In recent years, the sharing economy has dramatically impacted and transformed the economic and social landscape. Through its interplay with digital transformation, sharing economy proponents define societies of humans as naturally sharing, indicating that the natural condition of affairs is one of trust, togetherness and collaboration at the social level (John. 2016). At the same time, however, the sharing economy poses significant challenges to social and economic inclusiveness. Against the backdrop of a world that tends to be commercialized and capitalized, the future of the sharing economy may run counter to the purpose of resource sharing for some people from disadvantaged groups. This blog will analyze the challenges of the sharing economy on the traditional economy in the process of digital transformation and the negative impact on the communion of different classes in society.
Progress from the traditional economy to the sharing economy——What does it bring?
Before identifying the challenge that the sharing economy faces, what must be clear is the difference between the sharing economy and the traditional economy. In Crommelin, Troy, Martin, and Pettit’s study in 2018 has summarized the distinguishment between the sharing economy as a new innovative trend:
- It is not a socially responsible economic paradigm by definition. While the sharing economy has the potential to enhance environmental effects and enable more fair resource distribution, these outcomes are dependent on the users’ intentions and how they are managed.
- While sharing excess capacity in assets is not a novel economic activity, new technologies have radically transformed the magnitude of this activity.
- The originality of the sharing economy thus lies in the way new online platforms have increased the variety of participants while reducing expenditures and risk.
Advances in technology drive the improvement of digital platforms and the sharing economy, and there are significant benefits in shifting the economic paradigm.
Firstly, It helps save costs and brings convenience. The sharing economy gives the possibility to reuse many excess resources under the premise of “sharing” as the main purpose. In theory, re-use by sharing is one of the less resource-, information-, and labor-intensive ways to improve a product’s profitability and extend its lifetime. (Schwanholz & Leipold, 2020). For example, the rental software “Airbnb”, since COVID-19, has helped a large number of homeowners to the short-term rental of their rooms, so as to avoid a large number of vacant and wasted housing resources. Airbnb also gives renters from different geographic areas the opportunity to visit online, making it easier for consumers to refer to prices and housing environments remotely.
Secondly, The sharing economy promotes employment levels and provides employment opportunities for marginalized populations. The sharing economy has been associated with the intent of absolute decoupling, sustainability, energy and resource efficiency, innovation, local jobs, and social cohesion in particular (Schwanholz & Leipold, 2020). The platform economy has changed the employment patterns of people and reduced unemployment in a more flexible way, as people can earn directly through digital platforms. It has succeeded in transforming society towards a liberal new economic system, a transformation that allows disadvantaged groups, such as persons with disabilities, to have equal access to employment opportunities and much easier access to employment than in the traditional economy.
Deviation from the original intention——How this poses challenges for the sharing economy?
On the contrary, despite the positive and efficient expectations of the sharing economy, there are still obstacles and shortcomings that need to be addressed in the study of social actualization, which includes both economic and social dimensions.
On the one hand, the booming of the sharing economy has dealt a severe blow to the traditional economic model, increasing unemployment in the dominant model and diminishing the authority of the traditional economy. The importance of opportunities generated for drivers has been confirmed when comparing Uber in South Africa to regular taxis. Many of the interviewed drivers stated that the income-generating options with Uber were better than in taxis, In South Africa, there were open tensions between taxi drivers and Uber drivers, with the former claiming that Uber was eroding their market (Dreyer et al., 2017). In addition, the sharing economy could disrupt the education and banking industries. The increasing number of online classes that create different education systems can over time disorganize traditional forms of education, which is not a good economic model for governments and academics; moreover, online platforms do not regulate revenues and taxes as strictly as the traditional economy, which can have a tricky negative impact on the financial sector.
For more on the industries that the sharing economy could impact, the following video is worth checking out and learning from.
On the other hand, the accessibility and social inclusiveness of the sharing economy still need to be improved, and it is highly likely that it will exacerbate inequalities between different groups or the criticism it receives for excluding certain groups.
The figure from Analysis and Policy Observatory below indicates Australia’s Digital Inclusion Index in 2023, and it is clear that there are still regions where the use of digital platforms is not widespread, and this is even higher in developing countries. The sharing economy does not work best in these regions, to the detriment of the people who live there, and overly commercialized and capitalized sharing economy technologies may exacerbate the bullying of lagging regions.
The sharing economy has also been shown to hinder the process of social equality in some cases, contributing to victimization and discrimination against groups of persons with disabilities. In 2016, Uber infringed the Americans with Disabilities Act (ADA) by neglecting to change its wait time pricing policy for customers who require more than two minutes to get into an Uber car due to disabilities, passengers with impairments may require more time to enter a vehicle for a variety of reasons (Jonston, 2022).
Furthermore, another disabled woman had taken to social media to complain about the carpooling software Lyft’s flawed policies and differential treatment of vulnerable people after the driver refused to let the woman’s service dog into the car.
Although the concept of the sharing economy has been around for many years, it is still not technologically mature enough, and the lack of drivers has resulted in it not being a dominant economic model, much less a main source of income for the country. According to Ilsøe and Larsen in 2020, the result of data indicates that the revenue generated by digital platforms is quite low in Denmark, with only 2.4 percent of Danes providing and selling their services through online apps or websites (Ilsøe &Larsen, 2020). The challenges it poses to economic and social inclusion will remain for a long time to come. In the future, however, the balance of the benefits and challenges of the sharing economy will bring individuals closer to the free economy and make the sharing economy more efficient and accessible through digital transformation.
Crommelin, L., Troy, L., Martin, C., & Pettit, C. (2018). Is airbnb a sharing economy superstar? Evidence from five global cities. Urban Policy and Research, 36(4), 429–444. https://doi.org/10.1080/08111146.2018.1460722
Dreyer, B., Lüdeke-Freund, F., Hamann, R., & Faccer, K. (2017). Upsides and downsides of the sharing economy: Collaborative consumption business models’ stakeholder value impacts and their relationship to context. Technological Forecasting and Social Change, 125(1), 87–104. https://doi.org/10.1016/j.techfore.2017.03.036
Ilsøe, A., & Larsen, T. P. (2020). Digital platforms at work. 1st Edition. The Impact of the Sharing Economy on Business and Society: Digital Transformation and the Rise of Platform Businesses. Routledge.
John, N. A. (2016). The age of sharing. In Sharing Economies (pp. 58–77). Polity.
Jonston, B. (2022, July 19th ). AUTO Connected Car News – Wireless and Mobile News: Uber Settles Lawsuit for People with Disabilities Will Compensate Users $2Million. ProQuest. AUTO Connected Car News – Wireless and Mobile News: Uber Settles Lawsuit for People with Disabilities Will Compensate Users $2Million – ProQuest
Schwanholz, J., & Leipold, S. (2020). Sharing for a circular economy? an analysis of digital sharing platforms’ principles and business models. Journal of Cleaner Production, 269(1), 122327. https://doi.org/10.1016/j.jclepro.2020.122327
Challenges of digital transformation: Sharing economy can hinder social and economic inclusion. © 2023 by HE TAN is licensed under CC BY-NC-ND 4.0