Should the sharing economy be regulated

Sharing economy: more opportunities than risks?

First of all, it should be noted that the sharing economy encompasses a large number of different business models. This post focuses on the two best-known and most controversial new business models of a commercial sharing economy: Uber and Airbnb. Put simply: Uber arranges passenger transport and Airbnb arranges apartments via the (mobile) Internet - providers and consumers are brought together quickly and easily via an app.

The starting point for both innovations were economic bottlenecks: Taxis and affordable housing were scarce in San Francisco at the end of the 2000s. The prerequisites for the new broker platforms were the mobile Internet, apps for smartphones and the new option of paying for these services online. This made it technically much easier to act as an intermediary via an online platform. But the change in preferences after the economic and financial crisis also played an important role: In view of high unemployment and poor employment prospects, consumers were more willing to use than to own. However, the crisis also put increasing pressure on providers to generate income streams from existing assets, i.e. to offer cars and apartments for use.1 After all, trust in online transactions has developed over ten years: credit card payments are considered safe, online shopping including return options is well established and feedback systems have proven themselves (e.g. dealer and product reviews). On this basis, the new business models were able to flourish. In addition, there were investors who were willing to take risks and provided capital in the billions in several financing rounds.

Opportunities of the "Uber Economy"

The word creations “Uber Economy” 2 and “UberJobs”, 3 but also “Platform Economy” symbolize the unease about the new, profit-oriented business models of the sharing economy that have been launched by venture capitalists with billions. Behind this is the concern that financially strong companies like Uber will only act as intermediaries and no longer as employers. Uberjobs are jobs that formally independent service providers can work when there is a need for their manpower, i.e. usually as casual or part-time jobs.

On behalf of the company Uber, Hall and Krueger evaluated the opportunities of the sharing economy in the field of passenger transport.4 The analyzes are based on a survey from December 2014 among active Uber drivers in the USA as well as anonymized, administrative Uber data from 2012 to 2014. This analysis is currently the most extensive study of the sharing economy and, although it has been commissioned by a company, allows insights into the dynamics of this market.

Between July 2012 and the end of December 2014, the number of active Uber drivers in the USA doubled every six months and rose to over 160,000. Active drivers are defined as people who transport passengers at least four times a month. The growth is apparently being driven by the so-called UberX drivers. In this business model, drivers use their private cars to transport passengers. In contrast, the growth rates of UberBLACK - a business model with employed drivers who use company limousines - were low in the period under review, according to the study. The survey conducted covered 20 regional US markets, representing 85% of all US drivers. Almost 6,000 drivers were interviewed, of which only 601 (11%) answered the questionnaire. Nevertheless, the 601 drivers willing to provide information represent the average of all drivers in terms of their average working hours and hourly earnings.

Comparing the demographic characteristics of Uber drivers and traditional taxi drivers shows that Uber drivers tend to be younger and more educated. The proportion of women is also higher. This makes Uber drivers more similar to the composition of the workforce in the United States. The survey also revealed several interesting insights: only 8% of Uber drivers were previously unemployed, 7% were college students, and 3% were retirees. The majority of drivers are not employed full-time: 31% work full-time and 30% work part-time in another occupation. Only 38% are exclusively Uber drivers. More than a third of Uber drivers surveyed did not actively seek a job before joining Uber. From this, the authors conclude that Uber was perceived as an additional employment alternative.

There is also a special feature: Uber drivers do not remain anonymous, but can be rated by their customers after each trip. This allows you to build a reputation in the market that increases your own employment stability and can lead to increased income

The majority of UberX drivers were active up to 15 hours per week, only 5% of the drivers were active for more than 50 hours; 85% drove less than 35 hours a week. The weighted average pay of UberX drivers was a good $ 17 per hour, with hourly wages ranging from $ 16.89 (drivers up to 15 hours / week of driving time) to $ 18.31 (drivers between 35 and 49 hours per week) varied. For comparison: The legal minimum wage in the USA is currently US $ 7.25 per hour, although regionally higher legal minimum wages (e.g. US $ 10.55 in San Francisco) are possible. However, UberBLACK drivers earn significantly more at just under US $ 21. A comparison with the hourly wages of traditional taxi drivers for selected markets (Boston, Chicago, Washington DC, Los Angeles, New York, San Francisco) shows that Uber drivers at US $ 19.19 per hour are significantly more than traditional taxi drivers ( $ 12.90). However, even according to Hall and Krueger, this comparison is not meaningful because Uber drivers (as self-employed) do not receive any reimbursement for fuel, insurance and depreciation.6 A comparison of the after-tax hourly wages is not yet available.

Risks of the "Uber Economy"

In contrast to the study presented above, Rogers emphasizes the resulting social costs of Uber in the areas of safety, privacy, discrimination and labor standards.7 In the area of ​​safety, for example, accidents caused by Uber drivers due to improper driving behavior and lack of care by the company in the review the suitability of employees before they are hired, insults and sexual harassment of customers by Uber drivers, high-speed journeys that endanger customers are listed as examples of misconduct. There could also be social costs in the area of ​​data protection. Since Uber collects credit card information and data on the time and place of transports, individual transport routes can be identified. Discrimination against customers by drivers could be reduced by Uber's feedback culture. Since the reputation and thus the status of Uber drivers also depend on the assessment by customers, the incentives for drivers to strive for better customer relationships increase.

In the area of ​​labor standards, Rogers cites fears that companies will unilaterally pass risks on to employees. Uber does not see itself as an employer, but as an intermediary without employer obligations. In fact, this dispute is the subject of a lawsuit by Uber drivers, which a judge in San Francisco has given class action status.8 Furthermore, according to Rogers, legal norms for the protection of workers (e.g. working hours, occupational safety) could be undermined and wages could be lowered. So-called “surge pricing”, according to which transport prices rise in times of high demand, can lead to risks if there is a lack of transparency. While rising prices are an incentive for potential Uber drivers to offer their service when there is high demand, an unannounced price increase by a factor of eight can lead to unpleasant and expensive surprises for customers

Displacement effects and increased environmental pollution

Two types of displacement effects from the new business models of the sharing economy have so far been analyzed in studies: the displacement of new car production and the displacement of the existing taxi industry. The management consultancy Alix Partners calculated that in individual regions of the USA the principle of sharing threatens the classic business of some automakers. In the USA, the auto industry has so far sold around 500,000 fewer new cars due to the existence of car sharing offers. By 2020 this number will increase by a further 1.2 million unsold cars.10 This is an estimate by a management consultancy, not a scientific study.

An analysis of the New York taxi market identified significant crowding-out effects after Uber entered the market in 2011. According to the Economist, 14.8 million trips were made in June 2013 and 17.5 million trips in June 2015. The market for taxi rides grew by 18% during this period, which is also due to the relatively lower fares of new providers. A closer analysis shows that there was no growth within the New York core area. However, the new providers - Uber and "boro taxis" - substituted around 1.4 million journeys with yellow taxis. In contrast, growth took place exclusively in the outskirts of New York. But even there the yellow cabs lost - albeit only slightly - compared to 2013, while the new providers made strong gains. Accordingly, the price of taxi licenses for yellow taxis fell from US $ 1 million (2014) to US $ 690,000 in the summer of 2015.11 These are descriptive statements, not causal analyzes.

If several people share a car and the rate of use of cars is increased, then at first glance fewer cars are needed to drive a given number of kilometers. However, since the price per kilometer driven falls due to the sharing offers, increased demand is generated at the same time. Mobility can increase overall, as empirically proven by the figures on the New York taxi market. Similar phenomena can be observed, for example, in air traffic, where low-price offers increase the number of kilometers flown. This so-called "rebound" effect is well known in environmental economics literature. In this way, the often proclaimed sustainability of the new business models can be turned into its opposite - the environmental impact can increase significantly despite the higher use of existing vehicles thanks to an overall increase in journeys

Opportunities and risks of "Airbnb-ing"

But it is not only the Uber economy that has come under increasing criticism. Forced evictions in San Francisco are controversial under the heading of "Airbnb-ing". The background to this is the anecdotal evidence on the evacuation of inexpensive rental apartments in attractive residential areas by real estate investors - with the aim of converting them into apartments for short-term tourists. After the conversion, not only are the long-established tenants displaced to more cost-effective suburban locations, but the rental price level in the entire city district also rises. 13

The original idea of ​​living space sharing is thwarted. The focus of the discussion is Airbnb, founded in San Francisco in 2008. The company name - a combination of "air mattress" and "bed and breakfast (bnb)" - reflects the company's history. The high rental costs in San Francisco prompted the company's founders to rent part of their own apartment on short notice in order to generate additional income. Since the accommodation costs for tourists are low and the atmosphere in a private apartment is more personal than in a hotel, the basis for a new service was laid. The programming of an app made it possible for many suppliers and buyers to come together at low transaction costs. After exponential growth in recent years, Airbnb is currently present in more than 34,000 cities in over 190 countries with over 1.5 million properties listed worldwide.

Between June 2011 and May 2012, the consulting firm HR&A Advisors carried out a study on behalf of Airbnb.14 Among other things, the study looked at the characteristics of Airbnb landlords in San Francisco. To this end, 344 Airbnb providers were surveyed. According to this, 60% of the respondents had a below-average income, so that income from renting their own living space contributed to the financing of the standard of living. 48% of Airbnb housing providers used this additional income to fund special expenses and 42% funded their regular living expenses. The study also calculated that Airbnb travelers spent around US $ 56 million during the study period, including US $ 12.7 million on accommodation costs (excluding Airbnb fees) and US $ 43.1 million for other expenses (e.g. food and drinks) .15

Despite all the tempting simplicity of the organization of shared living, there are also some risks: landlords fear vandalism and theft of private property, tenants worry about the quality and security of private accommodation. At the same time, however, the virtual distance can also be transformed from the “source of risk” to the generator of transparency. Because the internet platforms offer the possibility of minimizing existing information asymmetries with low transaction costs. A detailed picture gallery or even a virtual tour of the apartment to be rented as well as the possibility of giving feedback after the overnight stay minimizes the risks for the tenants. Extensive individual data and booking via credit card as well as feedback from tenants enable landlords to rent out largely risk-free.

Negative external effects can result from large-scale rental of private accommodation. The frequent change of tenants, e.g. in Berlin, has already led to resentment among neighbors - Airbnb tourists typically stay in the city for around six days, so that frequent tenant changes could become permanent. Furthermore, the purchase of residential property for commercial letting via Internet platforms can have a price-driving effect on the local housing market, as the example of San Francisco shows.

In addition, not only additional demand is to be expected, but the additional, less strictly regulated competition should also lead to less demand for hotel accommodation - especially in the low-price segment. For example, Zervas et al. Show that every 10% increase in Airbnb's offering resulted in a 0.35% decrease in monthly revenue per hotel room in Texas - especially Austin.16 Data from the Texas hotel industry and Airbnb were used. However, the impact of Airbnb's growth on hotel industry revenues was not uniform across the market, but primarily affected budget hotels. Accommodation companies that have faced competition from Airbnb reduced their prices, which in turn benefited all consumers. The rooms provided by Airbnb can therefore be viewed as imperfect substitutes.

Massive regulation or further deregulation?

A massive regulation of the new business models up to and including a ban is a design option. In Indonesia, Thailand, the Netherlands and Spain, Uber was banned nationwide in the second half of 2014. The city council of New York City announced together with its mayor in July 2015 that they wanted to limit the annual growth of Uber by legislation to a maximum of 1% and to investigate the effects of the car service on traffic and the environment.

In France, the Uberpop transport service was banned. The ban from 2015 is based on a law passed in autumn 2014 that prohibits, among other things, referring non-professional drivers to customers and showing the availability of drivers in the vicinity on a map.17 In Germany, Uberpop was also legally banned as distorting competition. Uber then discontinued this driving service and offered a rule-compliant business model with UberX. At UberX, all drivers have a passenger transport license and the cars they use are licensed as rental cars.18 By paying up to $ 100 million, Uber was able to avoid its drivers being judged as employees by the courts.19

According to the employers' associations, the German occupational health and safety system is well positioned for the digital economy.20 However, existing regulations need to be questioned. The former head of Uber in Germany even takes the view that passenger transport in Germany is more strictly regulated than the explosives trade. 21

In a current special report on digital markets, the Monopolies Commission summarizes its considerations as follows: “From the Monopolies Commission's point of view, it is necessary to analyze in each individual case whether, against the background of technological and economic developments, the regulation of the established business models is still necessary and which regulation the new business models may have to be subjected to in order to create a level playing field ”.22

Furthermore, the Monopolies Commission in the area of ​​transport services (e.g. Uber) regards market access through concession restrictions and return obligations as well as unequal sales tax treatment as unnecessarily restricted. Navigation devices should also make the proof of extensive local knowledge tests superfluous. In the case of residential and overnight services (e.g. Airbnb), the Monopolies Commission complains that competition is hindered by restrictive housing and building regulations (prohibitions on misappropriation and others) .23 However, in the opinion of the Monopolies Commission, it is not just about adapting the regulatory framework to allow new providers to enter the market enable, but also about equal opportunities for established market participants. 24

Against this background, it makes sense for the legislator in Germany to review existing regulations. A minimum level of regulation is undisputed: Requirements, for example, on the quality of a car used and the reliability of drivers are not only in the interests of customers, but also in the interests of online platforms, 25 because trust is a central point for their functioning. 26 This is not primarily about protecting established providers, but about protecting users.

Importance of solo independence

With a view to the sharing economy, trade unions in particular fear that people's working conditions could worsen massively. They are concerned that the statutory and collective labor protection rights that have been fought for over decades will be undermined by turning employees into self-employed people. If platforms only act as intermediaries instead of employers, then the workers are forced to bear the full economic risk.

The unions also fear that many of the new self-employed people will be precariously employed in insecure, low-paid, short-term jobs. This includes self-employed Uber drivers who are available on call. This also includes private individuals who are placed with small jobs (e.g. cleaning jobs and gardening) via platforms such as "Helplinge" or "Taskrabbit". But also - often academically educated - so-called "clickworkers" who look for IT jobs on appropriate platforms such as Upwork are affected. IG Metall reacted to this development last year and set up the website "", which is aimed at the self-employed and offers them advice. The working conditions on various online platforms can also be assessed there.

But what significance does solo self-employment currently have on the German job market? Several studies came to the conclusion that solo self-employment increased significantly from 2002 to 2012. The earnings of a considerable part of the self-employed soloists were low. E.g. Eichhorst et al. Microcensus data for 2009 and calculate the share of freelancers in total employment: In the academic sector, the share was 13%, in the creative professions (e.g. journalists, publicists, architects, musicians, designers and IT / web specialists) it was even at 42% .27 In addition to the microcensus data, Brenke also evaluates the Socio-Economic Panel (SOEP) for 2011.28 It turns out that a significant proportion of the self-employed have only a low income. The median net earned income for the self-employed is 8.33 euros per hour, the bottom 25% earned 5.36 euros and the bottom 10% only 3.17 euros per hour. According to these calculations, around 800,000 or one third of the self-employed are low-income earners, including a not inconsiderable number of well-qualified people.

illustration 1
Employed persons by type of employment in Germany in 2014

Employed persons between the ages of 15 and 64 years, without persons in education or training or a voluntary service.

Source: Destatis, own illustration.

However, current statistical evaluations do not allow the conclusion that this development has continued.29 Figure 1 shows atypical employment, solo self-employment / freelance workers and normal employees in Germany in 2014. It can be seen that only 6% of the employed between the ages of 15 and 64 are self-employed. The vast majority are normal employees. The broadly defined atypical employment (mini-jobs, part-time employment, fixed-term employment, internships, temporary work, one-euro jobs) only comprises one fifth of employees. The majority of the self-employed and freelancers are highly qualified with a tertiary education (43%) or completed vocational training (45%). The majority of self-employed persons and freelancers also work as managers, in academic professions or as technicians and in non-technical professions of equal rank.

According to SOEP data for 2013, the proportion of people with gross earnings of less than EUR 8.50 per hour (the current statutory minimum wage level) has fallen since 2011. This corresponds to the level at the turn of the millennium, i.e. the time before the strong growth in solo self-employment.30 Since the solo self-employed are not included in social insurance, the gross wages can only be compared with those of dependent employees to a limited extent. No employer contributions are paid for self-employed persons, but they have to pay for their own social security or waive it.

The number of self-employed individuals has also not increased in recent years - on the contrary: after an increase in the early 2000s, this group has even declined to a certain extent in the last two years, as Figure 2 shows. After the Hartz reforms, it rose significantly, in particular through funding through start-up grants for the unemployed (e.g. Ich-AG, entry fee). However, funding has decreased significantly in recent years. A clear and long-term trend towards more solo independence cannot therefore be derived from the currently available figures. The proportion of low-wage earners has also fallen.31 The expansion of (solo) self-employment that is to be expected for the reasons mentioned above can therefore not be empirically proven at the present time.

Figure 2
Solo self-employment from 1999 to 2014

Employed persons between the ages of 15 and 64.

Source: Eurostat, own illustration.

Social security and taxes

In order to improve the protection of the (solo) self-employed and to reduce the cost differentials between self-employed and dependent activities, a general inclusion of self-employed in social insurance is advisable - possibly with the option of exemption from compulsory insurance ("opting out"), if sufficient private coverage or coverage, for example through professional associations or through the placement platforms themselves, can be proven. In analogy to the employer's contributions for employees subject to social insurance, it should be considered whether the clients are obliged to pay contributions for the service providers by the self-employed or the platform operators themselves. This would then also have direct consequences for their price calculation and would minimize distortions between the forms of employment.

In principle, the income of employees in the sharing economy is subject to tax liability: the self-employed are also subject to tax, if not subject to social security contributions. When private individuals regularly use their cars for Uber and rent their private apartments through Airbnb, taxable income is generated. The income streams are recorded by the sharing economy companies, as bookings are made using the customers' credit cards. In this respect, there is great transparency, so that taxpayers who are in default can generally be identified during tax audits.

Sustainable business

The sharing economy is also linked to the expectation that the inherent, more intensive use of resources promotes sustainable economic activity.32 However, the at least partial complementarity of the services offered by the sharing economy generates increased demand for goods and services, such as the evaluation of existing studies in the areas of mobility and accommodation has shown. Accordingly, environmental economic instruments such as a CO2 tax as well as bans on environmentally harmful substances and requirements with limit values ​​are still imperative. The sharing economy is not a substitute for environmental policy, but makes it more necessary than ever if sustainable management is to remain an economic policy goal.

Regulation with a sense of proportion

A ban on the new business models of the sharing economy, in which platforms act as intermediaries instead of employers, does not make sense after weighing all the arguments. While intermediaries such as Uber and Airbnb employ only a few thousand people worldwide, they enable millions of people to earn additional income and make better use of resources. Experience in the USA shows, however, that a lack of regulation can lead to massive distortions of competition at the expense of established employers and can have undesirable side effects such as incalculable, massive price increases for Uber taxi rides at peak times or the conversion of cheap living space into Airbnb apartments.

That is why regulation with a sense of proportion is the order of the day. Now is the right time to do this. Because currently millions of Uber drivers and Clickworkers in Germany do not have to work as self-employed individuals for minimal wages, nor is living space being misappropriated on a large scale or converted into cheap apartments for tourists through evictions.

A regulatory policy with a sense of proportion could be based on experiences with ebay: Powersellers are commercial providers. On the other hand, those who sell on a small scale are private traders who use the platform to earn additional income. Analogously, thresholds for additional private earnings as an Uber driver or Airbnb landlord could be set, whereby national and local regulations should allow the broadest possible leeway in order to take advantage of growth and employment opportunities. Anyone who lies above the threshold values ​​is classified as a trader - with all the associated regulations and tax obligations. Specifically, that would mean: Anyone who is almost exclusively an Uber driver for work, who rents out their private apartment for more than x days or who puts more than y apartments on Airbnb is a trader. Appropriate regulation offers legal certainty and defines a framework for a sharing economy in which the opportunities for more growth and employment are preserved with minimal risks.

This article is a shortened and updated version of the IZA study W. Eichhorst, A. Spermann: Sharing Economy - Opportunities, Risks and Design Options for the Labor Market, IZA Research Report, No. 69, 2015.

  • 1 See S. Hill: Raw Deal, St. Martin’s Press, 2015.
  • 2 S. Hill, loc. Cit.
  • 3 Economist of July 4, 2015.
  • 4 J. V. Hall, A. B. Krueger: An Analysis of the Labor Market for Uber’s Driver-Partners in the United States, 2015.
  • 5 Cf. J. Haucap: The opportunities of the sharing economy and its possible risks and side effects, in: Wirtschaftsdienst, 95th year (2015), no. 2, pp. 91-95; M. Peitz: Die Entzauberung von Airbnb and Uber, in: Ifo Schnelldienst, 67th year (2014), No. 21, pp. 6-8.
  • 6 J. V. Hall, A. B. Krueger, loc. Cit.
  • 7 B. Rogers: The social costs of Uber, 2014, on April 22, 2015 (October 6, 2015).
  • 8 Frankfurter Allgemeine Zeitung of September 2, 2015.
  • 9 See S. Hill, op. Cit.
  • 10 See press release from AlixPartners from February 5, 2014.
  • 11 See Economist from August 15, 2015.
  • 12 Cf. R. Loske: Political Design Needs in the Economy of Sharing: A Consideration from a Social-Ecological Perspective, in: Ifo Schnelldienst, 67th year (2014), No. 21, pp. 21-24.
  • 13 See S. Hill, op. Cit.
  • 14 HR&A Advisors: Economic Impacts in San Francisco and its Neighborhoods - Findings Report Preview, 2012, -effect-on-city-economies.html (23.10.2015).
  • 15 Cf.
  • 16 G. Zervas, D. Proserpio, J. Byers: The rise of the sharing economy: Estimating the impact of Airbnb on the hotel industry, Boston U. School of Management Research Paper, 2013-16, 2014.
  • 17 See H. Löffler: Bans all over the world - Ubers Horror Week, Gründerszene from December 11, 2014, (October 23, 2015).
  • 18 See DIE ZEIT online, May 19, 2015;
  • 19 See Frankfurter Allgemeine Zeitung of May 10, 2016.
  • 20 See Federal Association of German Employers' Associations - BDA: BDA position paper on the digitization of the economy and the world of work, 2015.
  • 21 Cf. F. Nestmann: Do the competition rules have to be adapted in the face of digitization ?, Speech at the Ludwig Erhard Symposion 2015 "Prosperity for everyone - Social market economy in times of the digital revolution" on February 4th, 2015, Berlin 2015, http: / /
  • 22 Monopolies Commission: Competition Policy: The Challenge of Digital Markets, Special Report 68, Bonn 2015, p. 178.
  • 23 See ibid., P. 178 f.
  • 24 See ibid., P. 180.
  • 25 Cf. A. Rebler: Unmodern regulation mania or justified controls: approvals according to PBefG in the times of Uber and Wundercar, in: ifo Schnelldienst, 67th year (2014), No. 21, pp. 8-12; M. Peitz, loc. Cit.
  • 26 See J. Haucap, loc. Cit.
  • 27 W. Eichhorst, P. Marx, V. Tobsch: Non-Standard Employment across Occupations in Germany: The Role of Replaceability and Labor Market Flexibility, in: W. Eichhorst, P. Marx (Eds.): Non-Standard Employment in Post-Industrial Labor Markets, Cheltenham, pp. 29-51.
  • 28 K. Brenke: Self-employed people working alone: ​​strong employment growth, often only low incomes, in: DIW weekly report, no. 7/2013, p. 3-16.
  • 29 Cf. K. Brenke: Self-employed employment is falling, in: DIW weekly report, no. 36/2015, pp. 790-796.
  • 30 See ibid.
  • 31 Cf. K. Brenke: Self-employed ..., loc. Cit.
  • 32 Cf. H. Heinrichs: Sharing Economy: Potential for a Sustainable Economy, in: Ifo Schnelldienst, 67th year (2014), No. 21, pp. 15-17; R. Loske, op. Cit.

Title: Sharing Economy - Boon or Bane?

Abstract: This article analyzes the pros and cons of the new profit-oriented sharing economy. It summarizes existing studies on the economic effects of Uber and Airbnb with a special focus on the repercussions for the labor market. It turns out that both business models could lead to additional revenues and employment rather than just crowding-out existing business models. However, unfair competition, exploitation of the self-employed and the destruction of cheap housing seem to be issues. Therefore, the authors conclude that neither laissez-faire nor a ban is the right answer. In order to allow for more growth and employment, appropriate regulation is needed.

JEL Classification: J2, J8, K2.