedly.”
But while the peer-to-peer economy may bring with it improved competition, lower prices and better services for consumers, there is some concern that it will reduce wages.
This was an issue noted by the shadow assistant treasurer, Andrew Leigh, last year when he released the ALP’s sharing economy policy.
But the Grattan Institute’s report would suggest these concerns can be overstated. The report notes that for the most part peer-to-peer services are in areas that already mostly involve independent contractors such as household repair and construction (hipages), household services and errands (Airtasker), writing, website design, IT services and data entry (Freelancer, Envato).
The report notes that “few large platform workforces in manufacturing, retail and wholesale trade, healthcare, or financial services”. The report does however see the possibility for such apps to be abused and recommends “sham contracting provisions in the Fair Work Act, to deter misclassification of legitimate employees as independent contractors.”
The sharing economy is here to stay. For governments to ignore it and hope services like Uber will just go away would be like media organisations pretending that social media is just a passing fad.
There are clear economic benefits from this new economy, but also issues for consumers and providers of these new services – the Grattan Institute’s report provides some good recommendations for governments to follow.