For thousands of years, people living in communities worked together and shared the goods and services they had for the betterment of everyone. Fast forward to today, and the dramatic growth of the new “sharing economy” has helped foster an era of collaboration that is helping make a big world feel much smaller.
The rise of the sharing economy has been connected to the evolution of the Internet and big data, both of which have made it easier to work with people living across town or on the other side of the world. Sites like Airbnb, Uber, TaskRabbit and Lyft provide users a platform to sell and buy products or services quickly and easily, often at much lower rates than what a person might pay normally for a traditional business to provide.
Poised for Growth
In 2014, the sharing economy was valued at $14 billion but is projected to rise to nearly $335 billion by 2025. As a result, a growing number of people, including millennials and baby boomers, are taking advantage of the market to supplement their regular incomes. According to the Pew Research Center, nearly a quarter of Americans have earned some money from participating in the sharing economy, usually for small amounts, either by offering a service or selling something online.
While the vast majority of people are not getting rich off of these side hustles, there is some benefit to participating. According to data from Earnest, the median income people make through the sharing economy is about $110, though that number is subject to change depending on the platform you use. Uber and Lyft drivers average about $370 each month while those renting out rooms or an entire home on Airbnb average more than $900 monthly, though the median is less than half that. Fiverr, Postmates and Doordash offered lower returns than the ride- and home-sharing platforms, but members still pulled in median incomes of $60-$100 each month.
As already mentioned, most people entering the sharing economy aren’t going to get rich off of it overnight, if at all. Nearly 85 percent of participants in Earnest’s study made less than $500 each month, though those working for Airbnb, Lyft and Taskrabbit had more users breaking the $500 plateau. With that in mind, the sharing economy does help millennials, who use the additional money for everything from travel to paying off student debt, and seniors, who participate to make use of their time while also earning cash.
Utilizing Idle Time and the Contractor Debate
So why is the thought of renting out a room to a stranger or giving someone a ride home so appealing? One reason might be the freedom employees have to set their own schedule, work their own hours and choose who they work with. Someone who may work a standard 40-hour workweek could use their spare time to drive people around on the weekends, perform consulting work for start-ups or sell homemade goods on Etsy.
The sharing economy is also largely based off using resources and space that would otherwise go unused under normal circumstances. A car, for example, sits parked for a majority of its usable life, but Uber and Lyft provide drivers with the opportunity to get more use of their vehicle while making some money on the side. Task-based platforms allow people to share their skills with others through web-based applications like Skype and Fiverr.
Although the rapid evolution of the sharing economy can largely be seen as positive, there are still a variety of concerns that need to be addressed, including whether or not certain workers are considered contractors or employees. For example, a recent decision in Britain has classified Uber drivers in London as employees, rather than contractors, a move that allows those workers to receive a minimum wage and vacation pay. Uber is planning to appeal the decision, suggesting these workers are independent contractors who enjoy the freedom their work provides.
In other areas of the gig economy, disruptor platforms and apps are taking a toll on more traditional options, forcing companies to make updates to their offerings and cater to the growing millennial population. The rise of Airbnb and the short-term rental industry has put the hotel industry on defense by offering cheaper rates on rooms and homes compared to more costly hotel rooms. Consumer Reports recently released a study citing that 70 percent of people using a home-sharing platform chose to do it because it was a cheaper option. Hotels are fighting back in a clever way by offering more options and amenities for millennial travelers and bolstering its grip on business and luxury travelers.
For those who are approaching the sharing economy with an open mind, the good news is that it’s estimated to keep evolving and flourishing well into the future. As these services continue to build trust with the general public, more people will likely take advantage of the lower costs and convenience they offer.
Author Biography: Jamie Wharton is an outreach coordinator for Earnest, a company that provides low-cost student loan refinancing services. She is passionate about her work and enjoys helping others create a brighter financial future through education. When not working, Jamie enjoys taking her dogs to the park and visiting her favorite coffee shops.