Christopher Mims at the Wall Street Journal (subscription) says Uber, Lyft, airbnb, Instircart, Postmates, TaskRabbit and others in the so-called “sharing economy” are “remarkably efficient machines for producing near minimum-wage jobs.”
The evidence he marshals is weak. More importantly, he makes no distinction across goods and services being shared. Those distinctions are crucial.
Mims complains that Uber drivers and Instacart shoppers cannot earn significant wages substituting for taxis or independent personal shoppers. But this shouldn’t surprise anyone. Neither task requires unusual skill, so it should be expected that the market-clearing wage is fairly low. But not all shared economy innovations involve unskilled labor.
Mims ignores the one thing (and sometimes two) that sharing economy innovations really do have in common First, they dramatically cut transactions costs. Their technology allows buyers and sellers to find each other at small fraction of what it used to cost. Second, they undermine government cartels (e.g., taxis) that artificially restrict supply and price, or they target markets where governments have imposed extraordinary burdens because demand is highly inelastic and customers can’t vote (e.g., hotel/motel taxes). Uber and Lyft are examples of the former; airbnb an example of the latter.
Consumers are unambiguously better off because they have more options and lower prices, and Mims makes no attempt to argue otherwise. Instead he attempts to show that suppliers are no better off than they were under the high transactions cost/heavy-handed regulatory model. This fails because shared economy transactions are voluntary. When a customer appears in the market, an Uber driver can decide whether to bid. Customers are assured that at least one driver will want to do so — otherwise, the market-clearing price will rise. Apparently what bothers Mims is they have to compete.
Airbnb is not selling unskilled labor but room-nights similar to (but also very different from) hotels. Consumers benefit from the diversity that sellers provide. And, because this “commodity” is so different from standardized hotel rooms, it’s not clear that market-clearing prices are always lower. A search for listings in Manhattan for the May 39-31 weekend yields over 1,000 options for a couple seeking to rent the entire apartment or house. Rents range from $134 to $7,000 per night, with an average nightly price of $390.
There are losers from disruptive technology like this, but it is almost certainly not Uber drivers or airbnb property listers. Where government directly restricts supply, such as by regulating or imposing unusually burdensome taxes, the government loses rents it used to collect when transactions costs were high. Where it indirectly restricts supply, such as by cartelizing the supply of taxis, it is the members of the cartel who lose.
Mims asserts that the “only way forward” is a new layer of regulation to solve a problem he neither clearly identifies nor provides credible evidence of its existence. If this is not adopted, Mims warns that “ride-sharing companies could cease to exist entirely, owing to a class-action lawsuit that almost certainly represents an existential threat to their business.” Mims seems to think that Uber and Lyft drivers would be the class members, but the absence of an injury in fact should deny all of them standing, much less gaining class certification.