A sharing economy can be a growth booster

This article appeared originally in Gulf News: link to original article

In a city where almost everything closes at 4pm, you become friends with two — Deliveroo and UberEats. And that’s the idea, isn’t it?

The convenience of getting something delivered to you, for a fee, without you having to sacrifice your valuable time in getting into your car, driving all the way to the restaurant and back. Or even riding your bicycle there — to elaborate, there is a higher chance here of you getting hit by a bicycle rather than a car.

Anyway, the idea of a sharing economy is that someone with no excess hours can use someone’s with excess hours for a rendered service. This could be food delivery or transporting you from point A to point B. Though I have been familiarising myself with the concept of a sharing economy for a while now, it only hit me when I saw a familiar face carrying an UberEats bag and who I had seen two days ago wearing Deliveroo colours.

So what’s happening here?

If anything, a sharing economy is one major example of shifting dynamics in labour markets. And this is not exclusive to delivery and transport services, but the general idea of utilising your free hours to generate additional income in return. You could be a programmer chilling on a beach somewhere while writing code for software being developed by a tech company that is thousands of miles away.

Or you could be that driver who delivered lunch as a Deliveroo driver, and picked up pancakes two days later as an UberEats one. So what’s fuelling this sharing economy? And where are labour markets headed?

Moreover, is a sharing economy pro or con market competition?

To answer the first two questions, two points must be noted. One, there is a huge misplacement between skills demanded by jobs and employers, and between the skills available in the market. For instance, doctors in the US are now working part-time for multiple hospitals, generating a much higher income than they would have if they signed a single full-time contract with one hospital.

This doesn’t only solve hospitals’ problem of staff shortage, but also reduces doctors’ idle time.

Two, unemployment is becoming the norm rather than the phenomenon. The same driver mentioned earlier delivered lunch on a weekday and was picking breakfast on a weekend. In other words, delivering for both companies seems to be the only job(s) he got.

On my way to the airport, I used Uber. When I came back, I took a cab from the airport to the same location. The latter costs me more than three times what I have paid for the first trip by Uber. When one food delivery company was consistently delivering my food 15 minutes late, I started scheduling my food delivery accordingly before eventually giving up.

Luckily, the other food delivery company provides a time frame, and food was almost always delivered within that given time frame.

So, to conclude, competition is good, and a sharing economy has competition at its core. Regulations can temporarily limit new entrants into markets and even banish others from maintaining profitable operations. However, regulators will lose that fight in the long-term.

A sharing economy, in essence, makes use of all the idle time available in the economy, which could potentially increase the economy’s overall productivity. A sharing economy could even manage to raise minimum wage by the sheer market forces of demand and supply.

So before trying to go take the “regulations way”, governments must weigh the benefits from the jobs being created by a sharing economy, be it the increase in productivity, consumer spending and reaching inflation targets versus the cost of jobs lost by existing market competitors.

The last thought that I want to leave you with: can a sharing economy model by adopted for the high unemployment rates among Arab youth? (Hint: training one million Arab youth in computer programming).