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One Driver's Story Shows the Benefits of the Sharing Economy

Friday, October 14, 2016 11:54
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When I was in London last week, I chatted with my Uber drivers whenever I used the service to get around the city. One driver’s story was particularly poignant, and demonstrates the opportunities opened up by the sharing economy for individual workers. It also illustrates the benefits to the wider economy, as well as the evils of restricting the right to take work.

My driver was Romanian, and a fluent Spanish speaker. His English was not so good, but good enough to tell his story. He had moved to Spain to seek work, and had been employed there as an appliance repairman. However, his son had fallen ill, and without any other family to rely on, he would have had to give up work to take care of him.

But my driver did have family in England, so he moved there. When he got to London he found that there was indeed plenty of work in appliance repair available, but he did not have the correct licenses to trade in Britain, so he had to study to pass the exams. He and his family would have been without regular income until he had done so.

Enter Uber. One of my driver’s family members told him that it was a good way to make money. My driver had been thrown a lifeline. Not only could he keep earning money, he could structure his days to allow time for study and to care for his son in a way that a traditional 9-5 job would not. He was delighted by Uber, and was so happy that the platform was there for him when he needed it.

The Right to Work

My driver’s story illustrates three important points about work.

First, the benefits of independent work are considerable, even if the job is not the worker’s first choice. A new study by the McKinsey Global Institute that looks at independent work divides independent workers into four categories:

[F]ree agents, who actively choose independent work and derive their primary income from it; casual earners, who use independent work for supplemental income and do so by choice; reluctants, who make their primary living from independent work but would prefer traditional jobs; and the financially strapped, who do supplemental independent work out of necessity.

Of these, McKinsey points out that the first two do independent work by choice, while the latter two do it out of necessity. My driver certainly did his job as a necessity, given his circumstances, but it was nevertheless an opportunity he gladly accepted and was grateful for. While policy makers might look at the last two categories and want to do something to “improve” the situation for workers in those categories, they run the risk of eliminating the opportunities entirely. For instance, forcing platforms to act as employers of people who do business through them and providing statutory benefits accordingly runs the risk of significantly reducing opportunities. My driver could easily have found himself with a job that did not give him the flexibility he wanted.

Secondly, occupational licensing forms a significant barrier to human flourishing. As Timothy Sandefur has pointed out, for most of Anglo-American history, the right to earn a living was regarded as “the most precious liberty man possesses” (as Justice William O. Douglas called it). Yet today, in the US and Europe, occupational licensing places substantial burdens on people wanting to follow trades as diverse as hair-braiding and appliance repair. Moreover, my driver’s story is a reminder that there is no common market in services in the EU (as Ambrose Evans-Pritchard noted in today’s Daily Telegraph), despite it being one of the “four freedoms” of the Union. Fear of “Polish plumbers” in France killed the EU services directive in the middle of the last decade. The sharing economy provides opportunities for the entrepreneur even as licensing prohibits them.

Thirdly, my driver’s story reminds us that the sharing economy provides an alternative to welfare. Had Uber not existed, my driver would have been on welfare benefits, either in Spain or the UK, and probably decried as a “welfare tourist” or worse. Instead, he was doing fulfilling work that enabled him to study to improve his lot. The ability to supplement income when needed also provides an alternative to short-term credit such as payday loans, which regulators are trying to kill off on the (false) grounds that they harm their consumers. Without the sharing economy, more people would turn to such products or make a claim on the taxpayer. It is particularly worrying that my driver’s poor English may soon be a reason why he might have to give up his job; Transport for London wants all rideshare drivers to pass reading, writing, and listening tests in English (Uber is fighting the new rule).

I hope my driver soon passes his exams and is able to pursue the trade in which he trained. I am also glad, like him, that the sharing economy was there when he needed it.

Originally posted at Foundation for Economic Education

Friday, October 14, 2016
Iain Murray
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